and not so great for QLGC shareholders, who cannot measure the success or lack thereof, since the switch revenues are not broken out!
If you're speaking strictly in terms of revenue the acquisition was accretive last year although I agree that it probably hasn't amounted to much yet. Unfortunately, the timing of the merger, just before the recession certainly didn't help (although it didn't hurt the ANCR shareholders); however, the switch acquisition allowed the company to market an "end-to-end" solution which is starting to gain some traction in the marketplace. In addition, the "switch-on-a-chip", i.e. the embedded switch, is also starting to gain some traction. The OEM with IBM to provide the switch silicon for IBM's new line of eServers is one example. I believe the switch silicon is also embedded in Cisco's new storage router. In point of fact, without the Switch group I don't think the Q would have a partnership with Cisco.
One of the reasons why I think Qlogic will enjoy robust growth in the future is that I believe that many companies that were early adopters of 1 GB fibre channel switches will begin to replace existing clunky SAN's that require stand-alone switches with embedded solutions. That's where the end-to-end interoperability thing will really help Qlogic. The replacement cycle hasn't really been discussed by analysts yet but it's beginning to happen, particularly as companies replace their servers.
Finally, the rumors have been flying for months now that the Q is going to announce a new 64-port HA switch to compete with Brocade's Silkworm 12000. I was disappointed that it wasn't announced before the end of the last quarter as I'd heard that was the target date. Brocade is having problems with the 12000 and if they can get a product to market it will hurt Brocade.
I actually owned both ANCR and QLGC at the time of the merger although I unloaded 90% of my position after the merger. (I'd like to say it was because I anticipated the downturn but truthfully, I had some family medical expenses to deal with.) I started adding to my QLGC position again during the October downturn prior to earnings as I felt that it was grossly oversold. I've also been trading the calls as I think the market, particularly in this stock will remain volatile. |
