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Mellanox (MLNX) Launches Ethernet-Based Mellanox Onyx

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Mellanox Technologies, Ltd. (MLNX - Free Report) recently unveiled a Spectrum-based Ethernet Network Operating System (OS) called Mellanox Onyx. This release places Mellanox as a leading Ethernet-based interconnect applications solution provider for futuristic data centers.

With rich Layer-3 feature set plus robust control plane and 64-way ECMP support, Mellanox Onyx provides “flexibility of a completely open container-based framework”. Customers can customize and optimize the network to their specific needs. Succeeding MLNX-OS, Onyx offers easy accessibility, provisioning, automation, telemetry, enhanced network visibility and managerial capabilities.

Like the other members of Spectrum switches, the new Mellanox Onyx is an ideal choice for hyper converged and storage infrastructures, due to the system's unique hardware design, high performance ASIC, and superior price performance.

Ethernet Switches & Interconnect Gain Rapid Adoption

According to a recent report by IDC, the service provider router and carrier Ethernet switch industry has witnessed a successful first quarter of 2017. The success is primarily attributed to strong demand from cloud service providers and the digital transformation imperative. Revenues for the worldwide Ethernet switch market (Layer 2/3) were $5.66 billion, up 3.3% year over year.

Market research firm IDC forecasts that by 2025, the global data sphere will grow to 163 zettabytes (that is a trillion gigabytes), which is ten times the 16.1 zettabytes (ZB) of data generated in 2016. This exponential growth bodes well for Mellanox’s interconnect solutions& Ethernet Switches owing to growing demand for higher network speeds for fast processing of data.

Strong Performance Indicators

Shares of Mellanox have gained 42.2% in the last year, outperforming the industry’s rally of 11.1%.

The company recently projected a higher first-quarter fiscal 2018 revenue guidance. Primarily, rapid customer transition to 25 gigabit Ethernet adapters had led to the revision.

In fourth-quarter fiscal 2017, the company reported revenues of $237.6 million, which increased 7.2% year over year and 5.3% sequentially. It can primarily be attributed to strong adoption of the company’s 25 gbps and above Ethernet switch business.

Bottom Line

The ongoing customer transition to 25, 50 and 100 gbps Ethernet solutions bodes well for the company. Moreover, adoption of 100 Gigabit EDR solutions in machine learning, artificial intelligence (“AI”), high-performance computing, database and storage remains a positive. Additionally, InfiBand’s adoption aided Mellanox to retain its leadership position in the high-performance interconnects space.

Apart from the Ethernet solutions, strong demand for Infiniband solution has been driver catalyst. Of late, InfiniBand has been the preferred interconnect for AI and deep learning systems.

Further, Mellanox has won contracts from the likes of NetApp, the University of Toronto and NASA Ames Research Center, which reflects strong demand for its solutions.

Zacks Rank and Other Stocks to Consider

Currently, Mellanox sports a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the broader technology sector worth considering are DST Systems , Nvidia Corporation (NVDA - Free Report) and Lam Research Corporation (LRCX - Free Report) . All the three stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DST, NVIDIA and Lam Research and have a long-term expected earnings growth rate of 10%, 10.25% and 14.85% respectively.

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