Mellanox Joins the IPO Party

Mellanox last week became the latest storage company to file plans for an initial public offering with the SEC, bringing the total number of storage companies filing for an IPO this year to five.

Two of the five — CommVault and Riverbed — completed their IPOs two weeks ago, becoming the first storage companies to go public since Xyratex in mid-2004.

InfiniBand chipmaker Mellanox hopes to raise $86 million in its IPO and trade on the Nasdaq under the symbol “MLNX.”

The company boasts as customers the top five server vendors (IBM, HP, Dell, Sun and Fujitsu), the top InfiniBand equipment makers (Cisco, Voltaire and SilverStorm), and storage equipment firms Network Appliance and LSI Logic. Its biggest InfiniBand competitor is QLogic, which acquired PathScale earlier this year.

Mellanox earned $558,000 on $19.3 million in sales in the first six month of 2006, up 9% from the first six months of 2005. For all of 2005, the company earned $3.16 million on $42 million in revenues. Mellanox, which has raised $89 million in funding, had $13 million in cash as of June 30.

Cisco, through its acquisition of Topspin, accounted for 44% of Mellanox’s sales last year, and the company’s four largest customers account for 72% of sales.

“Because the majority of servers, storage, communications infrastructure equipment and embedded systems is sold by a relatively small number of vendors, we expect that we will continue to depend on a small number of customers to account for a significant percentage of our revenues for the foreseeable future,” the company said.

Mellanox noted that “one of our largest customers has ordered fewer products from us in 2006 to date as compared to its 2005 order history.” That customer was Cisco, which accounted for only 10% of Mellanox sales so far this year. Mellanox attributed that decline to an inventory buildup “which we believe has been sold in 2005 and 2006. We expect this customer to remain one of our largest customers for the remainder of 2006.”

Mellanox’s IPO filing is also something of a milestone for InfiniBand technology, which is beginning to catch on as a storage interconnect after years of failing to live up to its early hype.

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