QLogic (QLGC) continues to innovate as far as its high performance server and storage networking connectivity products are concerned. Using its technology, leading storage array vendors have been able to develop high-bandwidth storage solutions. The company recently announced that its FlexSuite dual personality technology has been selected to constitute the converged interface for Dot Hill ninth generation storage architecture.
This is an all-new interface, which provides Dot Hill's OEM customers as well as channel partners with 16Gb Gen 5 Fibre Channel/10Gb iSCSI converged networking storage systems. This technology is expected to increase the demand for Dot Hill products globally.
Moreover, a few weeks back, QLogic launched FabricCache, which ultimately helps to enhance the performance of a program in the Oracle RAC environments.
Over the years, QLogic has designed products to address the requirements of high performance network infrastructure, where speed and reliability of networking hardware and software is most important. The company focuses on serving the high-end enterprise data center market, which is expected to grow significantly due to rapid adoption of cloud computing.
According to market research firm Gartner, spending on data center systems is expected to increase 4.0% year over year to $152.0 billion in 2014. We believe that this increasing spending level will boost the company’s top-line growth over the long term.
QLogic continues togain market sharedue to its strong product portfolio. The company’s extended adaptive convergence strategy is expected to boost its growth in converged networking (essential for cloud computing) over the long term. The company continues to gain market share in the Fibre Channel over Ethernet (FCoE) market. We believe that the innovative product pipeline will be a key catalyst for the company’s top-line growth over the long term.
We believe that QLogic will continue to benefit from contract wins from OEM’s such as IBM (IBM) and Hewlett Packard Co. (HPQ) in the near term. Moreover, innovative product pipeline, new technologies (Mt. Rainier) and additional savings from its restructuring initiatives will drive profitability going forward.
However, a tough macro-economic environment continues to hurt server sales, which in turn may hurt top-line growth in the near term. Increasing investments in engineering and increasing competition from peers such as Cisco (CSCO) will hurt profitability going forward.
Currently, QLogic has a Zacks Rank #3 (Hold).