Call me crazy, but it seems like the technology world in Orange County is upside down right now.
Take Aliso Viejo-based QLogic Corp. and Costa Mesa-based Emulex Corp.
The two companies once were the same company before Emulex spun off QLogic in the early 1990s. These days they’re rivals in host bus adapters for data storage networks.
Since splitting off, QLogic often has been considered the frontrunner in terms of growth potential and market value. But these days, some analysts are leaning toward Emulex.
J.P. Morgan analyst Mark Moskowitz recently cut his earnings projection for QLogic’s current quarter, saying the company was projecting growth that was slower than that of Emulex.
“We believe that Emulex remains on a clearer path to growth versus QLogic,” he said in a research note. Meanwhile, Emulex scored a string of upgrades from analysts.
The moves came after the companies reported results for the recently ended quarter.
For the quarter ended April 3, QLogic reported sales of $157.2 million, up 23% from a year earlier. Net income was up 40% to $46.2 million.
That beat estimates. But QLogic’s outlook for the current quarter left analysts wanting more.
The case was the opposite at Emulex. Sales for the quarter ended March 27 rose modestly, up 4% from a year ago to $102.6 million. Net income was up 10% to $22.7 million.
But Emulex offered a forecast for the current quarter that was ahead of what analysts were expecting.
Another Notch for Gateway
It looks like Wayne Inouye, chief executive of Gateway Inc., might be working his magic at the Irvine-based PC maker.
In Gateway’s first-quarter earnings report earlier this month, the company said it would have turned a net profit if not for $8 million in restructuring charges. Gateway came in with a net loss of $50 million, versus a $172 million loss in the same quarter a year ago.
Without charges, Gateway said it would have reported net income of $3 million.
On top of that, Rod Sherwood, Gateway’s chief financial officer, said he believes “revenue will grow sequentially each quarter on a significant basis for the remaining three quarters of the year and are currently very comfortable with this full year revenue guidance.”
Last year, Gateway bought Irvine discount PC maker eMachines for some $266 million, bringing the company from San Diego to Orange County. Ted Waitt, Gateway’s founder, stepped down as Gateway’s chief executive last year making way for Inouye, who had turned around eMachines.
Shipments of personal computers could grow by 9% this year, thanks in large part to more sales of laptop computers, according to market researcher Gartner Inc.
The growth forecast is lower than 2004’s PC shipment growth of 11.6%. In all, PC shipments could grow to 199 million units this year, up from 183 million units shipped in 2004.
Broadcom, the Bank
What’s $100 million? If you’re Irvine chipmaker Broadcom Corp., it’s not much. It’s what the company has added to its cash balance in the past year, giving the maker of communications chips almost a cool $1 billion on the “cash and marketable securities” line of its balance sheet.
Say what you will about Broadcom’s pro-forma accounting and lower stock price,the company has been quite a cash generator.
Drive Profits
Could the personal computer industry be stabilizing? Maybe,at least according to recent results from Maxtor Corp., a Militas-based rival to Lake Forest disk drive maker Western Digital Corp.
Maxtor’s sales rose to $1.07 billion from $1.02 billion in the same quarter a year ago.
The company would have turned a profit, but a charge due to severance and other items swung it to a loss.
Even so, Maxtor’s industry outlook was stable.
“Supply and demand remained in good balance in the desktop market throughout the quarter and demand in the enterprise market was extremely strong, resulting in relatively stable prices,” said Chief Executive C.S. Park.
Western Digital is more cautious. In April, the company said it’s seeing demand for drives for a range of products. But that demand isn’t likely to rise above the typically tepid sales of the June quarter.
Last month, Western Digital,the biggest maker of hard disks used in desktop personal computers,reported March quarter sales of $920 million, 23% higher than $749 million in the same quarter a year ago. Net profits rose to $70.8 million, up from $47.9 million a year ago.
