Voltaire Announces Continued Growth in Third Quarter 2010 Results

Voltaire Ltd. (NASDAQ: VOLT), a leading provider of scale-out data center fabrics, today announced financial results for the three month period ended September 30, 2010.

Third Quarter 2010 Main Highlights

• Year-over-year revenue growth of 25% and sequential revenue growth of 9%, reaching $18.1 million;
• GAAP net loss reduced to $0.8 million compared with $1.5 million in the third quarter of last year; non-GAAP net loss at $49 thousand;
• GAAP operating loss reduced to $0.6 million compared with $1.5 million in the third quarter of last year; Non-GAAP operating profit at $101 thousand;
• Positive operating cash flow of $3.6 million contributed to cash, cash equivalents and marketable securities as of September 30, 2010, which totaled $44.7 million; and
• Management expects revenues at the top end of the previously provided full year 2010 guidance range $67-70 million.

Third Quarter Results

Revenues for the third quarter of 2010 totaled $18.1 million, an increase of 25% compared to $14.5 million reported in the third quarter of 2009.

Gross profit for the third quarter of 2010 totaled $9.4 million, an increase of 27% compared to $7.4 million in the third quarter of 2009. Gross margin for the third quarter of 2010 totaled 51.9%, an improvement compared to 51% for the third quarter of 2009.

Operating loss on a GAAP basis, for the third quarter of 2010 totaled $618 thousand, an improvement compared to the operating loss of $1.5 million reported in the third quarter of 2009. Operating income on a non-GAAP basis, for the third quarter of 2010 totaled $101 thousand, a substantial improvement compared to the operating loss of $895 thousand reported in the third quarter of 2009.

Net loss on a GAAP basis, for the third quarter of 2010 totaled $768 thousand, or $0.04 loss per share. This represents an improvement from a net loss of $1.5 million, or $0.07 loss per share, in the third quarter of 2009. Net loss on a non-GAAP basis, for the third quarter of 2010 totaled $49 thousand, compared to a net loss, on a non-GAAP basis, of $949 thousand, or $0.05 loss per share, in the third quarter of 2009.

The company generated a positive operating cash flow of $3.6 million in the quarter. Cash, cash equivalents and marketable securities as of September 30, 2010, totaled $44.7 million with no debt, compared to $41.8 million as of June 30, 2010.

Management Comments

Mr. Ronnie Kenneth, Chairman and CEO of Voltaire commented, "We are very pleased with our business performance and strong financial results in the quarter. In the third quarter, we achieved a major financial milestone. We significantly improved our bottom line and generated positive cash flow, while increasing sales of our software and Ethernet solutions-- our top two long-term growth engines for the business. Time and again, our software proves to be a major differentiator for both our Ethernet and InfiniBand products and enhances our competitive edge. Through effective execution of a well-defined strategy, we are experiencing strong channel development and a growing customer roster. I look forward to enjoying the continuing fruits of our efforts for the coming quarters and years ahead.”

Outlook

Management updates its outlook for the year, expecting 2010 revenues to come in at the top end of its formerly provided full year guidance range, which was between $67 - 70 million with full year gross margins to be approximately 52%. Management improves its outlook for full year expenses, with operating expenses for 2010 to be in the range of $37.0 to 37.5 million, updated from an earlier estimate of between $38.0 to 39.5 million.

Third Quarter Press Release Highlights

• Sept. 20 - Voltaire Introduces New Software for Ultra-Fast Storage Access
• Aug. 30 - Voltaire Announces High Density 10 GbE Switch for Efficient Scaling of Cloud Networks
• Aug. 27 - Voltaire Offers Expertise on Improving Advanced Trading

Conference Call Details

The Company will also host a conference call today at 10:00 am ET. On the call, Mr. Ronnie Kenneth, CEO and Chairman of the Board, and Mr. Josh Siegel, CFO, will review and discuss the results for the quarter and will be available to answer investor questions.

To participate through dial-in, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call is due to commence. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

The call will be at 10:00 am Eastern Time; 7:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time.

The conference call will be broadcast live from a link on the Company’s website. To participate, please access the investor relations section of Voltaire’s website – www.voltaire.com – a few minutes before the conference call is due to commence. A replay of the call will be available from the day after the call for a period of 30 days. The link to the replay will be accessible under the investor relations section of Voltaire's website – www.voltaire.com.

Use of Non-GAAP Financial Measures

Voltaire reports its results of operations in accordance with GAAP and, additionally, on a non-GAAP basis. Non-GAAP operating income (loss) and non-GAAP net income (loss) are calculated based on the operating income (loss) or net income (loss) in Voltaire’s financial statements excluding non-cash equity-based compensation charges recorded in accordance with SFAS 123R. Reconciliation of this non-GAAP measure to operating income (loss) and net income (loss), the most comparable GAAP measures, is provided in the schedules attached to this release. Voltaire provides these non-GAAP financial measures because its management believes that they are useful in enhancing investors’ understanding of Voltaire’s ongoing performance. Voltaire uses internally the Non-GAAP information to evaluate the Company’s ongoing performance. Voltaire is providing this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results.

About Voltaire

Voltaire (NASDAQ: VOLT) is a leading provider of scale-out computing fabrics for data centers, high performance computing and cloud environments. Voltaire’s family of server and storage fabric switches and advanced management software improve performance of mission-critical applications, increase efficiency and reduce costs through infrastructure consolidation and lower power consumption. Used by more than 30 percent of the Fortune 100 and other premier organizations across many industries, including many of the TOP500 supercomputers, Voltaire products are included in server and blade offerings from Bull, Fujitsu, HP, IBM, NEC and SGI. Founded in 1997, Voltaire is headquartered in Ra’anana, Israel and Chelmsford, Massachusetts. More information is available at www.voltaire.com or by calling 1-800-865-8247.

Forward Looking Statements

Information provided in this press release contains statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to Voltaire's plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. They also include third-party projections regarding expected industry growth rates. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. These factors include in particular, but are not limited to, the impact of the economic downturn on capital expenditures by our customers and our product mix during the balance of the year. These factors and others are discussed in detail under the heading "Risk Factors" in Voltaire’s annual report on Form 20-F for the year ended December 31, 2009. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.