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What: Shares of Israeli fabless semiconductor company Mellanox Technologies sank as low as 20% today after its first-quarter outlook disappointed Wall Street.
So what: It's the second time this month that Mellanox has issued downbeat quarterly guidance, suggesting that the demand headwinds facing the company are much stronger than Mr. Market thinks. In fact, management blamed the shortfall on a buildup in inventory by one of its major customers, giving investors plenty of anxiety over its short-term growth prospects.
Now what: Management now sees first-quarter revenue of $78 million-$83 million, well below the consensus of $131.8 million. "The majority of the inventory will be depleted in the first quarter of 2013 and we expect growth to resume in the second quarter of 2013 and thereafter," CEO Eyal Waldman told analysts in a conference call. So when you consider the seemingly short-term nature of Mellanox's troubles, today's pullback looks particularly overblown.
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The article Why Mellanox Shares Plunged Again originally appeared on Fool.com.
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