Starboard says chipmaker Mellanox's 2018 targets insufficient

[January 08, 2018]  (Reuters) - Activist hedge fund Starboard Value LP criticized Israeli chipmaker Mellanox Technologies Ltd's 2018 targets on Monday, saying they were insufficient and too heavily reliant on revenue growth.

The logo of Mellanox Technologies is seen at the company's headquarters in Yokneam, in northern Israel July 26, 2016. REUTERS/Ronen Zvulun/File Photo

In December, Mellanox had forecast low to mid-teens revenue growth in fiscal 2018, compared with an estimated 0.5 percent rise this fiscal, but a far cry from 19 percent to 30 percent growth rates between 2014 and 2016. (http://bit.ly/2nCz1zI)

Mellanox had also forecast 2018 operating margins would be better than in 2017, but lower than in 2016.

The targets are "not nearly enough" to offset years of poor performance and missed expectations, Starboard, Mellanox's biggest shareholder, said in a letter to the company.

Mellanox lacks sufficient credibility to convince shareholders that it will hit even these modest targets, said Starboard, which bought a 10.7 percent stake in the company in November to influence strategy.

The hedge fund said it remains concerned that the targets were "merely reactionary" and, even if achieved, does not come close to addressing the magnitude of the problem at the company.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Savio D'Souza)

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