QLogic Corp (
reported fourth quarter 2013 earnings of 12 cents, which beat the
Zacks Consensus Estimate by a nickel. However, earnings per share
plunged 65.3% year over year and 37.2% sequentially.
Revenues decreased 13.4% year over year and 2.1% sequentially to
$116.9 million, slightly better than the Zacks Consensus
Estimate. Revenues were toward the higher end of management's
guided range of $112.0 million to $118.0 million.
The year-over-year decline was primarily due to weak growth in
the Host and Silicon products segment, partially offset by strong
growth in Network products.
Host products revenues declined 15.2% year over year but remained
almost flat on a sequential basis at $89.6 million. Silicon
products revenues plunged 30.3% from the year-ago quarter and
4.4% from the previous quarter to $9.1 million.
These declines were partially offset by a strong 11.5%
year-over-year jump in Network products revenues to $18.2
million. However, segment revenues fell 9.2% from a very strong
During the quarter, QLogic shipped its new FlexSuite 2600 Series
16-gig Fibre Channel Adapter product to original equipment
manufacturers ("OEM") such as Hewlett-Packard, Dell,
International Business Machines (
EMC Corp (
Gross margin expanded 10 basis points ("bps") from the year-ago
quarter and 40 bps from the previous quarter to 67.9%. This was
primarily due to favorable product mix in the quarter.
Total operating expense increased 9.4% year over year and 4.3% on
a sequential basis to $68.7 million. The year-over-year increase
was primarily due to higher engineering and development cost (up
16.1%). Operating expense exceeded management's expectation of
$62.0 million, which hurt QLogic's operating profit during the
Operating margin was 9.1% in the fourth quarter compared with
21.3% in the year-ago quarter and 24.1% in the previous quarter.
Net income as percentage of revenues was 7.3% compared with 20.2%
in the year-ago quarter and 11.6% in the previous quarter.
Balance Sheet and Cash Flow
As of Mar 31, 2013, QLogic had cash and short-term investments of
$579.2 million versus $495.2 million in the previous quarter.
During the quarter, QLogic improved its liquidity through a
$125.0 million revolving credit facility that matures in Mar
QLogic expects first quarter 2014 revenues in the range of $110.0
million to $116.0 million. Gross margin is expected to be
approximately 67.0% to 68.0%. QLogic expects to incur operating
expenses of $63.0 million. Earnings are expected to be in the
range of 11 cents to 16 cents for the first quarter.
We believe that QLogic will continue to benefit from major OEM
customer wins, innovative product pipeline, new technologies (Mt.
Rainier) and increased focus on its key strategic initiatives
over the long term.
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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