Grid backbone solutions provider Voltaire Ltd. (Nasdaq:VOLT) yesterday published its financial report for the first quarter of 2008. Despite 94% revenue growth compared with the corresponding quarter of 2007, the company slipped to a loss.
Merrill Lynch reiterated its "Buy/ high risk" recommendation for the company and $9 price target, a 50% premium on yesterday's closing price of $6.08. The investment bank says that the company demonstrated "solid execution in a difficult environment."
Merrill Lynch analyst Tal Liani noted that Voltaire's revenue was in line with forecasts, but that the shekel's appreciation against the dollar affected the company's operating profits. He concludes, "We see Voltaire as a pure play on the nascent, yet fast growing, High Performance Computing (HPC) switch market with its InfiniBand server and storage switches. The company’s small size and value proposition leaves room for continued growth as the market continues to grow in excess of 40% per annum. We do, however, also acknowledge the substantial risks associated with investing in a small company that competes with industry titan Cisco Systems Inc. (Nasdaq: CSCO), and is subject to potentially uneven order trends, and sales execution risk."
Voltaire posted $16.6 million revenue for the first quarter compared with $8.6 million for the corresponding quarter. However, the company posted a GAAP-based net loss of $2.1 million ($0.10 per share) because of a $2.1 million payment to the Office of the Chief Scientist to pay off the company's outstanding royalties, as well as other charges. Merrill Lynch notes that paying off these royalties should raise Voltaire's gross margins to 52% in the second quarter from 49% in the first quarter. The loss was half the of $4.2 million loss for the corresponding quarter. Excluding these charges, the company posted a non-GAAP net profit of $400,000 for the first quarter compared with a loss of $2.6 million for the corresponding quarter.
Voltaire predicts that it will post a non-GAAP earnings per share of $0.03-0.05 ($682,000-1.1 million) on $17-18 million for the second quarter. The company also expects $33.5-34.5 million revenue for the first half of the year, 65% more than for the first half of 2007.
Merrill Lynch predicts that Voltaire's revenue will grow by 43% in 2008 and 33% in 2009. It predicts that the company will post a net profit of $5 million on $76 million revenue in 2008, and a net profit of $11 million on $102 million revenue in 2009.
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2008
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