QLogic (QLGC) Beats Q4 Earnings, Lags Revenue Estimates - Analyst Blog
QLogic Corp. QLGC reported fourth-quarter fiscal 2015 earnings (including stock-based compensation but excluding one-time items) of 24 cents per share, which beat the Zacks Consensus Estimate of 22 cents. The company’s earnings increased considerably from 18 cents in the year-ago quarter.
Qlogic Corporation - Earnings Surprise | FindTheCompany
Quarter Details
Net revenue was $133.0 million, up 15% from $115.7 million a year ago. Revenues missed the Zacks Consensus Estimate of $134.0 million but came within management’s guided range of $132 to $138 million.
The year-over-year increase in revenues was driven by robust performance of the Advanced Connectivity Platform during the quarter.
Advanced Connectivity Platform (adapters and silicon for server and storage connectivity applications) revenues increased 19% year over year to $120.7 million. Legacy connectivity product (Switching products) revenues, however, declined 15.8% from the year-ago quarter to $12.3 million.
Total operating expense decreased 44.7% year over year to $65.7 million primarily due to reduced Special charges (down 90%) and marginally lower engineering expenses.
Operating income of $11.8 million compared favorably with an operating loss of $42.6 million. As of Mar 29, 2015, QLogic had cash and marketable securities of approximately $316.4 million compared with $278 million at the end of Mar 30, 2014. The company generated $82.5 million in cash from operations in fiscal 2015.
Our Take
QLogic is expected to benefit from the growing flash array storage connectivity market. The company received key design contracts from original equipment makers like Cisco CSCO and EMC Corp EMC in the prior quarter which should drive the top line, going forward.
QLogic’s growing share in the overall fiber channel market is a key growth catalyst. The company’s innovative product pipeline (including Gen 6 32-gigabit links), opportunities in the OpenStack platform and partnership with Brocade will further boost market share over the long haul.
The upcoming Intel INTC Grantley server cycle also provides significant growth opportunity for QLogic due to the strong demand for its Gen 5 Fiber Channel Adapter products.
QLogic believes that it is well positioned in the 10-gigabit Ethernet adapters market. The Grantley server and increasing Ethernet attachment rates will further help the company solidify its position in the market. Also, the company has initiated the development of 25-Gigabit Ethernet solutions.
However, a difficult macroeconomic environment continues to hurt server sales. This, in turn, may affect top-line growth in the near term. Increasing investments in engineering and intensifying competition from peers will also hurt profitability in the foreseeable future.
Currently, QLogic has a Zacks Rank #3 (Hold).
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