A leading supplier of high-performance network infrastructure solutions, QLogic Corp. (QLGC) gained revenue market share in Fibre Channel adapters, Fibre Channel over Ethernet (FCoE) converged networking adapters and 10Gb Ethernet adapters in calendar year 2010.
According to the latest reports provided by the two leading industry research firms Dell’Oro Group and Crehan Research, QLogic retained its #1 position in Fibre Channel adaptors for the second straight year. QLogic had 54.0% of total revenue share in calendar year 2010, a lead of 16.0% compared to its nearest competitor.
In the emerging FCoE adaptor market, QLogic became the frontrunner with 43.0% of revenue market share, 13.0% more than its nearest rival. In the 10Gb Ethernet adapters market, both the reports showed that the company has gained significant market share in calendar year 2010.
The significant market share growth was primarily driven by strong customer demands primarily due to a recovering enterprise information technology (IT) spending in 2010. We expect this trend to continue in calendar year 2011, along with a strong demand for QLogic’s converged networking technology.
QLogic reported strong third quarter 2011 results, with revenue increasing 4.5% year over year and 6.0% sequentially to $155.8 million. The sequential increase in revenues was primarily attributable to a growth in Host Products and Network Products that grew 9% and 6%, respectively, indicating strong demand for hosting and networking products.
For the fourth quarter of fiscal 2011, QLogic expects total revenue in the range of $148 million to $153 million. We believe QLogic will post strong top-line growth in the fourth quarter, due to higher revenue market share in the network products market.
Currently, the Zacks Consensus Sales estimate is pegged at $151.0 million, in line with the high end of management’s guidance for the fourth quarter.
Management expects non-GAAP EPS (excluding stock based and one-time charges) in the range of 32 cents to 35 cents for the fourth quarter of fiscal 2011.The Zacks Consensus Estimate is currently pegged at 27 cents (including stock -based but excluding one-time charges).
Our Take
We believe that QLogic will benefit from major OEM customer wins and increased focus on its key strategic initiatives over the long term. However, tough competition from Emulex Corp. (ELX) and Broadcom Corp. (BRCM) will act as a headwind for the stock.
Currently, QLogic has a Zacks #1 Rank, which implies a Buy rating on a short-term basis.
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