By Purwa Naveen Raman
BANGALORE, July 9 (Reuters) - QLogic Corp QLGC.O raised its first-quarter outlook that topped Wall Street estimates, as the supplier of components for data storage networks saw a sequential sales growth in its host and network products.
QLogic, which dominates host products market along with rival Emulex Corp ELX.N, gets almost 70 percent of its revenue from this business, with the core product being fiber channel host bus adapters — used to connect a server to storage devices.
For its first quarter ended June 29, QLogic now expects earnings of 30 cents to 31 cents a share before special items, up from its previous forecast of 26 cents to 28 cents a share.
The company also raised its revenue outlook to a range of $166 million to $168 million, up from $154 million to $158 million, QLogic said in a statement.
Analysts on average were expecting the company to earn 27 cents a share, before special items, on revenue of $156.3 million, according to Reuters Estimates.
“Soft macro environment has impacted QLogic and its competitors, but I would point out that storage is a category that’s a bit less discretionary than some other categories,” Robert W. Baird & Co analyst Jayson Noland said by phone.
Noland, who has a “neutral” rating on the stock, said the host products market was worth almost a billion dollar in size and was growing 7 percent to 9 percent annually.
However, he said, “It’s unlikely that QLogic and Emulex are going to be able to do a lot more with host products because they already dominate the market.”
In 2006, the company acquired PathScale Inc and SilverStorm Technologies Inc to diversify its business into InfiniBand — a technology that allows clustering of servers to create high performance computing.
“It (InfiniBand) is about $350 million business and it’s growing over 40 percent compounded annual growth,” company spokeswoman Jeanie Herbert said by phone.
QLogic’s top customers are Hewlett-Packard Co (HPQ.N), International Business Machines Corp (IBM.N) and Sun Microsystems Inc JAVA.O that accounted for nearly half of its total revenue in fiscal 2008 ended March 30.
QLogic is expected to report quarterly results on July 21.
Shares of the company were up $1.15 at $15.11 in afternoon trade on Nasdaq, after touching a high of $15.88 in morning. (Editing by Gopakumar Warrier, Jarshad Kakkrakandy)