) reported fourth-quarter fiscal 2014 earnings of 18 cents per
share, which beat the Zacks Consensus Estimate by a penny.
Earnings per share (including stock-based compensation but
excluding one-time items) jumped 38.1% year over year.
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Revenues declined 4.4% on a year-over-year basis to $115.7
million, which was slightly better than the Zacks Consensus
Estimate of $114.0 million. Revenues were higher than the
midpoint of management's guided range of $110.0 million to $116.0
In the quarter, Advanced Connectivity Platform (strategic server
and storage connectivity products) revenues increased 4.2% year
over year to $101.1 million in the reported quarter. Legacy
connectivity products (Fibre Channel Switch products and the 1
gig iSCSI products) revenues declined 26.6% from the year-ago
quarter to $14.6 million.
Gross margin expanded 90 basis points (bps) from the year-ago
quarter to 67.8%, which nearly met the higher-end of management's
guided range of 67.0% to 68.0%. The year-over-year growth was
primarily due to favorable product mix in the quarter.
Total operating expense decreased 10.8% year over year to $118.9
million. The year-over-year decrease was primarily due to lower
engineering and development costs (down 280 bps) and sales &
marketing (down 340 bps) costs.
Operating margin was 15.6% in the fourth quarter compared with
11.0% in the year-ago quarter. Net income margin was 13.7%
compared with 10.1% in the year-ago quarter.
At the end of the fourth quarter, QLogic had cash and short-term
investments of $278.0 million versus $462.4 million in the
previous quarter. Cash flow from operating activities was $45.0
million in the quarter.
In the reported quarter, QLogic announced a partnership with
semiconductor solutions provider
). With this agreement, QLogic is expected to license certain
Broadcom patents covering its Fibre Channel products for a
license fee of $62 million. QLogic expects this deal to be
immediately accretive to revenue and non-GAAP earnings per share.
QLogic expects fiscal first-quarter 2015 revenues in the range of
$116.0 million to $122.0 million with the midpoint at $119.0
million. Revenues from Advanced Connectivity Platforms are
forecast to be $105.0 million at the midpoint.
The acquisition of Brocade's adapter business is expected to
boost revenues in the upcoming quarter. Management expects
revenues from Legacy Connectivity Products to be $14.0 million.
Gross margin is expected to be approximately 64.0% to 65.0%.
Earnings are expected to be in the range of 17 cents to 22 cents
per share for the first quarter. The Zacks Consensus Estimate of
17 cents per share coincides with the lower end of the guidance.
We believe that QLogic will continue to benefit from contract
wins from OEMs such as Lenovo and
) in the near term. Recently, Lenovo acquired IBM's X-86 server
business. QLogic's already expanded partnership with Lenovo will
help the company to maintain its position as a key supplier to
the acquired X-86 business, going forward.
Moreover, an innovative product pipeline, new technologies,
partnership with Broadcom and additional savings from its
restructuring initiatives will drive profitability, going
However, a tough macroeconomic 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
) will hurt profitability, going forward.
Currently, QLogic has a Zacks Rank #3 (Hold).