QLogic Corp. (QLGC) filed Quarterly Report for the period ended 2009-09-27.
QLogic Corporation simplifies the process of networking storage for OEMs resellers and system integrators with the only end-to-end infrastructure in the industry consisting of award-winning controller chips host bus adapters network switches and management software to move data from the storage device through the fabric to the server. QLogic designs and produces solutions based on all storage network technologies including SCSI iSCSI InfiniBand and Fibre Channel. A member of the S&P 500 Index. Qlogic Corp. has a market cap of $2.06 billion; its shares were traded at around $17.47 with a P/E ratio of 25 and P/S ratio of 3.2. Qlogic Corp. had an annual average earning growth of 19.9% over the past 10 years. GuruFocus rated Qlogic Corp. the business predictability rank of 2-star.
Highlight of Business Operations:
Our net revenues are derived primarily from the sale of Host Products, Network Products and Silicon Products. Net revenues decreased 23% to $131.5 million for the three months ended September 27, 2009 from $171.2 million for the three months ended September 28, 2008. This decrease was primarily the result of a $25.7 million, or 21%, decrease in revenue from Host Products; a $5.3 million, or 18%, decrease in revenue from Network Products; and a $6.0 million, or 39%, decrease in revenue from Silicon Products. The decrease in revenue from Host Products was primarily due to an 18% decrease in the quantity of host bus adapters sold and a 7% decrease in the average selling prices of these products. The decrease in revenue from Network Products was primarily due to a 16% decrease in the number of Fibre Channel switches sold and an 8% decrease in the average selling prices of these products. The decrease in revenue from Silicon Products was due primarily to a 16% decrease in the units of protocol chips sold and an 18% decrease in the average selling prices of these products. Net revenues for the three months ended September 27, 2009 included $3.4 million of royalty and service revenue compared with $6.1 million of royalty and service revenue for the three months ended September 28, 2008. Royalty and service revenues for the three months ended September 28, 2008, included a $3.5 million one-time royalty associated with the license of technology acquired from Troika Networks. Royalty and service revenues are unpredictable and we do not expect them to be significant to our overall revenues.
Net revenues decreased 25% to $254.2 million for the six months ended September 27, 2009 from $339.6 million for the six months ended September 28, 2008. This decrease was primarily the result of a $58.0 million, or 24%, decrease in revenue from Host Products; a $10.2 million, or 17%, decrease in revenue from Network Products; and a $14.2 million, or 46%, decrease in revenue from Silicon Products. The decrease in revenue from Host Products was primarily due to a 22% decrease in the quantity of host bus adapters sold and a 5% decrease in the average selling prices of these products. The decrease in revenue from Network Products was primarily due to a 17% decrease in the number of Fibre Channel switches sold and a 13% decrease in the average selling prices of these products. The decrease in revenue from Silicon Products was due primarily to a 30% decrease in the units of protocol chips sold, a 12% decrease in the average selling prices of these products and a decrease in revenue from management controller chips, as these products reached end-of-life in fiscal 2009. Net revenues for the six months ended September 27, 2009 included $5.4 million of royalty and service revenue compared with $8.4 million of royalty and service revenue for the six months ended September 28, 2008.
Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related employee benefit costs, sales commissions, promotional activities and travel for sales and marketing personnel. Sales and marketing expenses decreased to $20.0 million for the three months ended September 27, 2009 from $24.0 million for the three months ended September 28, 2008. The decrease in sales and marketing expenses was due primarily to a $1.5 million decrease in promotional costs, including the costs for certain sales and marketing programs, and a $0.5 million decrease in travel costs, both related to our cost-cutting measures implemented in the second half of fiscal 2009. In addition, cash compensation and related employee benefit costs decreased by $1.3 million.
General and administrative expenses decreased to $16.1 million for the six months ended September 27, 2009 from $16.7 million for the six months ended September 28, 2008. The decrease in general and administrative expenses was due primarily to a $0.7 million decrease in cash compensation and related employee benefit costs, and a $0.6 million decrease in outside services and legal fees. These decreases were partially offset by a $0.8 million increase in stock-based compensation.
Interest and other income (expense) for the three months ended September 27, 2009 of $2.3 million was comprised principally of interest income of $1.4 million related to our portfolio of investment securities and $0.9 million of net realized gains on sales of investment securities. Interest and other income (expense) for the three months ended September 28, 2008 was comprised of a $5.0 million impairment charge on investment securities, partially offset by interest income of $3.0 million related to our portfolio of investment securities. The decrease in interest income was primarily due to a decrease in the average balance of our investment securities and a decline in interest rates.
Interest and other income (expense) for the six months ended September 27, 2009 of $5.3 million was comprised principally of interest income of $3.0 million related to our portfolio of investment securities and $2.1 million of net realized gains on sales of investment securities. Interest and other income (expense) for the six months ended September 28, 2008 was comprised principally of a $7.7 million impairment charge on investment securities, partially offset by interest income of $6.5 million related to our portfolio of investment securities and $0.4 million of net realized gains on sales of investment securities. The decrease in interest income was primarily due to a decrease in the average balance of our investment securities and a decline in interest rates.
QLGC is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc..
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