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Steve Sturgeon
858-472-5669
steve.sturgeon@qlogic.com

 
News Release


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QLogic Reports Third Quarter Results for Fiscal Year 2009
ALISO VIEJO, Calif., Jan 26, 2009 (BUSINESS WIRE) -- QLogic Corp. (NASDAQ:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its third quarter financial results for the period ended December 28, 2008.

Third Quarter Highlights

-- Net revenue increased 4% from the comparable quarter last year to $163.7 million.

-- Net income: $30.8 million GAAP, $42.5 million non-GAAP.

-- Net income per diluted share: $0.24 GAAP, $0.34 non-GAAP.

-- Cash generated from operations was $49.9 million.

-- $371.7 million in cash and marketable securities as of December 28, 2008.

Financial Results

Net revenue for the third quarter of fiscal 2009 was $163.7 million and increased 4% from $158.0 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 $112.2 million during the third quarter of fiscal 2009 compared to $118.9 million in the same quarter last year. Revenue from Network Products, which are comprised primarily of Fibre Channel and InfiniBand switches, was $32.8 million during the third quarter of fiscal 2009 and increased 18% from $27.8 million in the comparable quarter last year. Revenue from Silicon Products, which are comprised primarily of protocol chips, was $16.5 million during the third quarter of fiscal 2009 and increased 78% from $9.3 million in the comparable quarter last year.

Net income on a GAAP basis for the third quarter of fiscal 2009 was $30.8 million, or $0.24 per diluted share, compared to $31.9 million, or $0.23 per diluted share for the third quarter of fiscal 2008. Net income on a GAAP basis for the third quarter of fiscal 2009 includes stock-based compensation expense, acquisition-related charges, special charges, impairment charges on available-for-sale securities, net gains on trading securities, and the related income tax effects and valuation allowance on deferred tax assets. Net income on a non-GAAP basis for the third quarter of fiscal 2009 was $42.5 million, or $0.34 per diluted share, and increased from $41.0 million, or $0.30 per diluted share for the third quarter of fiscal 2008.

"Despite a very challenging macroeconomic environment, QLogic delivered solid financial performance during the third quarter," said H.K. Desai, QLogic's chief executive officer. "We are confident that our technology focus and business strategies are fundamentally sound. We will continue to invest in key development projects and maximize operating efficiencies to drive market leadership and long-term success."

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 third 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) 312-0849, pass code: 3198574.

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 (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 http://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: potential fluctuations in operating results; revenues may be affected by changes in IT spending levels; gross margins that may vary over time; 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; the company's 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.

QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited -- in thousands, except per share amounts)
                                                  Three Months Ended              Nine Months Ended
                                                  December 28,    December 30,    December 28,    December 30,
                                                  2008            2007            2008            2007
Net revenues                                      $      163,691  $      158,040  $      503,315  $      438,143
Cost of revenues                                         54,770          52,237          165,542         152,113
Gross profit                                             108,921         105,803         337,773         286,030
Operating expenses:
Engineering and development                              33,117          33,174          100,565         100,916
Sales and marketing                                      20,918          20,292          67,895          62,104
General and administrative                               8,172           8,260           24,892          25,250
Special charges                                          1,407           --              1,407           3,772
Total operating expenses                                 63,614          61,726          194,759         192,042
Operating income                                         45,307          44,077          143,014         93,988
Interest and other income, net                           2,511           4,866           2,035           16,885
Income before income taxes                               47,818          48,943          145,049         110,873
Income taxes                                             17,028          17,073          55,457          37,428
Net income                                        $      30,790   $      31,870   $      89,592   $      73,445
Net income per share:
Basic                                             $      0.24     $      0.23     $      0.69     $      0.51
Diluted                                           $      0.24     $      0.23     $      0.68     $      0.50
Number of shares used in per share calculations:
Basic                                                    126,180         136,836         130,050         144,932
Diluted                                                  126,497         137,421         130,932         145,614
QLOGIC CORPORATION
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(unaudited -- in thousands, except per share amounts)
                                              Three Months Ended                  Nine Months Ended
                                              December 28,      December 30,      December 28,       December 30,
                                              2008              2007              2008               2007
GAAP net income                               $    30,790       $    31,870       $    89,592        $    73,445
Items excluded from GAAP net income:
Stock-based compensation                           7,005             8,062             22,144             24,249
Amortization of purchased intangible assets        2,713             3,618             12,319             13,107
Acquisition-related stock-based compensation       292               606               787                568
Special charges                                    1,407             --                1,407              3,772
Impairment of available-for-sale securities        4,259             --                12,002             --
Net gains on trading securities                    (3,605 )          --                (3,605  )          --
Income taxes                                       (354   )          (3,170 )          (4,970  )          (11,504 )
Total non-GAAP adjustments                         11,717            9,116             40,084             30,192
Non-GAAP net income                           $    42,507       $    40,986       $    129,676       $    103,637
Net income per diluted share:
GAAP net income                               $    0.24         $    0.23         $    0.68          $    0.50
Adjustments                                        0.10              0.07              0.31               0.21
Non-GAAP net income                           $    0.34         $    0.30         $    0.99          $    0.71

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 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:

(unaudited - in thousands)                      Three Months Ended                  Nine Months Ended
                                                December 28,      December 30,      December 28,      December 30,
                                                2008              2007              2008              2007
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation                        $    569          $    564          $    1,577        $    1,629
Amortization of purchased intangible assets          1,873             2,778             9,800             10,088
Acquisition-related stock-based compensation         --                --                --                (24     )
Total cost of revenue adjustments                    2,442             3,342             11,377            11,693
Operating expenses:
Engineering and development:
Stock-based compensation                             3,748             3,851             11,600            11,131
Amortization of purchased intangible assets          32                32                94                283
Acquisition-related stock-based compensation         286               587               770               554
Sales and marketing:
Stock-based compensation                             1,288             1,479             4,303             4,753
Amortization of purchased intangible assets          808               808               2,425             2,736
Acquisition-related stock-based compensation         6                 19                17                38
General and administrative:
Stock-based compensation                             1,400             2,168             4,664             6,736
Special charges                                      1,407             --                1,407             3,772
Total operating expense adjustments                  8,975             8,944             25,280            30,003
Interest and other income:
Impairment of available-for-sale securities          4,259             --                12,002            --
Net gains on trading securities                      (3,605 )          --                (3,605 )          --
Total interest and other income adjustments          654               --                8,397             --
Total non-GAAP adjustments before income taxes       12,071            12,286            45,054            41,696
Income taxes                                         (354   )          (3,170 )          (4,970 )          (11,504 )
Total non-GAAP adjustments                      $    11,717       $    9,116        $    40,084       $    30,192
QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited -- in thousands)
                                               December 28, 2008   March 30, 2008
ASSETS
Current assets:
Cash and cash equivalents                      $     151,681       $    160,009
Short-term marketable securities                     183,063            160,497
Accounts receivable, net                             87,531             81,642
Inventories                                          30,171             27,520
Deferred tax assets                                  22,563             32,227
Other current assets                                 9,450              8,925
Total current assets                                 484,459            470,820
Long-term marketable securities                      36,908             55,903
Property and equipment, net                          93,071             93,726
Goodwill                                             118,859            127,409
Purchased intangible assets, net                     22,027             34,652
Deferred tax assets                                  26,484             25,870
Other assets                                         3,957              2,586
                                               $     785,765       $    810,966
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                               $     35,915        $    35,643
Accrued compensation                                 24,824             31,120
Accrued taxes                                        3,905              5,262
Deferred revenue                                     6,998              8,693
Other current liabilities                            6,893              5,952
Total current liabilities                            78,535             86,670
Accrued taxes                                        56,245             48,163
Deferred revenue                                     8,603              5,087
Other liabilities                                    4,742              5,130
Total liabilities                                    148,125            145,050
Stockholders' equity:
Common stock                                         202                200
Additional paid-in capital                           703,689            657,893
Retained earnings                                    1,174,530          1,084,938
Accumulated other comprehensive income (loss)        291                (2,530     )
Treasury stock                                       (1,241,072 )       (1,074,585 )
Total stockholders' equity                           637,640            665,916
                                               $     785,765       $    810,966
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited -- in thousands)
                                                                     Nine Months Ended
                                                                     December 28,      December 30,
                                                                     2008              2007
Cash flows from operating activities:
Net income                                                           $     89,592      $     73,445
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization                                              24,579            22,842
Stock-based compensation                                                   22,144            24,249
Acquisition-related:
Amortization of purchased intangible assets                                12,319            13,107
Stock-based compensation                                                   787               568
Deferred income taxes                                                      15,632            (12,472  )
Impairment of available-for-sale securities                                12,002            --
Net gains on trading securities                                            (3,605   )        --
Provision for losses on accounts receivable                                111               190
Loss on disposal of property and equipment                                 137               1,121
Changes in operating assets and liabilities:
Accounts receivable                                                        (6,000   )        (2,286   )
Inventories                                                                (2,651   )        7,720
Other assets                                                               (2,149   )        2,053
Accounts payable                                                           (2,073   )        3,813
Accrued compensation                                                       (5,376   )        (7,108   )
Accrued taxes                                                              6,725             33,329
Deferred revenue                                                           1,821             2,740
Other liabilities                                                          (702     )        (756     )
Net cash provided by operating activities                                  163,293           162,555
Cash flows from investing activities:
Purchases of available-for-sale securities                                 (117,475 )        (120,923 )
Proceeds from sales and maturities of available-for-sale securities        107,874           348,387
Proceeds from disposition of trading securities                            2,675             --
Additions to property and equipment                                        (21,410  )        (22,460  )
Acquisition of business                                                    --                67
Net cash provided by (used in) investing activities                        (28,336  )        205,071
Cash flows from financing activities:
Proceeds from issuance of stock under stock plans                          21,624            11,262
Tax benefit from issuance of stock under stock plans                       323               364
Purchase of treasury stock                                                 (165,232 )        (315,276 )
Net cash used in financing activities                                      (143,285 )        (303,650 )
Net increase (decrease) in cash and cash equivalents                       (8,328   )        63,976
Cash and cash equivalents at beginning of period                           160,009           76,804
Cash and cash equivalents at end of period                           $     151,681     $     140,780
QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited -- in thousands)
Net Revenues
A summary of the company's revenue components is as follows:
                     Three Months Ended              Nine Months Ended
                     December 28,    December 30,    December 28,    December 30,
                     2008            2007            2008            2007
Host Products        $      112,181  $      118,915  $      352,498  $      327,559
Network Products            32,788          27,833          92,477          74,239
Silicon Products            16,492          9,275           47,707          30,383
Royalty and Service         2,230           2,017           10,633          5,962
                     $      163,691  $      158,040  $      503,315  $      438,143
Geographic Revenues
Revenues by geographic area are presented based upon the country
of destination.
Net revenues by geographic area are as
follows:
                                Three Months Ended              Nine Months Ended
                                December 28,    December 30,    December 28,    December 30,
                                2008            2007            2008            2007
United States                   $      75,759   $      78,647   $      240,085  $      224,935
Europe, Middle East and Africa         40,395          40,243          123,407         105,425
Asia-Pacific and Japan                 38,985          29,143          111,410         81,000
Rest of world                          8,552           10,007          28,413          26,783
                                $      163,691  $      158,040  $      503,315  $      438,143

SOURCE: QLogic Corp.

Media Contact:
QLogic Corporation
Robin Austin, 949-389-6865
robin.austin@qlogic.com
or
Investor Contact:
QLogic Corporation
Jeanie Herbert, 949-389-6343
jeanie.herbert@qlogic.com