Benzinga  Aug 18  Comment 
Pacific Crest has increased its 2017 estimates of Cavium Inc (NASDAQ: CAVM) following its completion of the QLogic acquisition. But, the brokerage expressed its concern over the deal, terming it as "reactive," despite acknowledging cost synergy...
Benzinga  Jun 17  Comment 
D.A. Davidson analyst Mark Kelleher thinks Cavium Inc (NASDAQ: CAVM) acquired QLogic Corporation (NASDAQ: QLGC) for a fair price. On Thursday, the companies disclosed a deal whereby QLogic would be purchased for $15.50 a share comprising $11 a...
Benzinga  Jun 17  Comment 
As QLogic Corporation (NASDAQ: QLGC) shares are trading in Argus' former 12-month price target of $16, Argus' Jim Kelleher has downgraded the issue from a Buy rating to a Hold. Kelleher lowered his near-term rating on QLogic Corp to Hold while...
Benzinga  Jun 16  Comment 
After market close on June 15, Cavium Inc (NASDAQ: CAVM) announced that it will be acquiring QLogic Corporation (NASDAQ: QLGC) for $15.50 per share. Barclays’ Joseph Wolf maintains an Equal Weight rating on QLogic, with a price target of...
MarketWatch  Jun 15  Comment 
Semiconductor maker Cavium Inc. said late Wednesday it has agreed to buy networking infrastructure maker QLogic Corp. in a deal that values QLogic at about $1.4 billion, including $355 million in cash on QLogic's balance sheet. The deal provides...
Motley Fool  May 6  Comment 
While sales declined, the company beat analyst expectations across the board.


QLogic Corp. (NASDAQ: QLGC) makes electronics used to transfer large amounts of data between computer components -- usually servers. Host products, which connect computers to network and storage devices, account for 74% of sales.[1] The company outsources manufacturing and focuses on product design, development, and sales to original equipment manufacturers (OEMs) and distributors. Its chief customers include Hewlett-Packard, IBM, Sun Microsystems, Cisco Systems,and Dell.[2]

Sales of QLogic's products have shifted with the increased adoption of blade servers -- more compact and cost-effective than traditional rack-mounted servers. The company's revenue for host products (heavily used in blade server environments) grew by 6.65% in 2008, while the company's revenue for silicon products (almost exclusively used in non-blade server environments) decreased by 42%. [3]

QLogic's main competitors include Cisco Systems, Emulex, and Brocade Communications Systems.[4]

Business Overview

Although QLogic's net revenue increased every year from 2006-2008, its operating income decreased in each of the two years following fiscal 2006. Host products continued to make up the vast majority of QLogic's revenue, but silicon products fell 42%, reflecting the market's shift towards an acceptance of blade servers (which tend to not use silicon parts).[3]

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Year ending March 30[5]
QLogic Revenue and Operating Income ($ in millions)[3]
Segment 2008 2007 2006
Host Products 437.9 410.6 328.8
Network Products 101.8 88.3 70.7
Silicon Products 44.3 76.7 87.8
Other 13.9 11.1 6.8
Total Revenue 597.9 586.7 494.1
Operating Income 133.7 137.9 167.9

QLogic's fiscal year ends on a different day every year (March 30 in 2008, April 1 in 2007, and April 2 in 2006).[6]

Business Segments

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Year ending March 30, 2008[3]
  • Host Products (74% of 2008 Sales) consists of Host Bus Adapters (HBAs), which connect host computers to other network storage devices, and InfiniBand Host Channel Adapters (HCAs), which are high-performance communication links used in supercomputers and computer clusters. QLogic makes HBAs for the iSCSI and Fibre Channel interfaces. In fiscal 2008, QLogic was the largest Fibre Channel HBA maker with 49.9% market share.[7] The market's shift towards blade servers has placed a significant emphasis on this particular segment, as host products account for the majority of blade server products. This emphasis was mirrored by the 6.68% increase in host product revenue from 2007 to 2008, and by QLogic's introduction of newer and faster HBAs and HCAs in 2008. The introduction of these products and QLogic's already impressive market share is important for its future success, especially with companies like Emulex and Voltaire competing with QLogic in the market for host products.[8][9]
  • Network Products (17% of 2008 Sales) include Fibre Channel switches, InfiniBand switches, and storage routers and are used to connect different segments within a network.[1][10] Network Product revenue increased by approximately 15% from 2007 to 2008 due to the addition of InfiniBand switches to QLogic's product portfolio following its November 2006 acquisition of SilverStorm Technologies.[11] However, QLogic is still a relative newcomer to the market for network products, as Cisco and Brocade continue to dominate the market (holding a 96% share in the market for Fibre Channel switches).
  • Silicon Products (7% of 2008 Sales) consists of protocol chips and management controllers, which are used almost exclusively in non-blade computing. Sales in this segment fell by 42% in 2008.[3]

Key Trends and Forces

Increase in the market acceptance of blade servers is shifting QLogic's focus to blade server products

The market is ditching traditional rack-mounted servers and shifting toward blade servers because they save space, reduce power consumption, and reduce cost.[12] QLogic distributes both types of servers and its total revenue is hurt by the shift to the less-expensive blade servers. The changing market acceptance is reflected by a 6.65% increase in the revenue of host products (which include parts used in blade servers) and a 42% decrease in silicon products (which include parts used in non-blade servers) in 2007.[3]

In June of 2008, QLogic introduced new lines of HBAs, HCAs, and Fibre Channel Switches that may be used in blade servers and are faster than products currently available on the market.[8][9][13]

The loss of any one customer would cause a large negative impact on QLogic's revenues

In fiscal 2008, 47% of QLogic's revenue came from its three largest customers: Hewlett-Packard, IBM, and Sun Microsystems. As a result, a loss of the business of any of these companies would result in a loss of up to 20% of QLogic's total revenue.[5] In Q3 2008, QLogic introduced a line of brand new 8gb Fibre Channel switches and HBAs (important products for blade servers), which has secured HP's business for the foreseeable future.[8]

Top customers as percentage of total sales[5]
Customer 2008 2007 2006
Hewlett-Packard 20% 16% 15%
IBM 16% 17% 15%
Sun Microsystems 11% 12% 12%
Dell <10% <10% 10%

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Weak U.S. Dollar benefits QLogic's international sales

Because QLogic reports its revenues in U.S. dollars but does nearly half of its business internationally, it is affected by exchange rates. When the value of the dollar depreciates, QLogic's international sales grow in dollar terms. From 2007-2008, the dollar depreciated relative to the euro and Japanese yen.[14][15]

Competition and Market Share

  • Emulex: As of fiscal 2008, nearly 90% of companies from the Fortune 100 use Emulex for their storage connectivity needs.[16] Emulex is chiefly a competitor of QLogic's in the Fibre Channel HBA market, where it has a 40% share of the market, just behind QLogic's 49.9%.[4] Emulex also competes with QLogic in the distribution of blade server mezzanine cards (essentially circuit boards that are compatible with blade server networks), where it holds a 15% market share.[17]
  • Brocade Communications Systems holds a 67% market share in Fibre Channel switches. QLogic is a newcomer in this market with less than 4% share.[4][18]
  • Cisco Systems: In addition to being one of QLogic's main customers, Cisco Systems is also one of QLogic's competitors in the markets for Fibre Channel switches (where it has a 29% market share), storage routers, and InfiniBand HCAs and switches.[4][18] In 2005, Cisco received only 1% of its total revenues from storage area networking, and had a 10% market share. However, other companies provide bigger competition because of Cisco's lack of emphasis on storage networking.[19][20]
  • Voltaire Ltd. is a competitor of QLogic in the markets for InfiniBand HCAs and switches.[4][21]
Company 2008 Revenue ($ in millions) % Operating Margin 2007 Blade Server Mezzanine Card Market Share[22] 2007 Fibre Channel HBA Market Share[22] 2007 Fibre Channel Switch Market Share[23]
QLogic[24] 598 22.36% 73% 50% <4%
Emulex[25] 502 15.70% 15% 40% N/A
Brocade Communications Systems[26] 1,361 -1.06% N/A N/A 67%
Cisco Systems[27] 38,609 23.87% N/A N/A 29%
Voltaire Ltd.[28] 53 -4.95% N/A N/A N/A

The 2008 revenues are based on the fiscal year spanning from 3/31/07 to 3/31/08. The operating margin numbers are taken from the fiscal year spanning from 6/28/07 to 6/28/08.


  1. 1.0 1.1 QLGC 2008 10-K, Item 8:Financial Statements and Supplementary Data, page70
  2. QLGC 2008 10-K, Item 1: Business, page 1
  3. 3.0 3.1 3.2 3.3 3.4 3.5 QLGC 2008 10-K, Item 6: Selected Financial Data, page 25
  4. 4.0 4.1 4.2 4.3 4.4 QLGC 2008 10-K, Item 1: Business, page 3
  5. 5.0 5.1 5.2 QLGC 2008 10-K, Item 7: Management's Discussion and Analysis of Financial Condition, page 26
  6. QLGC 2008 10-K, Item 6: Selected Financial Data, page 21
  7. Reuters.com: QLogic is Fibre Channel HBA Market Share Leader for Fourth Consecutive Year
  8. 8.0 8.1 8.2 CNNMoney: QLogic 8Gb Fibre Channel Switches and HBAs Receive 'First and Foremost' Certification
  9. 9.0 9.1 EE Times India: QLogic rolls 20Gbps InfiniBand adapter card
  10. Wikipedia: Network Switches
  11. QLGC 2008 10-K, Item 7: Management's Discussion and Analysis of Financial Condition, page 25-26
  12. Hewlett Unveils Servers Meant to Cut Costs
  13. Zycko News: 'World's fastest' InfiniBand HCA unveiled by QLogic
  14. 14.0 14.1 EUR to USD Exchange Rates
  15. USD to JPY Exchange Rates
  16. Emulex Corporation: Company
  17. Wikipedia: Mezzanine card
  18. 18.0 18.1 SearchStorage.com: Brocade bounces back in Fibre Channel switch market
  19. Wikinvest: Cisco Systems (CSCO)
  20. Cisco: Corporate Overview
  21. Voltaire: Overview
  22. 22.0 22.1 ThomasNet: Emulex Gains Market Share in Fibre Channel HBA and Blade Server Mezzanine Card Segments
  23. Yahoo Finance: QLogic Gains HBA Market Share Over Nearest Competitor for Fourth Consecutive Quarter
  24. Google Finance: QLGC
  25. Google Finance: ELX
  26. Google Finance: BRCD
  27. Google Finance: CSCO
  28. Google Finance: VOLT
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