QLogic Quits ASIC Switch Market in Latest Push to Cut Costs

QLogic has discontinued the development of its ASIC switch solutions in an effort to boost long term profitability.

Interim CEO and chief financial officer Jean Hu announced the move during the company’s first quarter earnings call. She assured shareholders that QLogic’s existing ASIC solutions will remain on the market for foreseeable future, and stated that near-term OEM switch development and qualification programs will not be affected by the cutbacks.

Wikibon Senior analyst Stu Miniman told us that QLogic’s exit from the ASIC space was to be expected in light of its decline in recent years. He believes that the channel will play a big role in shaping the company’s future.

“While QLogic’s switch lines have delivered some strong innovative solutions over the years, it had failed to gain significant market traction and was a far third in market share. After selling off its InfiniBand switching unit to Intel in 2012, it is not surprising to have QLogic exit the switching business,” Miniman said. “QLogic remains the market leader in Fibre Channel HBAs and ASICs, a strong player in Ethernet adapters, and has a good opportunity with its FabricCache offering. QLogic’s switch business had more strategic impact on OEM relationships since the origin of the embedded switches was typically unknown to enterprise IT users. QLogic needs to both drive products through OEMs and create awareness at end-users of the differentiation that QLogic’s solutions offer.”

QLogic’s efforts to refocus on its core server adapter business and promote FabricCache have taken their toll on its bottom line. The company posted a net loss of $3.1 million in the first quarter, down from earnings of $29.6 million three months earlier. Management cited “special charges” of $12 million recorded in connection with Jean Hu’s ambitious plan to cut annual spending by $20 million.