QLogic Corp (
reported second quarter fiscal 2014 earnings of 18 cents per
share, which beat the Zacks Consensus Estimate by 7 cents.
Earnings per share jumped 38.1% year over year and 95.2%
Revenues decreased 4.4% year over year but remained flat
sequentially at $112.6 million, which was slightly better than
the Zacks Consensus Estimate. Revenues were also in line with the
mid-point of management's guided range of $108.0 million to
The year-over-year decline was primarily due to weak growth in
advanced connectivity platform and legacy connectivity platform.
Beginning fiscal first quarter 2014, QLogic revised its product
categories into these two new segments:
Advanced connectivity platform (strategic server and storage
connectivity products) revenues declined 3.5% year over year but
increased a modest 0.9% sequentially to $94.0 million.
Legacy connectivity products (Fibre Channel Switch products and
the 1 gig iSCSI products) revenues plunged 9.0% from the year-ago
quarter and 6.6% sequentially to $18.6 million.
Gross margin expanded 90 basis points (bps) from the year-ago
quarter and 20 bps from the previous quarter to 67.8%. This was
within management 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 and 13.0%
on a sequential basis to $58.8 million. The year-over-year
decrease was primarily due to lower engineering and development
costs (down 8.5%) and sales & marketing (down 16.8%) costs.
Operating expenses were slightly above management's expectation
of $57.0 million.
Operating margin was 15.6% in the second quarter compared with
11.0% in the year-ago quarter and 7.9% in the previous quarter.
Net income margin was 13.7% compared with 10.1% in the year-ago
quarter and 7.6% in the previous quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2013, QLogic had cash and short-term investments of
$433.0 million versus $431.9 million in the previous quarter.
Cash flow from operating activities was $24.1 million in the
quarter. QLogic bought back $19.0 million of the company's common
QLogic expects fiscal third quarter 2014 revenues in the range of
$114.0 million to $120.0 million. Gross margin is expected to be
approximately 67.0% to 68.0%. QLogic expects to incur operating
expenses of $56.0 million.
Earnings are expected to be in the range of 22 cents to 27 cents
for the third quarter. QLogic expects operating expenses of
approximately $230.0 million (down from earlier outlook of $235.0
million) for the fiscal year.
We believe that QLogic will continue to benefit from contract
wins from OEMs such as
International Business Machines (
Hewlett Packard (
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
will hurt profitability going forward.
Currently, QLogic has a Zacks Rank #3 (Hold).
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