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OEM Rains on QLogic's Quarter

When you're an "end-to-end SAN infrastructure" company as QLogic Corp. (Nasdaq: QLGC) bills itself, you risk leaving a lot of ends exposed. QLogic got bit on one of those ends last quarter.

First, the good news: In its quarterly report last night, QLogic reported net revenues of $137.1 million, up 4 percent sequentially and 20 percent year over year, of which 78 percent came from Fibre Channel products. The company reported 16 percent sequential growth in Fibre Channel host bus adapters (HBAs) and high single-digit growth in switches (see QLogic Posts Record Revenues).

Net income was $35 million, or 36 cents per diluted share, up 2 percent sequentially and 27 percent year over year.

QLogic doubled its customers that contributed more than $10 million in quarterly revenue to six from the previous year, and the company expects two more $10 million customers by the end of March 2005.

Now, the bad news: Despite the quarterly growth, Qlogic took a hit from a problem involving its hard-drive controller chips. According to CEO H.K. Desai, an OEM product failed to ramp up as fast as QLogic expected, resulting in lost revenue of $1 million in the quarter. What's more, Desai expects the problem to continue to the tune of $2 million to $3 million next quarter, and the company has revised guidance downward to reflect that.

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