QLogic Corporation (NASDAQ: QLGC), designs network infrastructure products that provide and manage computer data communication. Its products are utilized in enterprise data centers, cloud computing, Web 2.0, among other environments. QLogic sorts its products into three distinct groups: Host Products, Network Products and Silicon Products. QLogic’s converged network adapters (CNAs) are trendy devices that are critical to cloud computing systems. The small-cap company recently formed a symbiotic relationship with Intel (NASDAQ: INTC), allowing the larger company to brand their products related to networking.
According to Rob Davis, vice president and chief technology officer at QLogic, “the goal of the company is to provide a flexible infrastructure”. He went on to say that QLogic focuses on large OEMs. They allow the OEMs to distinguish their products by adapting infrastructure components. The large OEMs use Intel as their processors. Essentially what QLogic does is makes the parts. Intel is the chip supplier and then the OEM stamps the finished product.
QLogic also plans to work with Microsoft (NASDAQ: MSFT). The company will provide the cloud enabling solution for the Microsoft Cloud OS. Oracle (NASDAQ: ORCL) also recently announced a deal with QLogic. The bottom line is that without converged infrastructure, there is no cloud computing market. QLogic is the chief global supplier in converged networking. Ironically it supplies essential components to numerous partners who compete with each other.
The company recently announced that it has expanded its extremely successful Signature Partner Program, a CRN 5-Star Partner Program by adding the Advanced Solutions Partner tier. The new tier will support the company’s expanding solutions portfolio, including impending products based on the company’s innovative Mt. Rainier shared SSD caching adapter technology. Advanced Solutions Partners will gain the skills, to effectively install and support high-margin connectivity technology sales plus have special access to top-level program benefits and resources.
QLogic has a market cap of $900 million and is trading around $10.00. For a pure cloud play, small-cap QLogic is worth considering as an investment. The company is cash heavy and is protected by rock solid balance sheet that has much more cash than liabilities. But, and it’s a big but, operating profits declined 57 percent in the latest quarter reporting, while operating margin dropped 22.6 percent. Expenses rose 5.6 percent higher. Revenue declined across all three of its segments, host, network, and silicon products. This can easily be attributed to an industry-wide downturn as businesses are reining in their spending. Look to the company’s OEMs if your are considering a play here. It partners with some of the leading networking and cloud companies in the industry. They provide the company with steady revenue. Worth a look in our opinion.