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Executives

Ronnie Kenneth - Chairman & Chief Executive Officer

Joshua Siegel - Chief Financial Officer

Fiona Darmon - GK Investor Relations

Analysts

Mark Moskowitz - JP Morgan

Stanley Kovler - Merrill Lynch

Tom Earls - RBC Capital Management

Doug Reid - Thomas Weisel Partners

Glenn Hanus - Needham & Co.

Voltaire Limited (VOLT) Q4 2008 Earnings Call February 17, 2009 9:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Voltaire’s fourth quarter 2008 results conference call. All participants are present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions)

I’d like to now handover the call to Ms. Fiona Darmon of GK Investor Relations. Ms. Darmon, would you like to begin.

Fiona Darmon

Yes, thank you operator and good day everybody. I would like to welcome all of you to Voltaire’s fourth quarter and full-year 2008 results conference call and thank Voltaire’s management for hosting this call today. With us on the line are Mr. Ronnie Kenneth, Chairman and Chief Executive Officer; and Mr. Joshua Siegel, Chief Financial Officer.

Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements and the Safe Harbor statement outlined in today’s press release also pertains to this call.

In addition, during this call certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, forecast future results, and evaluate the company’s current performance. Management believes that the presentation of non-GAAP financial measures is useful to investors understanding and assessment of the company’s ongoing cooperation to the prospects of the future, reconciliation of non-GAAP to GAAP financial measures that’s included in the fourth quarter 2008 earnings releases.

I will now handover the call to Mr. Ronnie Kenneth, Voltaire’s Chairman and CEO. Ronnie.

Ronnie Kenneth

Thank you, Fiona. Welcome everyone and thank you for joining us today to discuss our fourth quarter and full-year 2008 results. 2008 was Voltaire’s second year as a public company, ending with a 16% annual increase in revenues, surpassing $60 million with consistently improving margin.

We continue to maintain our leadership position in the scale-out computing market evidenced in many ways, including Voltaire’s 50% share of InfiniBand deployment on the TOP500 supercomputer lease, as well as in many Fortune 500 accounts. In fact, more than 30% of the Fortune 100 have deployed Voltaire’s system.

We continue to innovate bringing new product to market on time and ahead of the competition. This includes our Grid Director 4000 family of QDR InfiniBand switches, as well as the 10-Gigabit-Ethernet and storage gateways and messaging acceleration software that really sets us apart from the competition. We also forge new partnerships with companies such as Oracle and strengthen our existing OEM partnership with the leading server companies to position Voltaire for long-term growth and success.

Revenue for the quarter came in at $13.2 million inline with the preliminary results released in January, with gross margins increasing to over 55%. We ended the quarter with a loss per share of $0.08 within our original guidance range provided for Q4 in November.

During the quarter, we witnessed a delay in several large system purchases, originally planned for 2008, primarily in the government sector, as they were pushed into 2009 awaiting the availability of Intel’s new Nehalem processor and the general availability of the 40-Gigabit per second QDR InfiniBand.

The movement of new orders from 2008 into 2009 has the biggest impact on Voltaire’s second half results and is inline with what our OEM partners experienced as well. We do believe however, that the GA over the QDR switches, availability of new complementary technology, and the sales back stimulus package may be constructive in driving recovery in the HPC markets in 2009. IDC recently forecasted a healthy $3 billion increase in the federal IT budget for 2009.

We anticipate that the market turbulence will continue to affect our business, at least through the first half of 2009. Clearly this scenario may change as customers refine their IT spending plans for the year, but in the meantime we have taken proactive efficiency measures in an effort to reduce expenses and preserve cash. These measures announced several weeks ago and adding up to several millions of dollars in annual saving will enable us to maintain 2008 expense level in 2009.

Voltaire’s strong capital position with over $55 million in cash and liquid investment is one of the ways we can weather the economic uncertainty. These, along with the ability of Voltaire’s products that help customers to do more with less, achieve quick ROI and get ahead of the competition, keep me optimistic about Voltaire’s long-term growth.

Now, let’s move onto the quarter ending sales. Our vertical market strategy continues to drive new demand for the company during the year. The manufacturing vertical closed the year with 84% year-over-year growth. Financial services rebounded after the September downturn with more than 200% growth between Q3 and Q4, ended with 40% year-over-year growth.

The education vertical remained relatively consistent with Q3 level, while the government vertical was substantially lower than originally anticipated, mainly as several key accounts were still digesting the large DDR based system they purchased in 2007 and deployed during 2008. We believe these plus their desire to wait for the new technologies booked a number of key deals into 2009.

This quarter we sold the first visible contribution of the Oracle relationship, bringing us into new verticals, such as Telecom and Retail. Voltaire is the sole supplier of InfiniBand switches for the HP-Oracle Database Machine, which Oracle began shipping to customers in Q4. We generated over $1 million in new orders resulting from this partnership in the fourth quarter alone. Oracle has been calling the extra data launch, its most successful product launch ever in the history of the company, making us feel consciously optimistic about the potential impact on our revenue in 2009.

We continue to focus on our proven go-to-market model to deliver our product and solutions to customers on a global scale via our OEM channel and have claimed in place for new revenue generating opportunities with our partners in the coming quarters. The successful partnership on the HP-Oracle Database Machine is one example of this.

Another of these exciting new developments which we announced last week is IBM's selection of Voltaire to develop a 40 gigabit per second InfiniBand switch module for IBM BladeCenter. This was a key win for Voltaire and represents our first internal blade switch design project with a Tier 1 Server OEM. Expected to be available from IBM in mid 2009, this solution will deliver increased performance, scalability and virtualization capabilities to BladeCenter customers in both the HPC and enterprise market.

For our partners, the Server OEM, we are central to their scale-out strategy of setting complete pre-tested package solutions to customers. We believe the Server OEMs need Voltaire’s high performance scalable interconnect fabric to create end-to-end solutions in order to compete in today’s increasingly competitive server market.

With regard to product, sales of our 20 gigabits per second InfiniBand switching platform remained strong this quarter and will continue to be the product of choice for both our enterprise and commercial HPC customers. Since its launch four years ago, we have shipped thousands of switches in the DDR product family to hundreds of customer worldwide, clearly establishing Voltaire as the pioneer and the market leader in this scale-out fabric space. We are also seeing very quick adoption of our new QDR offering, primarily by high end HPC customers.

As I mentioned, in December with GA, the Grid Director 4076 a 36-port, 40 gigabit per second QDR InfiniBand switch, we shipped the first 20 units in the last week of December and are seeing healthy demand continuing into 2009. Last week we announced the addition of our 40 gigabits per second Director Switch, the Grid Director 4700 to our family of QDR switches, which is expected to be available in Q2 of ’09.

The switch not only provides blazing performance scalability and ease of use for large high performance clusters, but also offers enterprise price reliability and availability features. These features are important to many customers and further differentiate us from the competition.

In concert with the 4700 switch and as part of our long-term strategy for building a robust software offering for the scale-out data center market, we also announced our new Unified Fabric Manager software. The platform has some unique features granting us a true technical advantage over the competition.

By using UFM software, customers can get better performance scalability and management for their systems and Voltaire is the only company to deliver this type of advanced management of InfiniBand. We have already begun taking orders for these products.

This ends my business review of the year and quarter. I would like now to turn to our CFO, Josh Siegel for the financial review and I will then summarize what we are witnessing, and our expectations for 2009. Josh.

Joshua Siegel

Thank you, Ronnie and hello everyone. Before I begin, in order to better understand our business, my review relates to our non-GAAP results. A full reconciliation between our GAAP and non-GAAP results is available in our earnings release published earlier. Revenues for the quarter totaled $13.2 million compared to $17.4 million in the fourth quarter last year. Revenues for the year increased 16% reaching $61.6 million, compared to $53.1 million in 2007.

In April, we intent to publish our annual report on the 20-F and we’d like to share with you today several key statistics. The first is the strong increase in revenues generated from our higher margin switching solutions. This year, our Grid Director, our Grid edge switches combined contributed to over 75% of total revenues, compared to just under 65% in 2007. This year, we also saw a strong increase in professional service revenues, which close to doubled over last year as more and more customers selected our suite of professional service products.

In terms of over 10% customers for the year, HP and IBM continue to be our largest customers. During the fourth quarter, our over 10% customers included HP; Silicon Graphics which had a significant insulation win in Q4 and Rackable, which continues to support a large portion of our FSI base. In terms of geographic mix, close to 50% of our revenues in 2008 continues to be generated outside the U.S., similar as last year.

Returning to our quarterly and annual financial results, gross profit for the quarter totaled $7.3 million compared to $8.3 million in Q4 last year. Gross margin for the quarter increased further to 55.5% up from 47.8% in the fourth quarter last year.

On an annual basis, gross profit increased by 45%, reaching $32.7 million in 2008 that compares to $22.6 million last year. Gross margin for the year was up, reaching 53.1%, compared to 42.6% in 2007. Our increased revenue mix towards our DDR switching solution was the prime driver for our continued gross margin expansion.

Operating expenses totaled $9.2 million in the fourth quarter, compared to $7.6 million in the fourth quarter of last year. The increase in expense this quarter was primarily due to higher R&D expenses as we step-up development on several key product launches in the second half of 2009. This increase was offset by initial and sequential decline in SG&A expenses, as we see the first contribution of our efficiency plan initiated in the fourth quarter of last year and to continue into the first quarter of ’09.

This quarter, we generated an operating loss of $1.9 million, compared to the $730,000 operating profit reached last year. Operating loss for the entire year totaled $1.7 million narrowing from the $2.2 million operating loss from 2007.

Net loss for the quarter, totaled $1.7 million, compared to $1.4 million net income in Q4 last year. Loss per share for the quarter totaled $0.08, compared to $0.06 earnings per diluted share in the fourth quarter of last year. Net loss for the year totaled $937,000 or $0.05 loss per share, again narrowing significantly from the $1.5 million net loss last year, which was equivalent to $0.09 per share.

Net cash and cash equivalents combined with all marketable securities and deposits as of the end of December 2008 equaled $55.8 million, compared to $59.6 million at the end of September. All-in-all, we have a very healthy cash position with zero debt, which is critical in the current environment. Our DSO for the fourth quarter was stable at approximately 62 days, compared to 65 days in the third quarter.

Looking ahead, we are currently operating in a highly turbulent and fluid climate, while our customers though continuing to express strong demand for our products, are extending decision cycles, increasing the potential per shift between the quarters. Subsequently, we have decided to provide only annual revenue guidance for 2009 and refrain at this time from quarterly and specific EPS guidance. In order to help your modeling, I’ll also provide some more financial color into our expectations for the year.

First off, we are operating under the assumption of a longer-term macro uncertainty, with revenues around $50 million for 2009. We expect growth margins during the year to remain in the range of 50% to 55% throughout the year. On the operating expense side, we expect the proactive efficiency measures initiated several weeks ago will enable us to maintain expenses at roughly the 2008 levels through 2009.

Let me add on this factor that these flat operating expenses include a 10% to 15% annual increase in R&D expenses, with R&D expenses in the first and second quarter being at similar levels as Q4 ’08, while dropping 10% to 15% from this level in the third and fourth quarters of ’09. The increase in R&D that I just mentioned will be offset by a 10% to 15% decline in SG&A expenses for the whole year.

With that I’d like to move back to Ronnie for his final words.

Ronnie Kenneth

Thank you Josh. Looking ahead to 2009 and the key plan development, we believe we have the sound fundamentals to weather the storm, optimally positioned for when the market rebounds. These fundamentals include our vertical market approach, stronger living product portfolio, as well as partnership with the major Server OEM. Furthermore, we continue to closely monitor our healthy cash balance, proactively cutting and managing expenses for the period ahead.

While it’s difficult to predict where IT spending will grow and where it will recede, Voltaire products are critical to the customers’ business sectors in many vertical industries and geographies, becoming even more essential in these lean times.

As I mentioned earlier, Voltaire’s management team is committed to maintaining its market leadership and optimally positioning the company for when the market reemerges. We will continue to invest in our research and development efforts, with anticipation of some exciting new product launches in 2009. This will ensure that we maintain our leadership position and continue to lead the scale-out data center market.

I would now like to open the call for questions. Operator.

Question-and Answer Session

Operator

Thank you. (Operator Instructions) The first question is from Mark Moskowitz of JP Morgan. Please go ahead.

Mark Moskowitz - JP Morgan

Two questions here Ronnie and Josh. Could you talk a little bit more about the government deferrals? How much do you expect to be captured in the first quarter versus maybe extended into the second quarter or beyond and could you quantify? Then I guess to kind of follow-up to this first question; in the past the government has been a pretty important vertical for you and also an early adopter of InfiniBand? Does this suggest that we could see a higher level of deferrals or order volatilities in other verticals as we go forward?

Ronnie Kenneth

Okay Mark, thanks for the question. If I understand you correctly, there are two factors or two vectors if you will, that are working here in concert. The first one is obviously the stimulus package by the government that we think can help, but to what degree; there’s still uncertainty in respect to that.

The other force that is working there is the government classical high-performance computing account awaiting QDR is now coming and already being shipped by Voltaire and the Nehalem processor from Intel that’s based on I think what we see in the public domain. Server OEMs will probably start shipping late Q1, beginning of Q2. So, to answer your question, I think that we will see probably more momentum being built in terms of revenue in the second half, even though already we started seeing some nice pipe being built.

Mark Moskowitz - JP Morgan

Then the second question revolves around new customer commentary. Could you maybe help us out Joshua or Ronnie, what was the percentage of revenues from new customers in the fourth quarter and then for 2009, the revenue guidance that you provided? How much should we expect in terms of will that profile be similar or will you have a higher level from new customers or maybe a higher level from more existing historical customers, given the volatility out there?

Ronnie Kenneth

I think that based on our research in ’09, 50% of the business came from new customers and obviously the other 50% came from existing customers. I think this split might change slightly this year as we are entering new verticals with Oracle such as retail and Telco. So, we’re already seeing new orders or new installations as a result of this partnership and a kind of customers that we haven’t seen before using our technology.

By large, I can say that we clearly see a movement more and more into the commercial verticals as we clearly help the commercial accounts and enterprises to differentiate the mix of business objective in the market. Though in spite of all the turbulence, I think during ’08 we saw a nice momentum being built as indicated earlier in commercial verticals such as manufacturing and financial services, even though it has been a tough time for them.

Mark Moskowitz - JP Morgan

Just as a follow-up if I may. Hey Joshua, can you help us understand what the economics are with the HP, Oracle deal? Do you guys benefit there, are there any sort of accretive or dilutive pieces to that versus the corporate average?

Joshua Siegel

Basically all the switches that are coming out in the Oracle machine are purchased from HP. It’s not accretive or dilutive, that’s the standard HP purchasing price to us. So we are seeing the standard revenue coming out of HP for the four switches in every appliance that goes out.

Mark Moskowitz - JP Morgan

Okay, thank you.

Ronnie Kenneth

Thank you Mark.

Operator

The next question is from Tal Liani of Merrill Lynch. Please go ahead.

Stanley Kovler - Merrill Lynch

Thank you. This is actually Stanley Kovler dialing in for Tal. I was wondering if you could; first, I missed the trends that you were discussing about the financials vertical, maybe you can just repeat that and can you remind us what the seasonality will be like in 2009? I know that you gave annual guidance, but given that you have some product releases coming out in the second quarter, after maybe you have a typically weak quarter, should we just expect the revenues to ramp up throughout the year or is this going to be much more heavily weighted towards the second half? Thank you.

Joshua Siegel

Stanley this is Josh. Thanks for the questions. I’ll take the seasonality question and then I’ll hand it over to Ronnie on the FSI trends. With regard to seasonality, I think you hit it on the head.

We expect to see a ramp up in the second half compared to the first half based on standard seasonality of our business, but also as we referred to in our discussion earlier, the release of several big products that will be coming out towards the middle and third quarter of this year. One of them we released publicly last week, the 4700, which is the large QDR Director switch and also together with that, the UFM, the Unified Fabric Manager software product that will also be coming out in the third quarter.

We also discussed last week in our press release, the great center design win for IBM, which will be coming out in H2 and we see Oracle continuing to be a driver, aggressively into ’09. So, I think all those factors together, we see an impact for H2 compared to H1.

Ronnie Kenneth

Stanley, I’ll take the portion on the FSI business. So, what we said earlier is basically in Q4 we saw a rebound of the business versus Q3 of ’08, with really a nice trend and overall for ’08, the FSI business grew 40% for us compared with ’07. So, kind of a follow-up question could be how come given the market dynamics that we have been able to grow the business? I think the answer is that, we are providing solution to people who are doing real-time trading, and for them the low latency that we are able to provide in our solution, both on the suite side as well as on the softer side, is very critical and they need it more so even in the difficult time.

Stanley Kovler - Merrill Lynch

Okay, thank you and just a quick question on the FX impact in your business on the revenue expense side, what were the puts and takes there?

Joshua Siegel

On the revenue side, there is no impact as we sell predominantly in US dollars. On the expense side, as we’ve already been for several quarters implementing a hedging program against the shackle exposure that we have, so the impact has been nominal.

Stanley Kovler - Merrill Lynch

I just have a follow-up question actually on the Oracle HP data center. Can you talk about some of the drivers and remind us again the growth there that you’re seeing in a very difficult spending environment, why customers would be spending on new applications? What actually are the drivers of that demand there?

Ronnie Kenneth

We are enabling Oracle solution to dramatically boost their performance. So, a transaction that took minutes, now take seconds or the transaction that took hours take, now minutes and obviously when they’re providing that solution based on our technology to their end-users, it creates a clear business opportunity and competitive advantage to these guys, so obviously, pretty much like in FSI.

I think in this kind of environment, people are looking for any angle to differentiate themselves, to be faster than the competition and by using data warehouse solutions and business imperative solutions that perform much, much faster than before, obviously is a good ROI investment.

Stanley Kovler - Merrill Lynch

Thank you very much. That was very helpful.

Operator

The next question is from Tom Earls [Ph] of RBC Capital Management. Please go ahead.

Tom Earls - RBC Capital Management

Can you elaborate a bit about the visibility you have into the first quarter? I know you guys are usually back-end loaded, but can you give us a sense from that?

Ronnie Kenneth

Obviously, we moved to an annual guidance, because in this kind of environment we felt that quarterly guidance is too risky due to lack of visibility. So, obviously I’m not in a position to comment on Q1.

Tom Earls - RBC Capital Management

Okay, so basing your annual guidance on and this was probably referred to as a ramp up on second half, right?

Ronnie Kenneth

Yes, but obviously we’ll look at trends from previous years, product introductions, product mix, new verticals; there are a lot of parameters and variables that go into this equation.

Tom Earls - RBC Capital Management

Okay, fair enough and except for volumes, could you give us a sense on what would cause gross margins to tend higher or lower throughout the year? What should we be looking after?

Joshua Siegel

Sure Tom, this is Josh. Thanks for the question. Basically, we could arrange in there for the gross margin. The gross margin is really going to be affected by (1) product mix; (2) volume of sales which you pointed out yourself; and (3) really the competitive environment.

We saw a very nice trend in ’08 on the product mix going towards our DDR switching solutions, which continue to expand our gross margins. Again to the visibility issue in ’09 and so forth, we need to wait and see how those factors are going to play out with regard to our vision for ’09 and therefore there could be some fluctuation from quarter-to-quarter on the gross margin.

Tom Earls - RBC Capital Management

Okay and could you address the competitive landscape that you’re seeing right now? Are we talking more about pricing pressures going forward or is it mainly just delayed adoption of the technology mix? Could you give us some color in that one?

Ronnie Kenneth

Well, I think it's primarily, as I said people in the classical HPC market segment, such as the federal government and higher education are awaiting the new technology. We are already shipping the QDR, we announced the Director level switch with 324 ports, as well as the Unified Fabric Management layer that we think that’s going to help us position ourselves and differentiate us in the market quite nicely. So, I would say primarily it’s the market waiting for the new technology and probably for the market to improve.

I think Tom, you also asked about the competitive landscape. I think that what puts Voltaire really apart from the competition is our ability to provide an end-to-end solution. People sometimes talk about end-to-end wire I would say, that is going from a server to a switch to another server. That’s a good start, but really what you need to provide a robust scale-out environment that consists thousands of servers.

We also made a very rock solid software layer on the server side and you need the management software to help you deploy and maintain the fabric, as well as managing conjunction to improve utilization and to improve performance of the overall environment, and this way, by providing all these things together, the end-to-end wire and then on top of it the management and the service software, only then you call really put in the hands of the customer, a true end-to-end solution and that exactly has been the focus of Voltaire from day one.

Not only did we develop the hardware that was needed, the hardware platform, but we extensively invested on the software side because we knew that this is what customers need along with high availability to really successfully deploy their solutions. I think we have said that all along, that if you look at Voltaire, for every hardware engineer we have probably three software engineers and it shows in the market as it positions Voltaire apart from the competition and really helps us quite nicely to differentiate our solutions against the competition.

Tom Earls - RBC Capital Management

Okay, thanks. That was very helpful. I’ll leave the floor to others.

Operator

The next question is from Doug Reid of Thomas Weisel Partners.

Doug Reid - Thomas Weisel Partners

Josh, I know you just reviewed some of the drivers behind gross margin outlook for ’09. I just wanted to know if you can give a better sense of the relative significance of those factors. Specifically, I’m wondering to what extent you’re relying on higher margin from new product launches in order to stay within the 50% to 55% band and then also I want to get a sense of the significant server volume? How sensitive is that margin range to volume?

Joshua Siegel

Okay Dough, thanks for the question. With regard to product mix, we clearly are sensitive to continuing to sell the switching solutions for Voltaire. We moved from 60% plus in ‘07 to over 70% in ‘08 and we don’t see any reason why those mixes should change radically, but we are sensitive to that mix.

The other thing I would add to that is, as we released last week, we introduced the Unified Fabric Management Software platform which will be available in the middle of the year and we see that as a driver for being able to increase gross margins if there is factors going other away from competition.

So, again I think product mix is the first and foremost. If we look at volume, I think you can take a look at where our volumes levels have been over the last 12 months and you’ll see where we’ve been able to retain our gross margin expense, our gross margin, even with reducing volume. So to the extent that we stay in the same volume levels as in the last year, I think we are okay.

Doug Reid - Thomas Weisel Partners

Okay, helpful thanks, just one more though and excuse me if you addressed this earlier, but I’m trying to get a sense of when you get the full run rate of your OpEx reductions, do we see cost reductions phased in over two quarters or are you going to do all of that this quarter?

Joshua Siegel

Some of it was phased in Q4, much of it will be phased in into Q1, but again where we’re going to see it on the R&D side will be only in the second half of the year as it will be more than made up for by product spend and investment and product development for releases in the second half of the year. So, in SG&A you will see it from Q1 and in R&D you’ll start to feel it in the second half of the year in Q3.

Doug Reid - Thomas Weisel Partners

Great. Thanks so much.

Operator

The next question is from Glenn Hanus of Needham and Company. Please go ahead.

Glenn Hanus - Needham & Co.

Good afternoon. Just following up on the competitive question, could you talk a little more specifically about what you are seeing relative to QLogic and Cisco on the InfiniBand side, and then just InfiniBand competing in the marketplace these days versus 10-Gigabit Ethernet and how you think adoption is going and how you think the economic situation is impacting adoption of InfiniBand? Thanks.

Ronnie Kenneth

Thanks Glenn for the question and thanks for joining the call here. In respect to Cisco and QLogic, I think that Cisco took a decision probably to deemphasize InfiniBand as they move forward, which is I believe good news for us, as we don’t think that for the customers only the bandwidth, the license fee and the scale-out session of InfiniBand, they have a good solution against.

If you look at the financial services market that I indicated and specifically the market data application, we don’t see Cisco there. I can tell you that we don’t lose to Cisco in that segment, purely simply because they don’t have the right solution, the right technology there.

With respect to QLogic, they have been in the market I think for probably about two years now and we have been able to maintain clearly our leadership there. Just for your reference, we have shipped today probably close to thousand chassis of Director level switches. So, I think we really have built a strong expertise, not only in this kind of switching solutions for the high-end, but also as I indicated earlier the software that comes on top of the fabric to help you deploy and manage the scale-out environment.

So, I think that basically I feel very good about our ability to continue and differentiate against them in the marketplace. I think they also talked about delivering a 40 gigabit per second switches based on their own silicon; we haven’t seen that in the market yet. Does that answer the question Glenn?

Glenn Hanus - Needham & Co.

Yes and the rest of the question was more about InfiniBand competing versus other protocols and how you see the economy impacting InfiniBand adoption or not?

Ronnie Kenneth

Everybody and every technology I believe is being affected by the economy. I think that relatively to the ramp up of 10 gigabit Ethernet, I think that InfiniBand is probably doing better because it’s helping people in critical mission application. So, somewhat less sensitive I would say compared to 10 gigabit Ethernet, but still obviously all of these technologies are being impacted by the macro-environment.

Now, I think that InfiniBand and especially now with the availability of 40 gigabit per second has a well defined market for itself, that I don’t think that definitely 1-Gig or even 10 Gigabit Ethernet can really address. So, in that respect I think the boundaries are well defined there and the gap is well maintained between InfiniBand 40 Gigabit per second and 10 Gigabit Ethernet is being now introduced to the market. So, I don’t necessarily see that as a competitive technology to InfiniBand. Obviously it’s addressing other needs of customers in different aspects of the market.

Again going back to Oracle, I think it’s a good example. I mean it was very easy to reveal obviously. I think for Oracle to consider going into Ethernet or 10 gigabit Ethernet, but when they really needed to boost application performance, they knew that the only technology that can deliver on that is InfiniBand and by the way, if you also look under the hood of the HP-Oracle database machine, you’ll find out that the storage is not only the service, but the storage is being connected with InfiniBand and in fact it is one of the key reasons why you can see really a boost in the performance of the HP-Oracle database machine.

So, I think here’s another example that here is a market opportunity that hasn’t been fully advanced, but clearly validated by Oracle and that is the connectivity to storage.

Glenn Hanus - Needham & Co.

Is the Oracle machine adopting QDR?

Ronnie Kenneth

Well, all I can tell you that we are shipping now DDR. I mean beyond that you’ll have to turn to Oracle.

Glenn Hanus - Needham & Co.

All right. Thank you.

Ronnie Kenneth

Thank you, Glenn.

Operator

(Operator Instructions) There are no further questions at this time. Mr. Kenneth would you like to make your concluding statement?

Ronnie Kenneth

Yes, thank you everyone for joining us today and for your ongoing support for the company. These are complex times; however, we believe we have the strong fundamentals and strong cash balance to meet the opportunities and execute on our plan to drive long-term growth for the company. We look forward to hosting you again on our next call. Have a good day.

Operator

Thank you. This concludes Voltaire’s fourth quarter 2008 results conference call. Thank you for your participation. You may go ahead and disconnect.

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