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Executives

Ehud Helft - CCGK Investor Relations

Ronnie Kenneth - Chief Executive Officer and Chairman

Josh Siegel - Chief Financial Officer

Analysts

Daniel Meron - RBC Capital Markets

Mark Moskowitz - JP Morgan

Glenn Hanus - Needham & Company

Voltaire Ltd (VOLT) Q2 2009 Earnings Call July 29, 2009 10:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Voltaire Second Quarter 2009 Results Conference Call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded.

As a reminder, this conference is being recorded July 29, 2009. I would now like to hand over the call to Mr. Ehud Helft. Mr. Helft, would you like to begin?

Ehud Helft

Thank you, operator. And good day to everybody. I would like to welcome you to Voltaire Second Quarter 2009 Earnings Conference Call and thank Voltaire management for hosting this call. With us on the line today are Mr. Ronnie Kenneth, Chairman and Chief Executive Officer; 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 earnings release also pertains to this call.

If you have not received the copy of the release, please call CCGK Investor Relations at 1-646-797-2868 or view it in the Investor Relations or News Sections of the company's website at www.voltaire.com. 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 investor's understanding and assessment of the company's ongoing core operations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures is included in the second quarter 2009 earnings release. I will now hand over the call to Mr. Ronnie Kenneth, Voltaire's Chairman and CEO.

Ronnie.

Ronnie Kenneth

Thank you, Ehud. Welcome everyone and thank you for joining us today to discuss our second quarter results. Revenues for the second quarter totaled 10.7 million, well up from the first quarter. Gross profit totaled 5.7 million. This quarter we substantially narrowed our operating and net loss as a higher revenues and prudent expense management directly contributed to the results. We presented good sequential order growth as demand pick-up for our existing and new product portfolio with bookings nearly doubled last quarter.

We are seeing strong demand in the sales for our 40 gig QDR InfiniBand directed switches, which we began shipping at the very end of the quarter. Most of the classical HPC deals emerging today, specified Intel Nehalem based servers and 40 gig InfiniBand to affectively maximize the new capacity provided by these next generation server architecture. We are therefore entering the third quarter with a significantly larger pipeline and backlog then in recent quarters. We expect the second half of the year to be above 40 gig order ramp-up. Incremental talks of business, linked introduction to move vertical by Oracle giving us a confidence for missing our annual revenue guidance of around $50 million. Now, to the quarter in further detail.

Looking at the vertical markets, we saw return of the government deals. The government vertical was the largest vertical this quarter in all of the geographies and the largest in the U.S., bringing in 30% of total orders. Here, as well as in research and education vertical, which was 20% of total orders. The combination of our 40 gig directors and Nehalem base servers were winning factor. In several cases our new UFM, UFM software product to be the differentiator where just the competition for closing new business. The Karlsruhe Institute of Technology, KIT is one customer who selected Voltaire 40 gig director switches and UFM software for the new super computer, dedicated to cloud computing research.

Financial services continued to remain strong this quarter. We've more than 20% share of the total orders. We announced some exciting new solutions with New York Stock Exchange technologies that dramatically speed up the performance of market data applications and automated trading. We are now opening the fastest solutions for market data and trading on both 40 gig and 10 gig Ethernet platforms. We want business with new customers in the energy verticals, notably in the oil and gas sector. We like the energy vertical, because it consist of few very large customers that relay on and frequently refresh their HTC data centers continuously buying more wholesale products.

We also continued to see momentum in the telecommunication vertical as a result of our partnership with Oracle. However, these switches are including with every HP-Oracle data base machine and this is helping us expand and win other types of business with Oracle. The majority of our business continued to flow through our robust OEM and refitted channel. And on June 30th, IBM began shipping the Voltaire design 40 gig switch module for IBM late center. We shipped more than 30 units during the quarter and are seeing demand went up rapidly. HP also made Voltaire 40 gig switches available as part of the HP Extreme Scale Out portfolio introduced during the quarter.

It was strategic new offering for HP, targeting scale out data center customers and they take Voltaire as a recommended interconnected fabric for the solution. Fujitsu, our new partner in the Asia-Pacific and Japan region began placing orders during the quarter and we have starting to see a growing pipeline. And we are starting to see a growing pipeline there. Together, we want to deal with the major manufacturing customer, which build the system based on our 40 gigabit InfiniBand. In terms of our switching product, at the end of the quarter with GA, the grid director of 4700. Our high port count 40 gig switch.

We shipped over $1 million worth of these switches during the quarter, and looking ahead see significant deal opportunities for this product in the second half. Since shipping started December '08, we have already shipped roughly 400 units of our other 40 gig switch, the grid director 4036. On the software front, we viewed the development of management and application performance enhancing software for both InfiniBand and Ethernet as a key strategic initiative. Towards the end of the quarter we released several new software products already contributing to the revenues. The friends of these products, UFM Management Software is unique from other fabric management software because it takes a details fabricwide view of the environment in order to optimize performance and management of scale-out server and storage fabrics. It comes a decent offering don't even compare to what UFM software has to offer.

Demand for UFM is drawing at an increasing rate. Nine customers already purchased the software for deployment ranging in size from 100 to 1000 of servers. We also introduced the outer MPI Accelerator or OMA software. It's offering significantly increases the performance of applications and server in storage environment by nearly 30%. This software is yet another key differentiator and is already helping us with business. Looking ahead to the second half of 2009, there are a lot of exciting developments on their way in our work to treat the company to lead the delivery of scale-out fabrics in both HPC and enterprise center.

On the InfiniBand side, we now had state-of-the-art 40 gig director switches in market that are winning against the competition because of their superior low licenses, scalability and tight coupling with solutions from our Global server OEM partners. In addition, we deliver added-value to the customer in terms of management and application performance through our unique and depreciated software offering. One indicate of our InfiniBand leadership is the latest top 500 list of the world's most powerful super computers released last month. On this list, Voltaire switches filed more than 50% of InfiniBand deployments more than doubled the share of any other InfiniBand system vendor. Voltaire share of deployment increased 14% over the November 2008 list. Voltaire switches are also used in 88% of the commercial sites using InfiniBand, a clear reflection of our leadership across vertical markets.

While we intend to maintain our leadership in the InfiniBand market, we also are focused on development of our next generation 10 Gigabit Ethernet switches which will become available later this year. During the quarter we announced the first switch in our 8 Ethernet portfolio, the Voltaire Vantage 8500, it was largest non-blocking Ethernet data centre switch. These switches cut the lines on the new data centers that are being built for virtualization and cloud computing where the ability to scale to out in cost effective manner is a top priority. Voltaire Vantage 8500 addresses these needs and stands out from the competition by providing higher performance, lower latency and significantly lower costs. As Ethernet becomes closer to InfiniBand and it's functionality, we are able to achieve this in Ethernet by incorporating key trades from the our InfiniBand products into their asset portfolio. I'm pleased to know that yesterday we announced the new open ecosystem of partners that will help accelerate the adoption of our Voltaire 10 Gigabit Ethernet coverage.

These industry leading partners bring a complete best of freight solution for customers. I'd like to call out a couple of these partners to you. First is the selection of Fulcrum Microsystems as our 10 Gigabit fixed silicon supplier. Our switches take advantage of the most advanced features of the Fulcrum silicon and take a step farther by adding our own IP for traditional benefit to our customers. On the 10 gig Ethernet adopted side our solution is interoperable with any standard base 10 gig adapter, including product for Intel, Minimo, Sheffield and others. Overall, we're very excited about the successful launch of our new Ethernet product.

They had been well received by prospective customers and our OEM partners, while looking at new ways to compete with CISCO as well as by industry analysts. We are already seeing pent-up demand for our Ethernet products, and I firmly believe that we are pouring to a broad market acceptance when we G8 later this year. I would now like to turn to our CFO Josh Siegel for the financial review. Josh?

Josh 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 today. Revenues for the quarter totaled $10.7 million, up 39% from the $7.7 million last quarter compared to 17.1 million in the second quarter, last year. During the quarter, we saw a strong increase in orders of our 40 Gigabit switches as well as initial revenues on our UFM software. In terms of over 10% customers for the quarter, both HP and IBM exceeded 10% this quarter.

Gross profit for the quarter totaled $5.7 million, up 30% from the first quarter's $4.4 million, and compared to 9.3 million in Q2 last year. Gross margin for the quarter totaled 52.9%, compared to 56.8% in the prior quarter and 54.5% in the second quarter last year. I will touch on the gross margins further in a movement. Operating expenses totaled $8 million in the second quarter. This is roughly flat to the operating expenses last quarter once you net out the $1.7 million provision for doubtful debt we recorded in Q1. I want to point out that R&D expenses for the quarter also came in flat at $4 million compared to the first quarter, lower than the $4.5 million guided, partially due to the prudent expense management and partially due to timing shifts between the quarters.

Overall, during the first six months of the year we succeeded in updating efficiencies from our operations, which translated to roughly $1 million reduction in our first half planned operating costs. Net loss for the quarter narrowed substantially from last quarter, totaling $2.3 million compared to $5.5 million loss last quarter. And the $840,000 net income in the second quarter last year. Net cash equivalents, marketable securities and deposits at the end of June were down $50.6 million, compared to $54.8 million at the end of March but no debt. During the quarter we used $2 million from operations and $2 million for fixed assets. All and all, we continued to retain a healthy cash position, which is critical in the current environment.

Our DSO declined to 45 days compared to 66 in the first quarter due to aggressive crunching efforts and significant increase in sales towards the end of the quarter. Looking ahead, we continued to operate in a challenging market, requiring prudent cost management. However, are encouraged by the positive trends we are witnessing. The healthy order intake this quarter enables us to enter Q3 in a stronger position than in the last two quarters, also granting us better visibility through the rest of the year. Coupled with the pipeline for our existing products and growing demand for our new products, we can reiterate our forecast for annual 2009 revenues to be around $50 million, with a seasonally strong second half. Now with regard to gross margins.

We are in initial phases of the rapid ramp-up in our new 40 Gigabit switch family. We see our 40 Gigabit products reaching more than 50% of our business before year-end. And this family currently bears lower margins as they are not yet benefiting fully from the economy to scale in cost reduction. The new product mix will create short-term pressures on the second half gross margins. With the second half margin expected to be in the range of 45 to 50%, we expect gross margins for the year to be around 15%. We expect in year 2010 our annual gross margins to return to the previous mid-50s level, as margin on the QDR increased following economies of scale higher margin Ethernet products beginning to sell and the ramp of our software products.

On the operating expense side, the proactive efficiency measures are already enabling us to maintain expenses at or below the 2008 levels, with operating expenses for the year expected to be in $34 million range, excluding the onetime bad debt provision in the first quarter. With that, I'd like to turn it back to Ronnie for a few more words.

Ronnie Kenneth

Thank you, Josh. Just to summarize, we believe we have the right product go-to-market and operational plans in place to meet our revenue targets for 2009, while continuing to grow and expand the company by the strengthening its position as the market leaders in the InfiniBand market. Simultaneously, we are building exceptional of 10 Gigabit Ethernet product that will become available at the right time to expand Voltaire's total addressable market and solidify future growth for the company into 2010 and beyond. With that, I would now like to open the call for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions). The first question is from Daniel Meron of RBC Capital Markets. Please go ahead.

Daniel Meron - RBC Capital Markets

Thank you. Hi Ronnie and Josh. Congrats on the good rebound you had in the quarter. The first question is how do you see the breakdown between the third quarter or the fourth... should we still expect a good ramp-up in the third and fourth quarter on sequential basis here?

Josh Siegel

Daniel, thanks for joining the call. Yeah, absolutely. I think we see the seasonally strong second half to be growing on a sequential basis between the quarters.

Daniel Meron - RBC Capital Markets

Okay. And then, as you look into 2010 and you have the E the Ethernet product that you're ramping up with the UFM product. A lot of these I guess good products cycle ahead of you is starting to materialize into orders. What kind of growth rate should we be looking at after 2010? And then you do call for the 55% gross margin. So I was just trying to get a sense on where the revenue run rate could go to?

Josh Siegel

Well Daniel, we're not giving guidance yet for next year. We'll wait a little bit of time for that. But I think the best direction is that we see the InfiniBand markets still continuing to grow and it's on rise. And we expect to take our first share of that growth on the InfiniBand side. And then on top of that we see additional growth from our on-trade into the Ethernet side, which is obviously a much larger market but and we're proving ourselves as the newcomers there. So, I think I'm not going to give guidance for next year, but I think you should take that growth in the InfiniBand market together with incremental growth of Ethernet and make your own model.

Ronnie Kenneth

Okay. Daniel it's Ron here. Just want to add that, it's not only the initial indication that we get from the market in terms of the level of excitement from their side to our product, but also we should take into the consideration the fact that 10 Gigabit Ethernet especially as we'll start seeing that appearing as part of integral part of the share provision and the price reduction as a result. So, combined user technology, they are probably going to be a very nice ramp-up in the market in general. And I believe we are in a great position to capitalize on that.

Daniel Meron - RBC Capital Markets

Okay, great. And then, as we look at the operating expenses into 2010 and as you see growth, should we expect further growth in the R&D line material one? Because you have the revenue growth or the sales of marketing or you think that that you've the platform right now to support the growth that you guys expect in 2010?

Josh Siegel

So, I think we will see, we will continue to invest new money and incremental money into the R&D to retain our technology and product edge. But as we've said we've already incorporated significant part of that increase to hold the two technologies within Voltaire over the last 12 to 18 months and our OpEx line. So, I think the increase will be relative to our expected growth as well on the revenue side so. So I wouldn't say it's going to be a material increase.

Daniel Meron - RBC Capital Markets

Okay. Great. Thank you. Good luck.

Josh Siegel

Yeah. Thank you, Daniel.

Operator

The next question is from Mark Moskowitz with JP Morgan. Please go ahead.

Mark Moskowitz - JP Morgan

Yes. Thank you. Good afternoon Josh and Ronnie. Couple of questions. Can you first give is a little bit more color on the second half of revenue guidance? How much of the second half revenue guidance include the GA of your Ethernet solutions and what could be the gross margin impact there?

Josh Siegel

Hi Mark. It's Josh. With regard to second half we have obviously see it seasonally strong. And we see seasonally strong from several factors and we see it more from the InfiniBand side because on the Ethernet side we will be releasing our product towards the end of the year and we see that being a major pipes order going into '10, but less material with regard to revenue for this year. The fact that that we see going into the second. The fact is that we see keep going into the second half; one is our 4700 QDR switch which we began shipping already in June.

And we have a significant pipeline for going into the second half. In addition, the stock where Unified Fabric Manager that we released, that we seek coming attached with many of the installed that are in our pipeline today. Third, we have IBM releasing their QDR Blade switch which is coming from Voltaire. So, those factors, coupled with to beat some stabilization in the economy for the second half, we see the ramp-up for the Q3 and Q4. I think there can be some upside on the Ethernet side, but it will be towards the end of the year.

Mark Moskowitz - JP Morgan

Okay. And what vertical do you see that traction and will be your heritage verticals first? Or are you going to see that more and maybe some newer commercial enterprise verticals as far as Ethernet is concerned?

Ronnie Kenneth

So, it's Ronnie here Mark. I think that based on what we see today, we see kind of a demand from both market segments if you will. It's enterprise in a much higher level of interest I would say that we have used to see before. And of course across the verticals that we know and penetrate well today in the HPC market. I think HPC market expansion is very metro for us as we'll see a report side of their people moving for 1 gig to 10 gig. I think with Voltaire's leadership already to scale out market in HPC will allow us to really fully capitalize on that.

With Ethernet I don't anticipate that necessarily to happen big time this year and more so towards 2010. And on the enterprise levels, people who are building today or planning to build a scale out environment in the next generation data centre, private clouds in the enterprise, we expect these to be early adaptors of our technology starting early next year.

Mark Moskowitz - JP Morgan

Okay. And then just a follow-up before I ask another question. Josh can you talk about software? Can you give us some update in terms of how much software is, what were whole revenues and where you see that trend over the next 12 months or so?

Josh Siegel

Sure. Today, we're UFM just released in June, also OMA product was released in Q2. We see the software revenue in the first half to be still in single-digits just under 5%, where we also though getting an uplift from the software revenues are is affected there coming with support revenues, as well which are going over 12 month period. The trend that we see on the software side based on the pipeline that we are looking at in the second half of the year, is for software to go above 5%, the 5 to 10% level in 2010.

Ronnie Kenneth

Mark, its Ronnie here. Just want to add to these, that we believe that one major OEM will also carry our UFM Management Software as part of their portfolio before year-end. So, that's going to give us a boost, I believe, later this year, as well as in 2010 and beyond. And OEMs are relatively slower in picking up this kind of technology, specifically software technology. So, we are very pleased with that progress. But in the same time, we also took a decision not only to promote our software by the OEM channel, but also through re-sellers that are specializing in this kind of selling.

And so, by doing that and adding significant there across the world to promote our solutions there, we are very excited about the potential of the software moving forward.

Mark Moskowitz - JP Morgan

Okay. I appreciate the color there. And Josh, coming back to the expenses. You guys are doing a nice job in terms of cost containment. I'm just trying to get a sense of as you move through the second half of the year and the growth that you are telegraphing with your reaffirmed guidance of 50 million in revenues, what does that suggest in terms of OpEx uptake? Will we see a similar growth uptake for the second half in expenses or less? Did that give a little leverage in the model?

Josh Siegel

I think you will see in the second half, if we go back to the beginning of the year, I guided towards being flat to 2008 and that $34 million range for OpEx. As you see in the first... and I also guided to that fact that the first half of expenses would probably be higher even then in the second half based on the fact that we're continuing to... we are bringing out the new R&D products and so forth in the Q2, Q3, Q4 timeframe. So, in the end we've been able to curtail some of those planned expenses, just be more efficient all the way around. So I think -- and some of those expenses are just being pushed in terms of timing to Q3, Q4. So, I would say that we're still on track to being at '08 levels or below and there maybe some minor uptick in the second half based on some expenses that we were able to push out. In fact we need to incur them.

Mark Moskowitz - JP Morgan

Okay. Hey, one more question and I'll cease the floor. Ronnie, can you give us a little more insight in terms of your existing HPC base in terms of high performers computing. They are currently used or utilized InfiniBand or how much of that base is looking at Ethernet and just trying to get a sense in terms of the cannibalization risk to your existing business versus the opportunity? Can you kind of help us understand the puts and takes there if possible?

Ronnie Kenneth

So, we don't really anticipate any cannibalization there whatsoever. I mean if you look at a top 500 list, which is a good I think indicator for how different technologies are being deployed in the general HPC market, you'll see that actually out of the top 500 list, 25% InfiniBand, 25 from proprietary technologies and the rest of which is 50% is one Gigabit Ethernet. So, there were always kind of people who want to drive the Formula-1 and obviously they turn to us and deploy InfiniBand. And there are people who want to run fast, but still do it while driving a sedan if you will. And these are the one giga is that are ready to refresh and move to 10 Gigabit when the price of 10 Gigabit drops which is on 50 patent I believe sometime in next year. So we see these two markets really evolving in parallel tracks if you will, not cannibalizing from each other.

Mark Moskowitz - JP Morgan

Thank you.

Operator

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

Unidentified Analyst

Hi. This is Wugene Hal for Tal. Real quick question in terms of close rates. How were the second quarter close rate versus the first quarter and how do you foresee the second half close rate to make your full year guidance?

Josh Siegel

Hi Woo. Do you mean by close rate success in closing deals of the pipeline relative to our competitors?

Unidentified Analyst

Deals of the pipeline relative to expectations relative to first quarter.

Josh Siegel

Yeah.

Unidentified Analyst

So, 2Q versus the first quarter and then, second half versus 2Q.

Josh Siegel

Right. So, we are had actually, a significant increase in our close rate, in Q2 compared to Q1. Our bookings were significantly higher as Ronnie talked about in his remarks. And in fact, leaving us with healthy backlog going into Q3. So, I would say, it's much higher close rate and some stabilization in the environment, in terms of our customer base and their order rate.

Unidentified Analyst

Got it. And then, I know its fairly early on, Ronnie. But I know it's fairly early on Ronnie, but could you just talk a little bit more about the development of the Ethernet pipeline? And also in your early discussions with customers and OEMs in terms of your Ethernet product, how are customers viewing? You touched on it a little bit earlier in terms of positive clouds. But are you still being drag into discussions of traditional networks versus next generation networks?

Ronnie Kenneth

So, first of all you know in our engagement with both OEM resellers and end users, we constantly on a daily basis confirm the opportunity ahead of us and the fact that what we bring to market is very unique and has it's own merit. So this is very, very encouraging for us. I think that the server OEMs find these solutions extremely attractive to be able to integrate it into their scale out solutions on both hardware level as well as the software level and very effectively compete with Cisco against their platform. So I think it is very attractive to them. They see the unique value in what we bring to the table. And I think it is a very powerful combination there.

I think the reception of the this is really... people are very receptive to it because it's 10 Gigabit Ethernet, it is a standard Ethernet. In fact it's more than the regular Ethernet because it is adhering to the latest evolution of Ethernet to include also the converged enhanced Ethernet features in it and the unification if you will of server and storage profits. So, I think this is what people expect. I think we are one of the first movers into this. This is the latest technology.

Interesting enough, if you look at the evolution of Ethernet it is adding more and more functionality, it is coming from InfiniBand for us. As a result is really a natural extension because we understand the technology, we understand the implications and know how to built to optimized environment around that. So, overall nothing but a very positive feedback.

Unidentified Analyst

Okay. Great thank you.

Operator

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

Glenn Hanus - Needham & Company

Good morning guys.

Unidentified Analyst

Hi Glenn.

Glenn Hanus - Needham & Company

Look see, how about on the competitive front maybe just give us your updated view on InfiniBand side competing with QLogic and then on the '10 gigabyte Ethernet side maybe talk a little bit more about your view of the go to market that going to be more through the OEMs or the channel and then just kind of you view on computing with Cisco there?

Ronnie Kenneth

Yes Glenn. It's Ronnie here and thanks for joining the call. I'll start with InfiniBand and the competition from QLogic. QLogic, I think several months ago announced the family of InfiniBand product. And in terms of level of engagement within the marketplace, I would characterize it as really minimal engagement or competition if you will. I don't recall any substantial call it significant deal that we lost to them in the last couple of months since we introduced also our latest 40 gig solutions as well.

So, overall I think that Voltaire has a robust solution for 40 gig. And as I said many, many times when you look into scaling out your fabric environment, it's not only about having a switch and the cable than the communication cards to connect them together. It's a good start to have all of that. But on top of it to be able to be a leader of this market as Voltaire is, you also have to have the reliability, to have liability functionality and of course the software layers that help you a) accelerate the application performance and b) effectively manage the environment. With our series of application performance packages as well as the UFM management, I think it really puts Voltaire ahead of the pack and nobody comes even close to what we have to offer there. So I think that we are well differentiated to continue and win business as was evident from the top five 500 list that's detailed just few minutes ago.

Moving to the Ethernet side, again we decided to expand our offering to include also Ethernet solutions, but we are not going to compete with every vendor out there that has 10 Gigabit Ethernet in their portfolio. We are focused and we optimize our solution for scale out computing that is really the foundation of cloud computing. And this is really the wave of the next generation data centre. So, we look at the market that we by the way think its pretty big and I believe it's north of the 1 billion in the next two to three years to only focus on that segment of scale out computing. And yes, there might be several company out there offering 10 Gigabit Ethernet solutions, we don't believe that any of them has an optimized solution for scale out fabrics. And as a result, with our scale out technology implemented into the switches that is really leveraging the InfiniBand technology, the low power consumption, the low cost of it, the non-blocking session of it.

All of this is really enabling us to come with a very, very attractive platform for scale outs not only for 100 servers that are connected in this kind of cloud, but also 1000 of servers. So, if I need to identify a competitor that help solutions in these area, I would probably at this point only mention Cisco. But again I think that we have much more attractive solution there that scales out with the 1000s of servers in an unblocking section much more affectively than Cisco is. And I think that by partnering with server OEMs, our customers can really enjoy the best of great solution, that outperform what Cisco has to offer.

Glenn Hanus - Needham & Company

Do you anticipate in terms of OEM versus channel or other go-to market on a 10 gig Ethernet. Is it mostly going to be three year OEMs or how do you anticipate that rolling up?

Ronnie Kenneth

So, I think in principal to have the very same go-to market strategy we have today, which is heavily kind of buyer stores leveraging the server OEM and resellers as we have them today. I think that our offering is in particular very attractive factors server OEMs because they now need to provide an integrated solution to customers and really compete in the infrastructure for clouds computing against Cisco. And I think that we are there in the right time with the right offering to help them do that very effectively. So, I would anticipate the relationship and partnership with several OEMs to remain as strong as they have been so far.

Glenn Hanus - Needham & Company

Can you add a little color to your remarks on Oracle and expanding your opportunity there and that how, what kind of growth you are seeing with the database machine?

Ronnie Kenneth

Yes, so I mean again Glenn, I wouldn't want to talk on behalf of Oracle here. But what I would say that we additionally had a design win with HP to provide the platform for the HP Oracle database machine and in an every basic unit of that solution you Grid switches. I think this is going well. I mean you can basically look into the report from Oracle and see how excited they are about the ramp-up of that solution. But as a result of this I think of this partnerships, we also... we are in a better position to add value to other Oracle offering such as Oracle 11g RAC that is basically a scale out solution for Oracle database.

And there we make a difference in terms of performance and have been working quite closely with the server OEM to provide a solution there. That is the best solution in market today to scale out an Oracle 11g RAC offerings. So that's basically what I meant there. And I hopefully I added some more color to that.

Glenn Hanus - Needham & Company

Thank you.

Operator

The next question is from Dan Meron (ph) from RBC Capital Markets. Please go ahead.

Unidentified Analyst

Hi Ronnie and Josh. Again congrats on good execution here. I have a question regarding your Ethernet strategy. And if you could educate us a bit about the sales channels that you are using. What I mean is, are you approaching like the same people in the OEMs, are your sales people, just a sense on... is selling InfiniBand and Ethernet requires different sort of sales strategy or is it just basically the same and just incremental education for sales people and for OEMs et cetera?

Ronnie Kenneth

So, Tom. Ronnie here. Thanks for joining the call. I think the extension into Ethernet was really a natural exercise for Voltaire for couple of reasons. They as I said, I think Ethernet is adding more and more functionality as InfiniBand is. The place we choose to really deploy Ethernet is exactly the same, probably the same problem as in InfiniBand is for scale out computing.

We are also using the same chapters of InfiniBand for the Ethernet solution. So there, there is a lot of synergy if you will between the technologies and the engineering on the product as well as we said all along, every people started at work on InfiniBand, is also going to work on Ethernet. So, the UFM Fabric Management, the application acceleration that was evident in the NASDAQ with the New York Stock Exchange on performance all worked on both platform. So because they solved the same problem but different kind of technology characteristics, I believe that they are very same OEM model that we have today or remaining in OEM centric company, nothing fundamental will change there. Maybe in the engagement with the server OEMs, it opened opportunities to deal with other division that haven't been engaging with that so far. But it principle, the same to same channel and the same infrastructure from our end.

So I don't anticipate any major changes into go-to market whatsoever.

Unidentified Analyst

Great. Thanks for all the color. And again congrats and good luck going forward.

Ronnie Kenneth

Thank you, Tom.

Operator

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

Ronnie Kenneth

Yes. Thank you everyone for joining us today and for your ongoing support. We look forward to hosting you again on our next call. Have a great day. Thank you.

Operator

Thank you. This concludes Voltaire's second quarter 2009 results conference call. Thank you for you participation. You may go ahead and disconnect.

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Source: Voltaire Q2 2009 Earnings Transcript
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