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QLogic Reports Third Quarter Results For Fiscal Year 2010
ALISO VIEJO, Calif., Jan 26, 2010 (GlobeNewswire via COMTEX) -- 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 27, 2009.

Third Quarter Highlights

  --  Net revenue: $149.1 million.
  --  Net income: $28.6 million GAAP, $36.2 million non-GAAP.
  --  Net income per diluted share: $0.25 GAAP, $0.31 non-GAAP.
  --  Cash generated from operations: $43.9 million.
  --  Cash and investment securities: $349.2 million as of December 27, 2009.

Financial Results

Net revenue for the third quarter of fiscal 2010 was $149.1 million compared to $163.7 million in the same quarter last year. Revenue from Host Products was $110.4 million during the third quarter of fiscal 2010 compared to $112.2 million in the same quarter last year. Revenue from Network Products was $27.4 million during the third quarter of fiscal 2010 compared to $32.8 million in the same quarter last year. Revenue from Silicon Products was $8.7 million during the third quarter of fiscal 2010 compared to $16.5 million in the same quarter last year.

Net income on a GAAP basis for the third quarter of fiscal 2010 was $28.6 million, or $0.25 per diluted share, compared to $30.8 million, or $0.24 per diluted share, for the third quarter of fiscal 2009. Net income on a non-GAAP basis for the third quarter of fiscal 2010 was $36.2 million, or $0.31 per diluted share, compared to $42.5 million, or $0.34 per diluted share, for the third quarter of fiscal 2009.

"We are very pleased with our strong financial performance in the third fiscal quarter. We experienced strong sequential revenue growth for both our Host and Network Products, and a substantial sequential improvement in profitability," said H. K. Desai, chief executive officer, QLogic. "We are clearly benefiting from several growth drivers, including the ongoing server upgrade cycle and the transition to converged networks."

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 third 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) 325-4876, pass code: 9984683.

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. 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.

                           QLOGIC CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
         (unaudited -- in thousands, except per share amounts)

                             Three Months Ended     Nine Months Ended
                            ---------------------  ------------------
                            December  December     December  December
                               27,    28,          27,       28,
                              2009       2008        2009      2008
                            --------  -----------  --------  --------
  Net revenues              $149,122     $163,691  $403,354  $503,315
  Cost of revenues            53,020       54,770   145,258   165,542
                            --------  -----------  --------  --------
   Gross profit               96,102      108,921   258,096   337,773
                            --------  -----------  --------  --------
  Operating expenses:
   Engineering and
    development               33,978       33,117   102,294   100,565
   Sales and marketing        18,812       20,918    58,268    67,895
   General and
    administrative             8,780        8,172    24,923    24,892
   Special charges                 -        1,407       848     1,407
                            --------  -----------  --------  --------
    Total operating
     expenses                 61,570       63,614   186,333   194,759
                            --------  -----------  --------  --------
  Operating income            34,532       45,307    71,763   143,014
  Interest and other
   income, net                 1,736        2,511     6,996     2,035
                            --------  -----------  --------  --------
  Income before income
   taxes                      36,268       47,818    78,759   145,049

  Income taxes                 7,620       17,028    18,985    55,457
                            --------  -----------  --------  --------

  Net income                 $28,648      $30,790   $59,774   $89,592
                            ========  ===========  ========  ========
  Net income per share:
   Basic                       $0.25        $0.24     $0.51     $0.69
   Diluted                     $0.25        $0.24     $0.51     $0.68
  Number of shares used in
   per share calculations:
   Basic                     114,695      126,180   116,935   130,050
   Diluted                   116,479      126,497   117,965   130,932
                              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  December  December   December
                                   27, 2009  28, 2008  27, 2009   28, 2008
                                   --------  --------  --------  -----------
  GAAP net income                   $28,648   $30,790   $59,774      $89,592
  Items excluded from GAAP net
   income:
   Stock-based compensation           8,456     7,005    27,022       22,144
   Amortization of purchased
    intangible assets                 1,893     2,713     6,719       12,319
   Acquisition-related
    stock-based compensation            286       292       403          787
   Special charges                        -     1,407       848        1,407
   Gain on sales of previously
    impaired investment
    securities                            -         -     (605)            -
   Impairment of investment
    securities                            -     4,259         -       12,002
   Net gains on trading
    securities                            -   (3,605)         -      (3,605)
   Income taxes                     (3,084)     (354)   (8,947)      (4,970)
                                   --------  --------  --------  -----------
  Total non-GAAP adjustments          7,551    11,717    25,440       40,084
                                   --------  --------  --------  -----------
  Non-GAAP net income               $36,199   $42,507   $85,214     $129,676
                                   ========  ========  ========  ===========
  Net income per diluted share:
   GAAP net income                    $0.25     $0.24     $0.51        $0.68
   Adjustments                         0.06      0.10      0.21         0.31
                                   --------  --------  --------  -----------
   Non-GAAP net income                $0.31     $0.34     $0.72        $0.99
                                   ========  ========  ========  ===========

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:

  (unaudited -- in thousands)                   Three Months Ended                       Nine Months Ended
                                     -----------------------------------------  -----------------------------------
                                                                      December                             December
                                            December 27, 2009         28, 2008      December 27, 2009      28, 2008
                                     -------------------------------  --------  -------------------------  --------
  Non-GAAP Adjustments:
  Cost of revenues:
   Stock-based compensation                                     $650      $569                     $2,039    $1,577
   Amortization of purchased
    intangible assets                                          1,624     1,873                      4,833     9,800
                                     -------------------------------  --------  -------------------------  --------
  Total cost of revenue adjustments                            2,274     2,442                      6,872    11,377
                                     -------------------------------  --------  -------------------------  --------
  Operating expenses:
  Engineering and development:
   Stock-based compensation                                    4,222     3,748                     13,719    11,600
   Amortization of purchased
    intangible assets                                              -        32                          -        94
   Acquisition-related stock-based
    compensation                                                 286       286                        403       770
  Sales and marketing:
   Stock-based compensation                                    1,629     1,288                      5,230     4,303
   Amortization of purchased
    intangible assets                                            269       808                      1,886     2,425
   Acquisition-related stock-based
    compensation                                                   -         6                          -        17
  General and administrative:
   Stock-based compensation                                    1,955     1,400                      6,034     4,664
  Special charges                                                  -     1,407                        848     1,407
                                     -------------------------------  --------  -------------------------  --------
  Total operating expense
   adjustments                                                 8,361     8,975                     28,120    25,280
                                     -------------------------------  --------  -------------------------  --------
  Interest and other income:
   Gain on sales of previously
    impaired investment securities                                 -         -                      (605)         -
    Impairment of investment
     securities                                                    -     4,259                          -    12,002
   Net gains on trading securities                                 -   (3,605)                          -   (3,605)
                                     -------------------------------  --------  -------------------------  --------
  Total interest and other income
   adjustments                                                     -       654                      (605)     8,397
                                     -------------------------------  --------  -------------------------  --------
  Total non-GAAP adjustments before
   income taxes                                               10,635    12,071                     34,387    45,054
  Income taxes                                               (3,084)     (354)                    (8,947)   (4,970)
                                     -------------------------------  --------  -------------------------  --------
  Total non-GAAP adjustments                                  $7,551   $11,717                    $25,440   $40,084
                                     ===============================  ========  =========================  ========
                   QLOGIC CORPORATION
         CONDENSED CONSOLIDATED BALANCE SHEETS
              (unaudited -- in thousands)

                              December     March 29,
                              27, 2009       2009
                             -----------  -----------
  ASSETS
  Current assets:
   Cash and cash
    equivalents                 $145,142     $203,722
   Short-term investment
    securities                   204,059      139,561
   Accounts receivable, net       86,101       68,519
   Inventories                    21,820       40,293
   Deferred tax assets            17,827       19,002
   Other current assets           13,892       10,854
                             -----------  -----------
    Total current assets         488,841      481,951
  Long-term investment
   securities                         --       34,986
  Property and equipment,
   net                            86,060       92,547
  Goodwill                       119,748      118,859
  Purchased intangible
   assets, net                    18,786       19,117
  Deferred tax assets             33,402       28,785
  Other assets                     3,813        4,045
                             -----------  -----------

                                $750,650     $780,290
                             ===========  ===========
  LIABILITIES AND
   STOCKHOLDERS' EQUITY
  Current liabilities:
   Accounts payable              $35,459      $36,874
   Accrued compensation           19,199       28,702
   Accrued taxes                   3,586       13,499
   Deferred revenue                9,177        7,470
   Other current
    liabilities                    5,821        6,728
                             -----------  -----------
    Total current
     liabilities                  73,242       93,273
  Accrued taxes                   41,882       47,116
  Deferred revenue                 8,147        8,559
  Other liabilities                4,865        4,797
                             -----------  -----------
    Total liabilities            128,136      153,745
                             -----------  -----------
  Stockholders' equity:
   Common stock                      204          202
   Additional paid-in
    capital                      756,401      712,064
   Retained earnings           1,253,501    1,193,727
   Accumulated other
    comprehensive income           1,163          634
   Treasury stock            (1,388,755)  (1,280,082)
                             -----------  -----------
    Total stockholders'
     equity                      622,514      626,545
                             -----------  -----------

                                $750,650     $780,290
                             ===========  ===========
                                                    QLOGIC CORPORATION
                                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                               (unaudited - in thousands)

                                                    Nine Months Ended
                                              -----------------------------
                                               December 27,   December 28,
                                                   2009           2008
                                              -------------  --------------
  Cash flows from operating activities:
  Net income                                        $59,774         $89,592
  Adjustments to reconcile net income to net
   cash provided
  by operating activities:
  Depreciation and amortization                      23,912          24,579
  Stock-based compensation                           27,022          22,144
  Acquisition-related:
  Amortization of purchased intangible
   assets                                             6,719          12,319
  Stock-based compensation                              403             787
  Deferred income taxes                               4,554          15,632
  Net gains on investment securities                (2,639)         (4,469)
  Impairment of investment securities                     -          12,002
  Provision for losses on accounts
   receivable                                           512             111
  Loss on disposal of property and equipment            657             137
  Changes in operating assets and
   liabilities, net of acquisition:
  Accounts receivable                              (17,378)         (6,000)
  Inventories                                        19,503         (2,651)
  Other assets                                          148         (2,149)
  Accounts payable                                  (2,446)         (2,073)
  Accrued compensation                              (9,505)         (5,376)
  Accrued taxes                                    (19,359)           6,725
  Deferred revenue                                    1,295           1,821
  Other liabilities                                   (695)           (702)
  Net cash provided by operating activities          92,477         162,429
  Cash flows from investing activities:
  Purchases of available-for-sale securities      (213,704)        (60,266)
  Proceeds from sales and maturities of
   available-for-sale securities                    175,513         102,198
  Proceeds from disposition of trading
   securities                                        10,525           2,675
  Reclassification from cash equivalents to
   other investment securities                            -        (57,209)
  Distributions from other investment
   securities                                         3,076           6,540
  Purchases of property and equipment              (17,605)        (21,410)
  Acquisition of business, net of cash
   acquired                                        (14,931)               -
  Net cash used in investing activities            (57,126)        (27,472)
  Cash flows from financing activities:
  Proceeds from issuance of stock under
   stock plans                                       18,966          23,605
  Minimum tax withholding paid on behalf of
   employees for restricted stock units             (2,833)         (1,981)
  Tax effect from issuance of stock under
   stock plans                                        (154)             323
  Purchases of treasury stock                     (108,976)       (165,232)
  Payoff of line of credit assumed in
   acquisition                                        (934)               -
  Net cash used in financing activities            (93,931)       (143,285)
  Net decrease in cash and cash equivalents        (58,580)         (8,328)
  Cash and cash equivalents at beginning of
   period                                           203,722         160,009
  Cash and cash equivalents at end of period       $145,142        $151,681

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  December  December  December
                         27,       28,       27,       28,
                           2009      2008      2009      2008
                         --------  --------  --------  --------
  Host Products          $110,446  $112,181  $292,801  $352,498
  Network Products         27,413    32,788    76,880    92,477
  Silicon Products          8,660    16,492    25,653    47,707
  Royalty and Service       2,603     2,230     8,020    10,633
                         --------  --------  --------  --------
                         $149,122  $163,691  $403,354  $503,315

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  December  December  December
                                  27,       28,       27,       28,
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
  United States                 $66,531   $75,759  $185,898  $240,085
  Asia-Pacific and Japan         37,625    38,985   100,352   111,410
  Europe, Middle East and
   Africa                        35,518    40,395    91,702   123,407
  Rest of world                   9,448     8,552    25,402    28,413
                               --------  --------  --------  --------
                               $149,122  $163,691  $403,354  $503,315
                               ========  ========  ========  ========

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: QLogic Corp.

CONTACT: QLogic Corporation
Media Contact:
Sonal Dave, 949-389-6000
sonal.dave@qlogic.com
or
Investor Contact:
Doug Naylor, 949-389-7525
doug.naylor@qlogic.com