QLGC ( $40-$34) P/E 60 Selloff Seen As Overreaction To News, meets expectations
By Shaheen Pasha
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--QLogic Corp. (QLGC) met Wall Street's first-quarter
pro forma estimates late Tuesday, but a dreary outlook for information
technology spending sent analysts running to cut fiscal 2002 earnings views
and investors scurrying to unload shares.
Shares fell more than 17% after Salomon Smith Barney analyst Clinton Vaughan
cut his fiscal 2002 earnings estimate to 89 cents a share from $1.11 and
downgraded the stock to neutral from buy.
In a research note, Vaughan said he expects QLogic stock to face pressure
as a result of the economic downturn, delays in new adoption cycles,
transition of its business to Fibre Channel from its legacy business Small
Computer System Interface, or SCSI, and pressure in the storage industry.
Banc of America Securities research analyst Shaw Wu also reduced his fiscal
year estimates but said Wednesday's selloff is an overreaction to the
outlook.
"The business is made up of two units: the storage related unit and the
networking side," Wu told Dow Jones Newswires. "While the legacy SCSI
business declined more than expected, the networking side with the Fibre
Channel switch products actually grew in this tough environment."
In fact, while SCSI sales fell from last year, the Fibre Channel portion of
the revenue, which accounted for 61% of the total revenue, grew a
better-than-expected 10% over the March quarter.
Wu said QLogic's current valuation is "interesting" and while first quarter
revenue did fall below estimates due to weak SCSI sales, investors may want
to take another look at the stock.
Thomas Weisel Partners analyst Kevin Hunt maintained a buy rating on QLogic
but cut fiscal 2002 estimates to 85 cents a share from $1.04, citing a
difficult IT spending environment.
In a research note, Hunt said while SCSI was under pressure, Fibre Channel
growth should continue to be strong, "potentially leading to the upside."
A representative from QLogic was not immediately available for comment.
Shares of the company recently traded at $33.95, down $6.79 or 16.6% on
volume of 16.5 millions share, doubling its average daily volume.
-By Shaheen Pasha, Dow Jones Newswires; 201-938-2312
shaheen.pasha@dowjones.com
(END) DOW JONES NEWS 07-25-01
11:34 AM
*** end of story *** |
