Quick Look
Date: Jul 15, 2009
Growth: B
Competitive Moat: C-
Management: B
Financial Health: A
Opinion: Good MFI pick, although a fast developing market.
QLogic (NasdaqGS:
) manufactures and sells components used in
computer data storage networks. The company has 3 primary divisions.
Host Products (about 75% of sales) sells host bus adapters, or HBAs,
which connect computers to networked storage devices like hard drives
or optical media. This division also makes
InfiniBand Host Channel
Adapters (HCAs), which are used in "supercomputing" applications that
require high data bandwidth. The second division is Network Products
(~17% of sales), which manufactures Fibre Channel and InfiniBand
switches and storage routers. Switches and routers connect different
parts of storage networks and route data between them. The final
division, Silicon Products, delivers the remaining small portion of
sales and is QLogic's legacy business, providing protocol and
controller components used in older network architectures.
QLogic has a number of positive factors, one of which is market
growth potential. It takes only a rudimentary knowledge of Internet
trends to realize the massive amounts of data storage that are required
for applications such as social networking, online photo and video
sharing, digital distribution of audio and video content, "cloud
computing" storage of documents and applications, and so forth. These
trends will only intensify going forward, and to efficiently handle
storage needs, these storage-area networks (SAN) will become more and
more ubiquitous, driving demand for QLogic's products. IDC forecasts a
15% annual market growth for HBAs through 2011, with the overall SAN
market growing at an equally impressive 10% annually. SAN vendors are
trying to push the technology to medium-size enterprises (it is
currently utilized mainly by large firms).
