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QLogic Seeks CEO to Help Mt. Rainier Climb

Biddiscombe: took job in 2010, resigned last month

Aliso Viejo-based networking-equipment maker QLogic Corp. is searching for a chief executive with deeper technology roots following last month’s abrupt resignation of Simon Biddiscombe, who came to the job with a financial background.

Biddiscombe’s departure came as a surprise to company watchers, who told the Business Journal that QLogic’s new leader will take on a key challenge in the storage flash market with the company’s new line of products under the Mt. Rainier brand name.

It was a welcome surprise to some.

“Given our skepticism of the Mt. Rainier product, we believe this announcement is exactly what the company needed to do in order to continue the development of this product,” Andrew Nowinski, senior research analyst at Minneapolis-based Piper Jaffray Cos., wrote in a recent investor note.

A fibre-channel adapter launched in March was the first product in the Mt. Rainier line, which is geared for large corporate customers to pool and quickly retrieve storage networks across a group of servers.

Flash memory is faster but more expensive than the traditional magnetic spinning disk drives prevalent today.

QLogic called the Mt. Rainier line the biggest product launch in company history, positioning it as QLogic’s primary growth driver, according to Nowinski.

The company makes electronics, such as switches and adapter cards, that speed up the flow of data on corporate storage networks.

Biddiscombe departed QLogic after less than three years at the helm. Longtime chief executive and current executive chairman H.K. Desai hand-picked him in October 2010.

The board appointed finance chief Jean Hu as interim chief executive. That move drew some ire among investors, who questioned why Desai wasn’t placed in the post, according to Toronto-based RBC Capital Markets analyst Amit Daryanani.

“He doesn’t want to take on the CEO position full time, nor does he want to create the impression that he may entertain such an option,” he said.

QLogic declined interview requests from the Business Journal.

Desai has returned to the chief executive’s job once already, a move that came after IBM veteran Jeff Benck was chosen to lead the company in 2007 and stepped down a year later. Benck was quickly scooped up by Costa Mesa-based rival Emulex Corp.—which spun off QLogic in 1994—as senior vice president and chief operating officer. He was promoted to president of Emulex in 2010.

Desai’s next attempt at relinquishing the chief executive’s job led to Biddiscombe’s promotion from chief financial officer.

“Simon’s background was in finance, and while he had proven to be an excellent communicator of the company’s market leadership and positioning to investors, we believe his lack of deep technical understanding of the product-market was unlikely to enable him to take very decisive action to lift QLogic out of its current woes,” Rajesh Ghai, an analyst in the Dallas office of Minneapolis-based Craig-Hallum Capital Group LLC, wrote in a recent note to investors.

Qlogic’s share price has tumbled 31% in the past 12 months to a market value of about $868.7 million.

Sales slid 13.2% to $484.5 million in the 12 months through March, the end of its fiscal year. Net income sank 38.4% to $73.5 million.

Ethernet Segment

The company, a longtime leader in the maturing fibre-channel segment, is among a group of companies fighting for market share in the emerging 10-gigabit Ethernet connection market for data centers. The competition includes the likes of Intel Corp., Dell Inc., Irvine-based chipmaker Broadcom Corp. and other established players.

At stake is the lead in an Ethernet segment that’s expected to see explosive growth with the proliferation of streaming video and data, along with cloud storage.

The developments at QLogic coincide with some major upheaval in the industry.

Salt Lake City-based rival Fusion-io Inc.’s chief executive, David Flynn, and fellow cofounder, Rick White, resigned last month to pursue “investing activities.”

Fusion-io, which sells corporate storage computers using flash memory, is seeking an executive with stronger operations skills.

Flynn is considered a core technologist, so his next move bears watching.

Elliott Management

The Business Journal in April reported that Emulex staved off a proxy battle with its largest shareholder with the appointment of two directors after New York-based Elliott Management Corp. boosted its stake past 11%.

Elliott Management has a history of major sales and acquisitions in the technology sector.

Some interesting developments at QLogic also preceded Biddiscombe’s resignation.

The Business Journal reported in December that Chicago-based Citadel Investment Group, headed by billionaire hedge fund manager Ken Griffin, upped its stake in the company from 3.15% to 5%.

Citadel—which has an estimated $14 billion under management, according to Crain’s Chicago Business—is one of the world’s largest hedge funds.

Meanwhile, Desai resigned from the board of Irvine-based networking equipment maker Netlist Inc. in April “to focus on his increasing demands at QLogic,” according to regulatory filings.

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