Alliance of Mellanox and Eucalyptus

Last week, Mellanox Technologies, Ltd. (MLNX - Snapshot Report) entered into a partnership agreement with Eucalyptus Systems. The confluence was made with the clear intent of enhancing usability and productivity of cloud infrastructure solutions.

Mellanox’s 40GbE and InfiniBand Interconnect hardware devices will come together with Eucalyptus’ infrastructure as a service (IaaS) cloud software platform as per the agreement. The merger will then give birth to an easy-to-install, user-friendly, inexpensive and high-performing cloud computing solution.

The industry has been awaiting a less-complicated and inexpensive cloud infrastructure solution. We can, therefore, be perspicacious of the burgeoning demand this platform would generate for itself with this strategic alliance. Not only would there be market share proliferation because of this venture but also would there remain its indelible mark in the industry for a very long time.

On May 7, 2012, the company declared that it has crossed the $1 billion mark in accumulated revenues since its inception in 1999. This is a clear depiction of the goodwill Mellanox has enjoyed over time along with the strong market demand it currently generates for it’s interconnect solutions.

Such technological advancements and profitable mergers will most certainly burgeon the growth rate of the company in the industry it pertains to. However, there are some big players in the industry the company should always be wary of. These include Himax Technologies, Inc. (HIMX - Snapshot Report), AuthenTec, Inc. (AUTH) and Cirrus Logic Inc. (CRUS - Snapshot Report).

The current Zacks Consensus Estimate for the second quarter of 2012 and for fiscal 2012 is 55 cents per share and $1.51 per share, respectively. The company currently retains a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating. However, we presently maintain our ‘Outperform’ recommendation on the stock.