QLogic Reports Second Quarter Results for Fiscal Year 2009

QLogic Corp. (NASDAQ:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its second quarter financial results for the period ended September 28, 2008.

Second Quarter Highlights

• Net revenue increased 22% from the comparable quarter last year to a record $171.2 million.
• Net income: $27.2 million GAAP, $45.2 million non-GAAP.
• Net income per diluted share: $0.20 GAAP, $0.34 non-GAAP.
• Cash generated from operations was $55.2 million.
• $421.0 million in cash and marketable securities as of September 28, 2008.

Financial Results

Net revenue for the second quarter of fiscal 2009 was $171.2 million and increased 22% from $140.3 million in the comparable quarter last year. Revenue from Host Products, which are comprised primarily of Fibre Channel and iSCSI host bus adapters and InfiniBand host channel adapters, was $119.7 million during the second quarter of fiscal 2009 and increased 15% from $104.4 million in the comparable quarter last year. Revenue from Network Products, which are comprised primarily of Fibre Channel and InfiniBand switches, was $29.8 million during the second quarter of fiscal 2009 and increased 36% from $22.0 million in the comparable quarter last year. Revenue from Silicon Products, which are comprised primarily of protocol chips, was $15.7 million during the second quarter of fiscal 2009 and increased 36% from $11.5 million in the comparable quarter last year.

Net income on a GAAP basis for the second quarter of fiscal 2009 was $27.2 million, or $0.20 per diluted share, and increased from $22.6 million, or $0.16 per diluted share for the second quarter of fiscal 2008. Net income on a GAAP basis for the second quarter of fiscal 2009 includes stock-based compensation expense, acquisition-related charges, impairment charges related to marketable securities, and the related income tax effects and valuation allowance on deferred tax assets. Net income on a non-GAAP basis for the second quarter of fiscal 2009 was $45.2 million, or $0.34 per diluted share, and increased from $32.5 million, or $0.22 per diluted share for the second quarter of fiscal 2008.

"We are very pleased with our strong financial performance and record revenue during the second quarter despite significant challenges as a result of the current macro-economic environment,” said H.K. Desai, QLogic’s chief executive officer. "Second quarter highlights include the continued ramp of our 8Gb Fibre Channel HBAs and initial revenue from our FCoE converged network adapters.”

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 2009 second quarter conference call is scheduled for today at 2:30 p.m. Pacific Time (5:30 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 (913) 312-1484, pass code: 5914802.

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.

About QLogic

QLogic is a leading supplier of high performance storage network infrastructure solutions, which include the controller chips, host adapters and fabric switches that are the backbone of storage networks for most Global 2000 corporations. The company delivers a broad and diverse portfolio of products that includes Fibre Channel adapters, blade server embedded Fibre Channel switches, Fibre Channel stackable switches, iSCSI adapters and iSCSI routers. The company is also a leading supplier of InfiniBand switches and InfiniBand host channel adapters for the emerging high performance computing market. QLogic products are delivered to small-to-medium businesses and large enterprises around the world via its channel partner community. QLogic products are also powering solutions from leading companies such as Cisco, Dell, EMC, Hitachi Data Systems, HP, IBM, NetApp and Sun Microsystems. QLogic is a member of the S&P 500 Index.

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: potential fluctuations in operating results; gross margins that may vary over time; revenues may be affected by changes in IT spending levels; the stock price of the company may be volatile; the company’s dependence on the storage area network market; 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 limited 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; dependence on sole source and limited source suppliers; the company’s dependence on relationships with certain silicon chip suppliers; declines in the market value of the company’s marketable securities; the complexity of the company's products; sales fluctuations arising from customer transitions to new products; 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 the company’s tax provisions or adverse outcomes resulting from examination of its income tax returns; 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 diluted per share basis.

Management uses non-GAAP net income in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that this measure is an important component 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 this non-GAAP financial measure. 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: