A leading supplier of high-performance network infrastructure
) continues to dominate the Fibre Channel adapter market.
According to latest reports provided by the two leading industry
research firms Dell'Oro Group and Crehan Research, QLogic
retained its #1 position in Fibre Channel adapters for the ninth
As per the Dell'Oro report, QLogic's revenue market share was
53.4% in 2012. According to Crehan research, QLogic's revenue
market share was 52.0% in the same period. Despite this
difference, both the research firms reported that QLogic had a
lead of 11.4% compared to its nearest competitor.
However, QLogic's market share growth slightly declined from
approximately 55% at the end of 2011. In 2011, QLogic's market
share had increased slightly from 54.0% reported in 2010.
Moreover, QLogic's lead from its nearest competitor in 2012 also
declined considerably from 16.0% in 2010 and 15.0% in 2011.
This shows that competitors such as
) are catching up slowly but steadily, which does not bode well
for QLogic, in our view.
Nevertheless, QLogic's dominant position continues to be
driven by its superior product portfolio. QLogic focuses on
serving the high-end enterprise data center market, which is
expected to grow significantly due to rapid adoption of cloud
According to market research firm Gartner, spending on data
center systems is expected to reach $147.0 billion in 2013, up
4.5% from 2012. For 2014, spending is further projected to
increase 4.2% year over year to $154.0 billion. We believe that
this increasing spending level will boost QLogic's top-line
growth over the long term.
Moreover, QLogic continues to upgrade its existing product
portfolio as well as launch new products such as 16 gig Fibre
Channel adapters and FlexSuite" 2600 Series adapters. QLogic's
extended adaptive convergence strategy is expected to boost its
growth in converged networking (essential for cloud computing)
over the long term.
We believe that QLogic will benefit from major OEM customer
wins. Moreover, increased focus on its key strategic initiatives
with large OEMs such as
) will boost growth over the long term. This will also provide
QLogic a competitive edge over its peers 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 product
development is also expected to hurt profitability in the near
Currently, QLogic has a Zacks Rank #3 (Hold).
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