QLGC

QLogic Corporation (QLGC)

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QLogic Corporation (QLGC)

Credit Suisse Technology Conference Call

November 28, 2012 5:00 pm ET

Executives

Jean Hu – Senior Vice President and Chief Financial Officer

Analysts

Vlad Rom – Credit Suisse Securities

Presentation

Vlad Rom – Credit Suisse Securities

My name is Vlad Rom from Credit Suisse IT Hardware. I have the pleasure of welcoming Jean Hu, CFO of QLogic, and Doug Naylor, VP of Finance. I’ll start off with a few questions and then open it up to the audience, so feel free to chime in. Jean, for those not familiar with QLogic’s story, can you talk about your products and end markets that you serve?

Jean Hu

Okay, thank you for inviting us and thank you for joining us this afternoon. So QLogic, we provide high-performance interconnect solutions for data center. We are the market leader in the high-performance interconnect data center in space. If you look at it today, there is tremendous explosion of data. All the data we created that needed to be processed transmitted to start, and everything needs to go through the interconnect. So there is a tremendous need for I/O performance. What we do is today we’ll provide the Fibre Channel I/O solutions, which is 8 gig, but it’s going to 16 gig and the 32 gig.

On the 10 gig Ethernet side, we provide solution today and that is going to go through the 40 gig. We also provide Fibre Channel over Ethernet solutions. We also have the networking side, the Fibre Channel Switch and the Fibre Channel over Ethernet Switch. And not long ago in September, we also announced a new technology, an exciting one, the Mt. Rainier technology, which combined our high performance adapters with flash technology to do the server-side caching cluster to caching actually, so that’s also a new segment we are getting into adjacent market.

So overall as a company, we have delivered a very consistent financial performance in the past. Our customers are major OEMs, very OEM-centric model. We are very committed on delivering shareholder value. So we have bought back $1.8 billion using cash to buyback the stock for the history of the company. So overall, we’re very excited about the future opportunity. We think the growth opportunity for us between the 10 gig Ethernet market and the flash market we are going to address using our high-performance adapter technology is going to be $3.4 billion in fiscal 2016. So it’s very exciting time for us.

Vlad Rom – Credit Suisse Securities

I think a lot of investors are trying to figure out what the macro is filling. Can you tell us what you are seeing in terms of end market demand and the kind of conversations you are having, what the people as they said 2013 end demand forecasts?

Jean Hu

Yeah, so we’re like a component supplier, right. So our customers are the major OEMs. To a certain degree, the OEMs when they need our product, they ticked out from our hub. So we are less connected with the end market. But I think everybody has seen all the earnings release from some of our major customers and from big companies like Intel, like ourselves that we see the same thing is certainly we do see the macro uncertainty and the environment are impacting the data center spending. So people are very cautious, especially the big enterprise as they tend to be more sensitive to the macro uncertainty. So that continued to be the case. I think what we have seen is just cautious about 2013.

But I think for us, I just want to add is we do have some new product cycle coming out in 2013, not only the 10-gig Ethernet aside, but also we have again a lot of a design wins on the targeted side, which a new market for us and also the Mt. Rainier Technology, which we are on track for the product announcement next year, which we will see revenue next year. So the product cycles, which hopefully we can continue to grow the revenue.

Vlad Rom – Credit Suisse Securities

Can you talk about those two revenue opportunities and how you see them coming on line? On the target side, PMC Sierra is exiting that business, so that opens up a little bit market opportunity, I think they have 70% share on that side. And then maybe after that, can you talk about Mt. Rainier, SSDs are growing very quickly. They’re being adopted very quickly in enterprise. You have a good footprint there and kind of how you see the traction there and where they potentially need to grow revenues?

Jean Hu

Yeah. So, on the targeted side, this is on the front set of storage area. Traditionally, PMC has been a major player in that market. But one technology transition to 16-gig in Fibre Channel side, we have not invested in the next-generation technology. So it’s opened the market for both QLogic and Emulex.

We have worked really hard during the past year. We’ve got a lot of a design wins that we talked about during our Analyst Day. Those market a little bit of different in the sense the design cycle is longer. You need to work with each storage OEMs to make sure the software, everything works.

The cycle is long, but it’s very sticky business once you get into it. Different OEMs all started their platform at the different time. We do start to think the early next year, we will start to see some of the platforms start to ramp up, over the years it’s going to continue to go; so overall market actually is quite big. We estimated about $160 million in fiscal 2015 our time. And we hope we can get a majority over the share.

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