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Qlogic Q1FY10 Earnings: Growth Engine Needed
Yesterday Qlogic announced first quarter revenues of $122.8 million for the period ended June 29, 2008. That's at the low-end of the previous guidance of $120-130 million and down 27% year-over-year.
Since peaking at $171.2 million in Q2FY09, Qlogic revenues have declined for the third consecutive quarter by a total of $48.4 million. In my opinion the magnitude of the decline is an indicator that it's not all due to "the macro." I believe slowing Qlogic revenues also reflect the continuous decline of the Fibre Channel market thus the need for the company to build or buy an engine for growth.
The emphasis of the Qlogic conference call was continued profitability, the stabilization of orders and a bright future featuring contributions from FCoE products.
Qlogic deserves credit for delivering an astounding 56th consecutive quarter of profitability and another quarter of solid earnings per share. In addition, the company still has a strong cash position of almost $400 million and no debt. With that much cash, the company can operate for years without any growth. However, it is worth noting that earnings per share have been achieved in large part with draconian cost-cutting and by retiring shares with approximately $1 billion in stock buy backs. If the trend of declining revenue persists, it will seem obvious the company should have balanced EPS and growth in their investment strategy. And right about then I expect QLogic will most appreciate how nice it would be to have $1 billion for technology and new sources of revenue.
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