Strong Quarter Sends QLogic Higher

The company beats estimates for both earnings and revenue and says growth will come this quarter.
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Updated from April 29

Propelled by solid financial results and encouraging guidance, shares of storage hardware provider

QLogic

(QLGC)

were up strongly Wednesday.

In recent trading, QLogic had gained $2.60, or 6.2%, to $44.23.

On Tuesday, the company reported higher earnings and record revenue for its fourth quarter and full fiscal year.

QLogic's net income in the fourth quarter was $29.9 million, or 31 cents a share, compared to $18.7 million, or 20 cents a share a year ago, according to generally accepted accounting principles. Revenue for the quarter was $120.6 million, 31% higher than a year ago, when the company recorded revenue of $92.3 million.

Wall Street was expecting the company to earn 30 cents a share on sales of $118.5 million.

QLogic expects earnings in the June quarter of 30 cents to 34 cents onsales that will range from $123 million to $126.6 million, or sequential growth of 2% to 5%. But gross margins will likely be somewhat lower thanin the March quarter. Analysts were expecting earnings of 31 cents on sales of $122.4 million.

Emulex

(ELX)

, the company's major competitor, reported a somewhat weaker quarter last week and suffered a

beating as a result.

"This guidance is calling for growth on top of a great quarter -- Emulex was much more conservative," said Deutsche Bank analyst Sabrina Ricci. Her firm does not have a banking relationship with QLogic.

Other analysts who follow QLogic were also positive, though Clay Sumner of Legg Mason noted that the solid results were largely priced into shares and set a target of $46 a share. Sumner's firm does not have a banking relationship with QLogic.

For the year ended March 31, the company reported a GAAP net income of $103.5 million, or $1.09 a share, compared to $70.7 million, or 74 cents a share, a year ago. Net revenue was a record $440.8 million, up 28% from the $344.2 million reported a year ago. Analysts polled by Thomson Financial/First Call were expecting revenue of $442 million. That revenue figure excludes charges of $3.2 million for warrants issued in past years.

On a pro forma basis the company earned $111.9 million, or $1.17 per share, 2 cents better than analysts had expected.

QLogic's fourth-quarter gross margin was 65.9%, compared with 64.2% in the prior quarter, and 62.5% a year ago. The company attributed the increase to a better product mix and increased manufacturing efficiencies. Inventory turns, a significant measure of efficiency in manufacturing, were up sequentially from 7.6 to 8.5 for the year.