Stock Attack II - A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: Chris who wrote (22409)	10/24/2001 11:51:23 AM
From: stockman_scott	Read Replies (1) of 52237

ET Sector Watch: Storage : Storage sector contributing to Nasdaq strength following a well received earnings report from QLogic (QLGC +8.1%). Other names of note making moves include Brocade Communications (BRCD +9.8%), McDATA (MCDT +5.4%), Emulex (EMLX +9.7%) and EMC Corp. (EMC +3.0%). QLogic (QLGC): A good quarter for this maker of Fibre Channel HBAs (host bus adapters) and switches for networked storage devices. SepQ sales and EPS were in line, although the company edged expectations lower for DecQ. Revenue is expected to be flat to grow in the low single digits for DecQ, or $81.7-$85.0 mln vs Multex consensus of $85.9 mln. The range for EPS was widened to $0.17-$0.20 vs Multex consensus of $0.19. Just to back up a second, it's important to understand the difference between legacy SCSI and the next generation Fibre Channel. Most expect FC to phase SCSI out over the coming years, so it's not surprise QLGC is focusing more on its FC business. SCSI was 30% of sales in SepQ, down from 39% in JunQ. Demand for FC looks strong as it grew sequentially in a difficult SepQ, partially offsetting weakness in the SCSI business. QLGC's main competitor in the FC market is Emulex (EMLX). Emulex issued a press release after the close announcing that its HBAs are now available from Dell for its CLARiiON system co-branded by Dell and EMC. This is seen by many as a threat to QLogic as evidenced by the peppering of questions during the Q&A session tonight. EMLX is the leading HBA provider and could leverage that position into a greater share of the switch market. But QLGC downplays those concerns citing its long-standing relationship with Dell. "What's good for Dell is good for QLogic." There has been a lot of Street talk about a QLGC/Dell switch OEM agreement. The agreement seems likely given the history between Dell and QLogic, but could take a while to materialize. -- Robert J. Reid, Briefing.com

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