QLogic (QLGC) Q3 Earnings & Revenues Beat, Shares Up

QLogic Corp. QLGC reported third-quarter fiscal 2016 earnings (including stock-based compensation but excluding one-time items) of 30 cents per share, surpassing the Zacks Consensus Estimate of 22 cents. The company's earnings, however, remained flat on a year- over-year basis. 

Following the results, shares surged over 11% in after-hours trading yesterday.

Quarter Details

Net revenue came in at $122.7 million, down 12.5% on a year-over-year basis but ahead of the Zacks Consensus Estimate of $117.4 million.

Advanced Connectivity Platform (adapters and silicon for server and storage connectivity applications) revenues decreased 9.8% year over year to $112.5 million. Legacy connectivity product (Switching products) revenues plummeted 33.7% from the year-ago quarter to approximately $10.3 million.

Total operating expense decreased 12.9% year over year to $51.1 million. Operating income of $21.5 million was lower than $23.7 million in the prior-year quarter.

As of Dec 27, 2015, QLogic had cash and marketable securities of approximately $299.5 million compared with $316.4 million at the end of Mar 29, 2015. The company generated $63.3 million in cash from operations in the nine-month period ended on Dec 27, 2015.

Guidance

In the fourth-quarter of fiscal 2016, QLogic expects revenues in the range of $113 million to $119 million. Non-GAAP earnings per share are expected to be between 23 cents to 27 cents, while GAAP earnings are likely to be 7 cents to 9 cents lower than the non-GAAP figure.

Our Take

Qlogic's ongoing restructuring program to streamline its operating expenses is expected to weigh on financials in the near term. In addition, the company is reducing investments in some of its non-core businesses in order to focus on the development of new products in its core Fibre Channel and Ethernet product portfolios. This restructuring program is expected to continue to impact the company's top line going ahead.

Nonetheless, the company is likely to benefit from the rapid adoption of cloud computing, which is one of the key drivers in the high-end enterprise data center market.

Currently, QLogic has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Allot Communications Ltd. ALLT, Extreme Networks Inc. EXTR and Silver Spring Networks, Inc. SSNI. All three carry a Zacks Rank #2 (Buy).

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