QLogic Reports Fourth Quarter and Fiscal Year 2010 Results

QLogic Corp. (Nasdaq: QLGC), a leading supplier of high performance network infrastructure solutions, today announced its financial results for the fourth quarter and fiscal year ended March 28, 2010.

Fourth Quarter Highlights

• Net revenue: $145.7 million.
• GAAP net loss: $4.8 million or $0.04 per diluted share.
• Non-GAAP net income: $32.4 million or $0.28 per diluted share.
• Cash generated from operations: $69.3 million.
• Cash and investment securities: $375.7 million as of March 28, 2010.

Fiscal Year Highlights

• Net revenue: $549.1 million.
• GAAP net income: $54.9 million or $0.47 per diluted share.
• Non-GAAP net income: $117.7 million or $1.00 per diluted share.
• Cash generated from operations: $161.8 million.

Financial Results

Net revenue for the fourth quarter of fiscal 2010 was $145.7 million and increased 12% from $130.5 million in the same quarter last year. Revenue from Host Products was $103.7 million during the fourth quarter of fiscal 2010 and increased 17% from $88.4 million in the same quarter last year. Revenue from Network Products was $22.6 million during the fourth quarter of fiscal 2010 compared to $25.1 million in the same quarter last year. Revenue from Silicon Products was $16.7 million during the fourth quarter of fiscal 2010 compared to $13.7 million in the same quarter last year.

Net loss on a GAAP basis for the fourth quarter of fiscal 2010 was $4.8 million, or $0.04 per diluted share, compared to net income of $19.2 million, or $0.16 per diluted share, for the fourth quarter of fiscal 2009. Net loss on a GAAP basis for the fourth quarter of fiscal 2010 included a special tax charge of $29.7 million described below. Net income on a non-GAAP basis for the fourth quarter of fiscal 2010 was $32.4 million, or $0.28 per diluted share, and increased from $24.5 million, or $0.20 per diluted share, for the fourth quarter of fiscal 2009.

Approximately five years ago, the Company implemented a globalization initiative to expand its worldwide footprint. As part of this initiative, certain intellectual property and other rights were licensed to an international subsidiary of the Company. The special tax charge of $29.7 million recorded in the fourth quarter of fiscal 2010 was primarily related to an amendment of the license agreement with this international subsidiary which resulted in a fully paid-up license.

Net revenue for fiscal 2010 was $549.1 million compared to $633.9 million in fiscal 2009. Net income on a GAAP basis for fiscal 2010 was $54.9 million, or $0.47 per diluted share, compared to $108.8 million, or $0.85 per diluted share for fiscal 2009. Non-GAAP net income for fiscal 2010 was $117.7 million, or $1.00 per diluted share, compared to $154.2 million, or $1.20 per diluted share for fiscal 2009.

"Despite a very challenging macroeconomic environment, we delivered solid financial performance during the fourth quarter and full fiscal year,” said H. K. Desai, chief executive officer, QLogic. "This performance was attributable to continued share gains within our traditional markets, the introduction and ramp of innovative new products that provide us incremental business opportunities in the converged networking and 10Gb Ethernet markets, and extremely careful operating expense management.”

QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a description of the reasons that management believes that these non-GAAP financial measures provide useful information to investors and the additional purposes for which management uses these non-GAAP financial measures, is presented in the accompanying financial schedules.

QLogic’s fiscal 2010 fourth quarter conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). H.K. Desai, chief executive officer, and Simon Biddiscombe, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at http://ir.qlogic.com and www.earnings.com. Phone access to participate in the conference call is available at (719) 457-2692, pass code: 6096494.

The financial information that the company intends to discuss during the conference call will be available on the company’s website at http://ir.qlogic.com for twelve months following the conference call. A replay of the conference call will be available via webcast at http://ir.qlogic.com for twelve months.

Follow QLogic @ twitter.com/qlogic

About QLogic

QLogic (Nasdaq: QLGC) is a global leader and technology innovator in high performance networking, including adapters, switches and ASICs. Leading OEMs and channel partners worldwide rely on QLogic products for their data, storage and server networking solutions. QLogic is a NASDAQ Global Select company and is included in the S&P 500. For more information, visit www.qlogic.com.

Disclaimer — Forward-Looking Statements

This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business trends) that are "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The company advises readers that these potential risks and uncertainties include, but are not limited to: declines in information technology spending levels; potential fluctuations in operating results; gross margins that may vary over time; the stock price of the company may be volatile; the company’s dependence on the networking markets served; potential adverse effects of server virtualization technology on the company’s business; potential adverse effects of increased market acceptance of blade servers; the ability to maintain and gain market or industry acceptance of the company's products; the company’s dependence on a small number of customers; seasonal fluctuations and uneven sales patterns in orders from customers; the company’s ability to compete effectively with other companies; declining average unit sales prices of comparable products; a reduction in sales efforts by current distributors; the company’s dependence on sole source and limited source suppliers; the company’s dependence on relationships with certain third-party subcontractors and contract manufacturers; declines in the market value of the company’s investment securities; the complexity of the company's products; sales fluctuations arising from customer transitions to new products; changes in the company’s tax provisions or adverse outcomes resulting from examination of its income tax returns; environmental compliance costs; international economic, regulatory, political and other risks; uncertain benefits from strategic business combinations; the ability to attract and retain key personnel; difficulties in transitioning to smaller geometry process technologies; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; reliance on third party technology; the use of "open source” software in the company’s products; changes in regulations or standards regarding energy use of the company’s products; computer viruses and other tampering with the company’s computer systems; and facilities of the company and its suppliers and customers are located in areas subject to natural disasters.

More detailed information on these and additional factors which could affect the company's operating and financial results are described in the company's Forms 10-K, 10-Q and other reports filed, or to be filed, with the Securities and Exchange Commission. The company urges all interested parties to read these reports to gain a better understanding of the business and other risks that the company faces. The forward-looking statements contained in this press release are made only as of the date hereof, and the company does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

QLogic and the QLogic logo are registered trademarks of QLogic Corporation. Other trademarks and registered trademarks are the property of the companies with which they are associated.

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the above table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

The company has presented non-GAAP net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core net income and core net income per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making comparisons of the company’s core net profitability with historical periods and comparisons of the company’s core net profitability with the corresponding results for competitors. Management believes that non-GAAP net income and non-GAAP net income per diluted share are important measures in the evaluation of the company’s profitability. These non-GAAP financial measures exclude the adjustments described in the above table, and thus provide an overall measure of the company’s on-going net profitability and related profitability on a per diluted share basis.

Management uses non-GAAP net income and non-GAAP net income per diluted share in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. In addition, the company prepares and maintains its budgets and forecasts for future periods on a basis consistent with these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.

For additional information on the items excluded from the non-GAAP financial measures and why the company believes that these non-GAAP financial measures provide useful supplemental information to investors, the company refers you to the Form 8-K regarding this release filed today with the Securities and Exchange Commission.

A summary of the non-GAAP adjustments presented in the table above by the financial statement line impacted is as follows: