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Input: JERUSALEM (Reuters)  - Israeli chip maker Mellanox Technologies  saw  its  shares surge on the Nasdaq on Tuesday after activist hedge fund Starboard Value LP bought a 10.7 percent stake to influence strategy.
The logo of Mellanox Technologies is seen at the company's headquarters in Yokneam  in northern Israel July 26  2016. Picture taken July 26  2016. REUTERS/Ronen Zvulun
Starboard became the biggest shareholder in Mellanox after disclosing its stake purchase - valued at around $300 million - and said the chipmaker could improve its financial performance.
In particular  Starboard is concerned that Mellanox  which makes computer networking products using InfiniBand and Ethernet technology  rejected a potential merger with rival Marvell Technology. Starboard  in its filing  said Marvell had expressed interest in discussing a “potential strategic transaction” but  Mellanox  declined to enter into talks.
 Mellanox’s  shares opened 14 percent higher and were still up 11 percent at $56.65 by 1552 GMT.  They  had risen 25 percent this year through Monday  underperforming Marvell’s 56 percent rally and a 48 percent increase in the Philadelphia Semiconductor index.
The source noted that  Starboard - which believes Mellanox is spending too much on research and development and other corporate expenses to try to boost revenue  sacrificing margins compared with peers - must stop disappointing investors .
“ They  need to improve financial performance or sell the company. Either way it is to see the stock price go up significantly ” the source said  noting there was a “long list of potential buyers” for Mellanox.
 Mellanox  which was founded in 1999 and has a market value of nearly $3 billion   said in a statement on Tuesday that  it  “welcomes the input and investment” from all  its  shareholders.
“In line with our commitment to drive enhanced shareholder value  the Mellanox board of directors and management team continually review our operational and strategic priorities and are committed to acting in the best interests of our shareholders ” it said.
Barclays analyst Joseph Wolf  who downgraded  Mellanox  to “underweight” after  its  earnings report  said that while there is room for  Mellanox  to cut expenses   its  growth stems from accelerating revenue during product transitions.

Mellanox shares jump 11 percent after Starboard stake purchase