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Mellanox Technologies Ltd. tumbled to the lowest level in three months after Oracle Corp., its third-biggest customer, reported quarterly sales and profit that trailed analysts’ estimates.
Mellanox fell 5.4 percent to $30.80 yesterday, swelling the discount versus the Tel Aviv shares to $1.44, the most since Nov. 18, data compiled by Bloomberg show. The drop led declines in the Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York, which fell 1.9 percent to 85.61. Teva Pharmaceutical Industries Ltd. sank 1.4 percent after its profit forecast lagged behind estimates.
Oracle, which owns 8.7 percent of Mellanox, said earnings were hurt by a decline in demand for databases, applications and computer servers because of slow economic growth in the U.S. and the possibility of a recession in Europe next year. Mellanox received 11 percent of its total revenue from the world’s second-largest software company as of the second quarter, and investors are concerned Oracle may trim spending, said Rajesh Ghai, an analyst at ThinkEquity LLC.
“Oracle is a key customer to Mellanox,” Ghai said in a telephone interview from San Francisco. “The results were clearly weak compared to what they have guided in the past.”
Concern among investors that Europe’s debt crisis will curb demand for Israeli exports has pushed the Bloomberg Israel-US 25 Index has declined 18 percent and the Israeli benchmark’s TA-25 Index down 17 percent this year.
‘Aspirational Goal’
Teva, the world’s largest maker of generic drugs, forecast profit that was below estimates for next year and said it may buy back as much as $3 billion worth of its shares to return money to investors.
The company’s American depositary receipts dropped to $41.76 in New York after the Tel Aviv shares retreated 1.3 percent to 157.10 shekels, or the equivalent of $41.62. The shares rose less than 0.1 percent to 157.20 shekels in Tel Aviv today.
“People may have been hoping for slightly better guidance,” said Randall Stanicky, an analyst at Canaccord Genuity in New York. The company’s forecast “seems conservative to us.”
Earnings excluding some costs will be $5.48 to $5.68 a share in 2012, Chief Executive Officer Shlomo Yanai said on a call with investors yesterday. Analysts at Leerink Swann expected an estimate of $5.55 to $5.85.
Teva also indicated it may not meet its long-term target of $31 billion in sales by 2015, which Yanai described as an “aspirational goal.”
Maintain Growth
Mellanox shares in Tel Aviv dropped 2.9 percent to 121.70 shekels, or the equivalent of $32.24, yesterday. The shares dropped 3.9 percent to 117 shekels, or the equivalent of $31.04, today.
Oracle, which fell 12 percent yesterday, trails only International Business Machines Corp. and Hewlett-Packard Co. among Mellanox’s largest customers, according to data compiled by Bloomberg. The software maker said profit before some costs in the quarter ended Nov. 30 was 54 cents a share, on revenue excluding certain items of $8.81 billion. Analysts had projected profit of 57 cents on sales of $9.23 billion, the average of estimates compiled by Bloomberg.
SAP AG, the biggest German software maker and a rival of Oracle, dropped 6.1 percent to 39.92 euros in Frankfurt
The Yokneam Elit, Israel-based company’s revenue will probably surge 67 percent to $258 million this year, according to the average estimate of eight analysts surveyed by Bloomberg.
“Mellanox can maintain its growth into 2012 and 2013 because we have a small share of the market we’re playing in,” Chief Executive Officer Eyal Waldman said in an interview on Bloomberg Television on Dec. 19.
Nasdaq Falls
Mellanox’s market value has surged to $1.21 billion from $877 million at the end of the first quarter as it benefits from increased demand for cloud computing and customers that seek to move data more easily over networks.
The global market for cloud computing is forecast to increase to $241 billion in 2020 from $40.7 billion in 2011, according to Forrester Research Inc.
A decline in technology stocks pushed the Nasdaq Composite Index 1 percent lower yesterday. The shekel gained 0.2 percent to 3.7690 a dollar today.
Israel, whose population of 7.7 million is similar in size to that of Switzerland’s, has about 60 companies traded on the Nasdaq stock market, the most of any country outside North America after China. It’s also home to the largest number of startup companies per capita in the world.
Goldman Sachs Group Inc. joined Israeli venture capital fund Jerusalem Venture Capital to invest $40 million in Cyber Ark Software, which is based in Petach Tikva, Israel, according to a statement distributed by Business Wire yesterday.
Ormat Technologies Inc., the developer of geothermal power plants that is owned by Yavne, Israel-based Ormat Industries Ltd., rose 2 percent to $18.20.
The company signed a power purchase agreement allowing it to sell electricity from a 10-megawatt solar facility in California, its first photovoltaic project in the U.S.
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