Letter #269: Eyal Waldman (2007)
Mellanox Cofounder and CEO | 2006 Shareholder Letter
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Eyal Waldman is the Founder of Waldo Holdings. Prior to founding Waldo, Eyal was the Cofounder, President, and CEO of Mellanox Technologies (acquired by Nvidia for $6.9bn). Before starting Mellanox, Eyal was a Cofounder and VP of Engineering of Galileo Technology (acquired by Marvell for $2.8bn). Eyal started his career at Intel, where he held a number of roles across design, management, and architecture.
Today’s letter is Eyal’s first shareholder letter for Mellanox as a publicly traded company. Eyal opens the letters with the company’s financial progress and standing, acknowledges their IPO, highlights a number of milestones achieved, calls out the launch of their Mellanox Cluster Center, lays out their strategy for deploying their interconnect technology to a broad base of apps, shares the additional vertical markets they expect to penetrate, and closes out by sharing their goal of building a company of increasing value for their stakeholders before then thanking their employees and stakeholders.
I hope you enjoy this letter as much as I do! It’s short and to the point, making it a good example of efficient communication between a management and its stakeholders.
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Letter
TO OUR SHAREHOLDERS
Fiscal 2006 was an outstanding year for Mellanox, with record revenues, gross margins and net income results. Our fiscal year 2006 revenues grew 15 percent from $42.1 million in 2005 to $48.5 million in 2006, and our net income increased approximately 125 percent year-over-year from $3.2 million in 2005 to $7.2 million in 2006. We generated net cash from operations of $9.1 million during the year and exited 2006 with cash holdings of $20.6 million.
As you know, Mellanox successfully completed an initial public offering on February 13, 2007, raising approximately $106 million in net proceeds to the company.
We accomplished a number of milestones during 2006. We expanded the utilization of Mellanox’s InfiniBand products and launched ConnectX, our fourth generation adapter architecture, and the first InfiniBand and Ethernet combined adapter architecture. We saw increased adoption of our InfiniBand adapters in blade servers from leading OEMs, Hewlett-Packard and Sun Microsystems, adding to our existing design wins from Dell and IBM. We continue to see additional storage vendors utilize InfiniBand for their internal and external storage area networks and anticipate revenue growth from both our storage and server design wins. Also, 82 InfiniBand-based super-computers made the November 2006 TOP500 list of the world’s most powerful computer systems, representing an increase of 173 percent over the past twelve months, with three InfiniBand-based supercomputers listed in the Top10.
In addition, we opened the Mellanox Cluster Center in 2006, an environment for developing, testing, benchmarking and optimizing products based on Mellanox’s InfiniBand technology. We have received positive responses from independent software vendors and OEMs who are taking advantage of our two 128-core clusters to quickly and reliably optimize their software and hardware products.
We have a clear strategy to deploy our unique interconnect technology into a large base of applications. Our InfiniBand and Ethernet products can be used nearly everywhere computing and storage are necessary. Now that the software from operating system and independent software vendors has matured, we are seeing an increase in the deployment of InfiniBand technology in the enterprise data center, high-performance computing and embedded markets.
Across the entire industry, there is a continued increase in the number of applications that benefit from low-latency input/output (I/O), which is becoming just as critical as bandwidth and throughput performance. We expect to penetrate additional vertical markets by working with our OEM and software partners on a variety of applications such as medical research, retail, manufacturing, hosting facilities and others that can benefit from Mellanox’s products.
In closing, 2006 was an excellent year for Mellanox from a financial perspective, and we believe that we are well-positioned to benefit from the increasing market adoption of our interconnect products. We look forward to building a company of increasing value for our shareholders, our customers and our employees in the years ahead.
I’d like to thank our employees, our greatest asset, for their commitment and contributions to the success of our company, as well as our vendors, partners, and customers for their continuing support.
I’d also like to thank our shareholders for investing in Mellanox and we look forward to building a large and successful fabless-semiconductor company that will add significant value.
With best regards,
Eyal Waldman
Chairman, President and Chief Executive Officer
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