51.5 F
Laguna Hills
Thursday, Mar 28, 2024
-Advertisement-

Western Digital, QLogic Shares Break Rank

Two of Orange County’s biggest technology stocks have taken opposite paths than their closest rivals.

Aliso Viejo’s QLogic Corp. and Costa Mesa’s Emulex Corp., two longtime rivals for electronics used in data storage networks, have parted ways this year after trading in tandem for much of last year and most of their lives as public companies.

Lake Forest disk drive maker Western Digital Corp. also has split from its key rival, Scotts Valley-based Seagate Tech-nology LLC.

For the past few months, Western Digital and QLogic have seen gains while Seagate and Emulex have declined.

Western Digital has seen a big run-up,its shares are up 20% since January with a recent market value of about $7.5 billion. Seagate is down roughly 20% in the same time with a value of about $9 billion. Both companies make drives that store data in computers and consumer electronics.

Western Digital has seen a quicker-than-expected boost from its $1 billion buy last year of San Jose-based Komag Inc. The buy allowed Western Digital to make most of its drives on its own and helped widen profits in the cutthroat drive business.

The Komag buy also may have crimped Seagate’s supplies of drive parts, said Richard Kugele of Needham & Co. in New York.

In March, Western Digital said it was ending sales of Komag parts to other drive makers as prior contracts ended.

“We believe the absence of Komag’s supply to the rest of the world likely removed 10% of global capacity,” he said. “We believe that Seagate now receives (supplies) from a multitude of places and this creates the opportunity for quite a large amount of variability in supply and quality.”

Western Digital also has benefited from other factors, including stable supplies and prices and market share gains in drives sold at stores and used in laptops.

“It’s hard not to be impressed with the performance of Western Digital,” Kugele said. “They have been knocking the cover off the ball for quite some time.”

QLogic is holding onto a 5% gain in its shares for the year with a recent market value of $2 billion. Emulex is off 30% with a market value of $950 million.

The two companies have parted ways before on Wall Street but have traded in tandem most of the time. Emulex spun off QLogic in 1994.

“For QLogic some of the prospects are changing,” said Kaushik Roy, analyst with Pacific Growth Equities LLC in San Francisco.

Part of it is due to QLogic getting a better deal on chips from supplier Mellanox Technologies Ltd of Santa Clara.

Mellanox’s chips go into QLogic’s switches, which speed up the flow of data on storage networks.

“On the switch side, they were getting beat up on margins,” Roy said. “But it seems like they are getting a little better deal now.”

QLogic also scored a sizable contract with Carlsbad-based Dot Hill Systems Corp., a maker of data storage software that sells to Sunnyvale’s Network Appliance Inc. and Santa Clara’s Sun Microsystems Inc.

“It’s a new business deal for them and it was a surprisingly positive event,” Roy said.

A separate deal with Hewlett-Packard Co. is helping turn around QLogic’s chip business, which had seen slower growth during the past few quarters.

“All these little things are adding up,” Roy said.

On the flip side, Emulex has been losing share to QLogic for a profitable bit of electronics that go into storage networks.

During the first quarter, QLogic managed for the first time to nab half of the market for host bus adapters.

“Emulex has fallen into a little bit of a gap where they are getting hurt more by the economic slowdown,” Roy said. “Emulex is still going through that rough patch, where QLogic is turning around.”

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-