Mellanox Exceeds IPO Hopes

Mellanox became the first storage-related IPO of the year today, and -- like the four 2006 storage IPOs -- it opened with an impressive share price. (See Mellanox Goes Public.)

The Infiniband chip firm began trading publicly today at $17 per share, higher than its original target range of $12 to $14 set last month and even above the revised range of $14 to $16 it announced Tuesday. Mellanox sold 6 million shares and raised $102 million, well above the $86.25 million it hoped for when first filing for the IPO last September. (See Mellanox Ready for IPO .)

The Mellanox IPO follows an active year for storage IPOs, coming one day after EMC revealed plans to spin off 10 percent of its VMware shares into an IPO. (See VMware to Spin Out.)

Isilon and Riverbed began trading above their target shares when they went public last year, and CommVault and Double-Take opened at the high end of their ranges. (See Double-Take, Isilon Go Public, Riverbed Comes Out at $9.75, and CommVault Swims in Public Pool.)

Unlike all the 2006 storage IPOs (except CommVault's), Mellanox was profitable for the previous year at the time of its IPO. According to its SEC filing, Mellanox had income of $3.4 million on $32.7 million in revenues for the first nine months of 2006, up from $1.9 million in revenues and $30 million in income for the first nine months of 2005. Mellanox did not report results from last quarter or the full year for 2006, but claimed income of $3.1 million on revenues of $42 million in 2005.Mellanox supplies chips for InfiniBand devices for server companies Dell, IBM, Fujitsu-Siemens, Hewlett-Packard, and Sun, as well as storage vendors Cisco, LSI Logic, Network Appliance, QLogic, and Voltaire.

Mellanox is going public at a time when InfiniBand technology is heating up. Last year, Fibre Channel HBA vendor QLogic spent $168 million to acquire two InfiniBand startups - PathScale and SilverStorm Technologies. (See QLogic Eyes SilverStorm and QLogic Bets on InfiniBand.) That follows Cisco's $250 million 2005 acquisition of Topspin. (See Cisco Takes On Topspin.)

QLogic's acquisition of PathScale gives it the capability to produce its own InfiniBand chips, and Mellanox's SEC filings lists QLogic as a competitor as well as a customer. However, QLogic CEO H.K. Desai said during QLogic's earnings call last month that he did not plan to use the PathScale technology to produce its own chips for InfiniBand switches, leaving Mellanox as the sole major supplier.

Mellanox plans to move further into storage with its future ConnectX architecture, which places support for InfiniBand and Ethernet in one chip for blade servers. (See Mellanox Incorporates 10-GigE and A Dynamic Duo.) ConnectX will support Fibre Channel but also alleviate the need for it. ConnectX chips are expected this year.

— Dave Raffo, News Editor, Byte and Switch