QLogic Flaunts Fabric Plans

Vendor beats earnings estimates and opens up on 8 Gbit/s and FCOE

January 25, 2008

3 Min Read
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HBA specialist QLogic beat its own and Wall Street's estimates in its third quarter report last night, in which the supplier outlined more of its plans for 8-Gbit/s technology and Fibre Channel-over-Ethernet (FCOE).

QLogic posted revenues of just over $158 million for the quarter, up slightly from $157.6 million in the same period last year, although this topped analyst estimates of $155.6 million.

On a GAAP basis, QLogic's third-quarter earnings were 23 cents on net income of $31.9 million, compared to $35.5 million and 22 cents per share in the year-ago quarter, although both quarters included stock-based compensation and acquisition charges.

Excluding these charges, QLogic's non-GAAP EPS was 30 cents on net income of $41 million, compared to 28 cents and $45 million in the third quarter of last year. Analysts had estimated third quarter EPS of 26 cents.

"QLogic reported strong financial performance during the third quarter with revenue and earnings per share above the high end of our previous forecast," said the vendor's CEO H.K. Desai, during a conference call last night, explaining that this topped QLogic's estimate of between $147 million and $151 million.The CEO explained that $118.9 million of QLogic's revenue came from its host products, driven by a 13 percent sequential increase in sales of Fibre Channel HBAs. "During the December quarter, 86 percent of our Fibre Channel revenue came from 4-Gig products," he said.

Although a much smaller proportion of overall revenues, QLogic's Infiniband business is also doing well, execs said. Revenue from the vendor's network products division was $27.8 million, a 27 percent hike on the previous quarter, largely driven by the vendor's Infiniband and Fibre Channel switch lines.

But with virtualization pushing demand for greater bandwidth within data centers, OLogic is focusing mainly on 8-Gbit/s Fibre Channel.

"We believe that 8-Gig Fibre Channel is the technology refresh required to meet the increasing performance requirements of the new data center," said Jeff Benck, the QLogic COO. "Our 8-Gig Fibre Channel HBAs have been in qualification in all tier-1 OEMs [and] we expect to start shipping products this quarter."

At this point, QLogic has secured some 12 design wins for its 8-Gbit/s Fibre Channel products with "tier-1" OEMs, according to Benck, who added that certifications are also underway with second tier vendors.The exec also predicted that FCOE will start gaining traction within calendar year 2009, explaining QLogic's decision to throw its weight behind the technology.

QLogic is one of a number of vendors, including Intel, Sun, Emulex, and IBM, that have embraced FCOE, which aims to enable SAN traffic to be transported natively over Ethernet networks.

The vendor is currently sampling the FCOE adapter it demo'd at trade shows this fall, according to Benck, although at least one analyst warns that QLogic will have to be careful in its approach to the technology.

"It will be interesting to watch the evolution of the FCoE protocol and see which vendors are early with products and OEM qualifications," wrote Pacific Growth Equities analyst Kaushik Roy, in a note released this morning. "[But] we remain a little concerned about the long-term growth rate of the Fibre Channel market with the increasing traction of iSCSI and advent of FCOE technology."

The analyst firm nonetheless raised QLogic's fourth quarter earnings estimate from 23 to 26 cents this morning based largely on healthy demand for the vendor's Fibre Channel products. "We are also raising our FY09 estimates from $0.96 to $1.03," added Roy. "We expect Street estimates to be revised upwards and the stock to react positively."Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • Emulex Corp. (NYSE: ELX)

  • IBM Corp. (NYSE: IBM)

  • Intel Corp. (Nasdaq: INTC)

  • Pacific Growth Equities Inc.

  • QLogic Corp. (Nasdaq: QLGC)

  • Sun Microsystems Inc.

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