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QLogic Corporation (QGLC)
Goldman Sachs Group Inc. Technology and Internet Conference
Feb 14, 2012 17:00 PM ET
Simon Biddiscombe - President, Chief Executive Officer, Director
Bill Shope - Goldman Sachs
Bill Shope - Goldman Sachs
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So with that we will go ahead and get started, Simon I wanted to, give that there is some probably some investors that don’t know the story all that all yet. Wanted to start off with a bit of a primary type of question if you could just to us a rundown the core QLogic story.
So historically QLogic has been very focused on fiber channel technologies and we have had both fiber channel host technologies that would be server or storage deployed and then private channel switch technologies as well.
And the private channel market has actually continued to be very robust despite people suspect its demise might be eminent over the course of many, many years. There is an industry we shipped more fiber channel ports last year than ever before. Last year we shipped 3.4 million euros so the fiber channel market continues to be a very robust market and QLogic enjoys a significant leadership position in the host part of the market with 55% market share and way ahead of the nearest competitor.
Over the course of about the last five years we have also being investing in the latest version of convergence. So for us convergence means primarily fiber channel over Ethernet and we have invested aggressively in fiber channel over Ethernet convergence which naturally takes you into the Ethernet market as well.
So even though the fiber channel market continues to be robust and we shipped more than ever before last year the greater growth opportunities is actually presented to us by converged technologies and 10 gig Ethernet technologies for data center applications as well. So we've invested aggressively in those markets over the course of the last five years. We always thought that fiber channel or the Ethernet convergence share will attract fiber channel share and that’s exactly the way it plays it. So FCoE market today we have approximately 55% market share and then in the Ethernet market through the first nine months of last year, we were actually number two behind only Intel in the Ethernet adapter market.
So we have been able to establish very strong positions for ourselves in both converged technologies but then also in core Ethernet technologies as well. So the market opportunity is expected to grow significantly, if you look at the total market that we served last year, you probably have something around $1.7 billion if you fast-forward to 2014, you will probably close to the $3.5 billion so there is roughly a doubling of the market over a number of years and roughly a 20% growth in the overall market that we serve on an annual basis.
CapEx, tremendous positions grow itself, we are excited about the future.
Bill Shope - Goldman Sachs
Well if you look into more recently your most recent quarter, I think many investors were surprised the strength of the business particular the fiber channel portion of the business and I think a lot of the surprise there comes from the fact that we are pretty concerned about the macro environment. As I know you were as well few months ago. What do you think that tells us your performance tells us about how the year ended, what enterprise spending is looking like going into this year particularly in the markets that you serve
We saw a slightly stronger end to the year than we had expected to, part of our growth in the December quarter was actually dampened by our InfiniBand business, by lower later we are going to talk about the decision that we have made to sell that business to Intel at this point in time but our growth was even stronger than the headline numbers if you take out the InfiniBand business that we have entered into the process of selling to Intel.
We never quite tracked the server market perfectly from quarter-to-quarter but if you look at the underlying fiber channel market in particular, it's a start, we had a very close correlation on a yearly basis to the underlying server market and obviously our growth is further accelerated against that server market by our participation and converged Ethernet markets as well.
So as we look into 2012 our expectations Global IT spend we actually use your Goldman Sachs number when we give consideration, we see the market development so we are somewhere in the mid-single digits little less than developed economies, little bit more in the emerging economies. We see services been slightly below those numbers but we storage been slightly above those numbers. When I access the overall markets that QLogic serves at the server and storage level, the public got something in the mid-single digits by way of growth.