February - 2002 issue > Cover

Storage product vendor qLogic grew its cash by about $40 million last quarter. Forget debates about what technology will prevail in storage, or new age management theory, $40 million more on the balance sheet at a time when most technology companies don’t have a P/E ratio is a strong statement.

It’s true that qLogic is in a sweet spot at the moment. The storage market that it addresses, with a broad product portfolio that covers everything from storage area networking (SAN) switches to controllers for disk drives and tape drives, is hot and is likely to remain on a consistent growth path for the next several years. The market for Fibre Channel technology alone is expected to grow 67 percent over the next five years.

CEO H.K. Desai has made the right technology bets, and signed up the right set of long-term customers. CFO Tom Anderson says simply, “If we stopped all design activity we’d still have revenue and sales for the next year or two.”

For all the CEOs sweating every quarter to scrounge up enough tough sales in a down market to prevent their stock from being crushed on Wall Street, that kind of cushion is almost depressing. Some companies have all the luck.

Technology Evolution
But qLogic has been around since the late 1980s, first as a subsidiary of Emulex until 1994, when it was spun out and became an independent public company. These days it competes with Emulex. Though qLogic is fortunate that it got into a lucrative market, it didn’t fall into its strong position by accident.

When asked about the fundamentals of engineering a company to be financially successful, H.K. Desai immediately puts investing in new technologies at the top of his list, and with good reason. When Desai joined qLogic in 1990, the company exclusively made controllers for disk drives. The boom and bust nature of the disk drive market was unsettling for Desai. He explains, “If we wanted to spin off, we needed to cover more segments, so we decided to cover the host side — SCSI technology.”

Since then qLogic’s market reach has grown significantly. In 1995, the company started investing in Fibre Channel technology, now the industry standard technology in storage networking. These days more than 70 percent of qLogic’s revenues come from the Fibre Channel market. It’s a case study in having the right product at the right time.