… And by Bernstein Liebhard

Bernstein Liebhard LLP announced that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of a class of purchasers of Mellanox Technologies, Ltd. common stock between April 19, 2012 and January 2, 2013.

The complaint charges Mellanox and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Mellanox produces and supplies interconnect products for computing, storage, and communication applications in the computing, Web 2.0, storage, financial services, database, and Cloud markets. Mellanox’s most lucrative product offering at the start of the class period was its IB product. IB technology is used to transfer and store data in high-end computing and data centers.

The complaint alleges that during the class period, defendants issued materially false and misleading statements regarding the company’s financial performance and future prospects.

According to the complaint, the true facts, which were known or recklessly disregarded by each of the defendants but concealed from the investing public during the class period, were as follows:

• Mellanox was receiving a continuous stream of customer complaints concerning glitches in its IB product;
• Mellanox knew that the pace of a competitor’s development of its own IB adaptor would diminish Mellanox’s product offering and increase competition in the IB market in which Mellanox enjoyed a near monopoly;
• Mellanox knew that its outsized first and second quarter 2012 sales growth was not sustainable and was not the result of defendants’ business acumen or growth in the IB market;
• Mellanox’s inventory was dramatically increasing, both at the company and in the hands of at least one significant customer, which would decrease sales and profit margins going forward; and
• as a result, Mellanox knew its actual sales growth supported neither its own fourth quarter 2012 guidance nor the inflated share price targets the investment community was modeling based on defendants’ bullish class period statements and guidance.

According to the complaint, through a series of partial disclosures made between September 7, 2012 and January 3, 2013, the market learned that the company’s business was not as defendants had portrayed it throughout the class period. On September 7, 2012, Mellanox shares were downgraded from Buy to Hold. Then on October 18, 2012, Mellanox reported third quarter 2012 financial results and issued lower than expected fourth quarter 2012 fiscal guidance. Finally, on January 2, 2013, defendants admitted that Mellanox had grossly missed its fourth quarter 2012 revenue guidance by upwards of 20%. This news, along with the earlier negative announcements, caused the price of Mellanox stock to fall precipitously, on unusually high trading volume.