- Associated Press - Thursday, July 22, 2010

NEW YORK (AP) - Shares of Mellanox Technologies Ltd. sank Thursday after the company, which designs chips to help network components communicate, issued a third-quarter revenue outlook below Wall Street’s expectations.

The company’s second-quarter results were stronger than expected. But Mellanox expects revenue in the range of $37 million to 37.5 million in the current quarter, below the $39.5 million that analysts polled by Thomson Reuters are expecting.

Credit Suisse analyst John W. Pitzer said the lower revenue forecast is due to a large customer’s decision to shift to lower-priced chips. Pitzer, who rates Mellanox shares at “Neutral,” lowered his target price to $20 from $25.

For the second quarter, the company earned $5.3 million, or 15 cents per share, up from a profit of $1.7 million, or 5 cents per share, in the same period a year earlier. Adjusted earnings were 29 cents per share in the latest quarter.

Revenue rose 58 percent to $40 million from $25.3 million.

Analysts, on average, were expecting a profit of 24 cents per share on revenue of $39.5 million.

Shares of the Israeli company tumbled $7.33, or 32 percent, to $15.61 in afternoon trading. In the past 52 weeks, the stock has traded between $12.90 and $27.48.

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