##### Table of Contents



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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended March 30,
2003


Commission File No. 0-23298

QLogic Corporation

(Exact name of registrant as specified in its
charter)


|                                                                                                  |  |                                                   
|------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State of incorporation)                                                                  |  | 33-0537669(I.R.S. Employer Identification
    No.)
|26650 Aliso Viejo Parkway
    Aliso Viejo, California(Address of principal executive
    offices) |  | 92656(Zip Code)                                   

(949) 389-6000

(Registrants telephone number, including
area code)




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Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:


Common Stock, $0.001 Par Value


Series A Junior Participating Preferred
Stock, $0.001 Par Value


(Title of class)




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Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of
Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     þ

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     þ

The aggregate market value of the voting stock
held by non-affiliates of the Registrant was $1,831,002,985
(based on the closing price for shares of the Registrants
common stock as reported by the Nasdaq National Market on
September 29, 2002).

As of May 30, 2003, 94,173,323 shares of the
Registrants common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement
relating to the Registrants 2003 Annual Meeting of
Stockholders, to be held on August 26, 2003, are
incorporated by reference into Part III of this Form 10-K
where indicated.



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TABLE OF CONTENTS



|                                                |                                                                                                         |                                                                          |  |  |  |  |  | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ |  |  |  |  |  | 
|PART I                                         
|                                                | Item 1. Business                                                                                       
|                                                | Item 2. Properties                                                                                     
|                                                | Item 3. Legal Proceedings                                                                              
|                                                | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                        
|                                                | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                                                | Item 6. Selected Financial Data                                                                        
|                                                | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                | Item 7a. Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                | Item 8. Financial Statements and Supplementary Data                                                    
|                                                |                                                                                                         | INDEPENDENT AUDITORS REPORT                                            
|                                                |                                                                                                         | CONSOLIDATED BALANCE SHEETS                                             
|                                                |                                                                                                         | CONSOLIDATED STATEMENTS OF INCOME                                       
|                                                |                                                                                                         | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
|                                                |                                                                                                         | CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
|                                                |                                                                                                         | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              
|                                                | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|PART III                                       
|                                                | Item 10. Directors and Executive Officers of the Registrant                                            
|                                                | Item 11. Executive Compensation                                                                        
|                                                | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                | Item 13. Certain Relationships and Related Transactions                                                
|                                                | Item 14. Controls and Procedures                                                                       
|PART IV                                        
|                                                | Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K                             
|SIGNATURES                                     
|CERTIFICATIONS                                 
|Schedule II  VALUATION AND QUALIFYING ACCOUNTS
|EXHIBIT INDEX                                  
|EXHIBIT 3.4                                    
|EXHIBIT 3.5                                    
|EXHIBIT 3.8                                    
|EXHIBIT 21.1                                   
|EXHIBIT 23.1                                   
|EXHIBIT 99.1                                   
|EXHIBIT 99.2                                   



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PART I




Item 1.     Business

Introduction

QLogic Corporation was organized as a Delaware
corporation in 1992. Our principal executive offices are located
at 26650 Aliso Viejo Parkway, Aliso Viejo, California
92656, and our telephone number at that location is
(949) 389-6000. Our Internet address is www.qlogic.com. Our
periodic and current reports, together with any amendments to
these reports, are available free of charge on our website as
soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the Securities and
Exchange Commission.

In August 2000, we merged with Ancor
Communications, Incorporated in a pooling-of-interests
transaction. Unless the context indicates otherwise,
we, our, us and the
Company each refer to the Registrant and its
subsidiaries.

All references to years refer to our fiscal years
ended March 30, 2003, March 31, 2002 and April 1,
2001, as applicable, unless the calendar years are specified.
All references to share and per share data have been restated to
reflect our stock splits.

Overview

We design and develop storage networking
infrastructure components sold to original equipment
manufacturers, or OEMs, resellers and system integrators. With a
vision of a storage area network in every business, we produce
the controller chips, management enclosure chips, host bus
adapters, or HBAs, fabric switches and management software that
provide the connectivity infrastructure for storage networks of
every size. We serve customers with solutions based on various
storage area network, or SAN, technologies including Small
Computer Systems Interface, or SCSI, Internet SCSI, or iSCSI,
and Fibre Channel.



| |                                        
| | ---------------------------------------
| | Customers, Markets and
    Applications



| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our products are sold directly to OEMs and
    through our authorized distributors and resellers. Our customers
    rely on our SAN infrastructure technology to deliver storage
    solutions to information technology professionals in virtually
    every business sector.
|
| | Our technology is found primarily in server,
    workstation, storage subsystem and hard disk drive solutions
    targeted at:                                                                                                                                                



| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Storage-intensive enterprise applications such as
    data warehousing, data mining and online transaction processing;                                   
|
| |  | Media-rich file types such as film/video,
    broadcast, medical imaging and computer-aided design, or CAD,
    and computer-aided manufacturing, or CAM;
|
| |  | Server clustering and local area network-free, or
    LAN-free, high-speed backup.                                                                       



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our products are incorporated in a large number
    of solutions from OEM customers, including Cisco Systems, Inc.,
    Dell Computer Corporation, EMC Corporation, Fujitsu Limited,
    Hitachi, Ltd., Hewlett-Packard Company, International Business
    Machines Corporation, Quantum Corporation, Storage Technology
    Corporation, Sun Microsystems, Inc. and many others. For
    information regarding our major customers and their impact on
    our revenues, see Managements Discussion and Analysis of
    Financial Condition and Results of Operations, included in
    Part II, Item 7 of this report.



| |                       
| | ----------------------
| | Alliance Relationships



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To ensure interoperability within the SAN, we
    work closely with independent hardware vendors and software
    vendors, as well as developers and integrators who create, test,
    and evaluate complementary storage networking products. We have
    key alliance relationships with Cisco Systems, Inc., Microsoft
    Corporation, VERITAS Software Corporation, Computer Associates
    International, Inc., Legato Systems, Inc. and McData Corporation.

1



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Storage Industry

In late 2000, the University of California,
Berkeley published a report entitled How Much
Information? in which it measured how much digital
information is generated in the world each year. The report
concluded the world was generating over 1.6 million
terabytes (1 terabyte equals roughly 1 million books)
of magnetically recorded information per year and that this
volume is doubling every year. The ability to access, share and,
most importantly, manage this amount of information represents a
large market opportunity.

In the mid-1980s, the need to distribute
information quickly and efficiently drove client access from a
mainframe direct connect environment to a LAN
environment. More recently, the need to access growing volumes
of information by large numbers of homogeneous and heterogeneous
computing platforms has led to a rapid adoption of storage area
networking environments. As indicated in the University of
California, Berkeley study, the explosive expansion of the
Internet and the growing use of digital information servers act
as catalysts for the ever increasing storage requirements and
drive the need to network storage for accessibility,
maintainability and simplicity of management.

IBM first introduced storage area networking in
the early 1990s with the Enterprise System Connection, or ESCON.
While this was an effective solution for IBM mainframe
environments, it did nothing for the rapidly expanding open
systems environment. Fibre Channel, which was introduced in
1994, promised superior connectivity, distance and access
benefits over ESCON in a standard protocol.

Initially deployed in a loop environment and used
primarily for its tremendous bandwidth advantages over existing
SCSI solutions, Fibre Channel gradually moved into networked
environments. At first, deployments used hubs to connect
networked servers and storage subsystems. Subsequently, switches
replaced hubs and now represent the vast majority of deployments.

As was the case in the adoption of LANs, software
was necessary for the successful adoption of storage area
networking. The ability to consolidate multiple computing
environments and share connectivity of previously dedicated
storage offered significant cost advantages. The only remaining
issue was managing such a sophisticated environment. SANs
followed much the same adoption path as LANs, with storage
manufacturers, OEMs and third parties all developing and
delivering SAN management solutions. Today, there are many SAN
management solutions available, from relatively basic solutions
for small environments to extensive software packages capable of
managing thousands of SAN nodes.

During 2002, SANs continued to be the fastest
growing method for connecting external Redundant Array of
Independent Disks, or RAID, storage, reaching 30% of the market
according to Gartner/ Dataquests August 2002 Disk Storage
Systems World Wide Forecast. In addition, Gartner/ Dataquest
forecasts that SANs will account for over 56% of all externally
attached RAID storage subsystems by 2006. This report also
indicated that Fibre Channel is expected to be the dominant
technology employed for SAN connectivity throughout the forecast
period.

During the past year, iSCSI has emerged as a new
SAN technology, which allows standard SCSI commands to be
transported over standard Ethernet infrastructure. This
technology provides an excellent entry point for small and
medium-sized businesses to incorporate the benefits of SANs. By
utilizing an Ethernet infrastructure that already exists in
almost every business environment, small and medium-sized
businesses can implement SANs without needing to train new
people on the transport infrastructure.

Our SAN Solutions

Our ability to serve the storage industry stems
from our highly leveraged product line that addresses virtually
every connection point in a SAN infrastructure solution. On the
server side of the SAN, we provide enclosure management
products, HBA technology on the motherboard (Fibre
Down technology), baseboard management solutions and Fibre
Channel HBAs. Connecting servers to storage, we provide the
network infrastructure with a full suite of Fibre Channel
switches. On the storage side of the network, we provide
controller chips for RAID storage systems. These include Fibre
Channel host port connections and RAID controller to Fibre
Channel and SCSI disk drive port connections. In addition, we
are the leading, independent designer, developer and supplier of
enterprise disk drive controllers.

One of our key strategies has been to provide our
customers with solutions that simplify their product design
requirements. Complete storage networking solutions that are
pre-tested and easy to install significantly reduce the critical
implementation and time-to-market effort for OEMs. Today, our
SAN infrastructure components are found in solutions from most
major server and storage OEMs worldwide.

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Product Overview

We design and supply storage network
infrastructure components and software for the worlds
largest server and storage subsystem manufacturers that
ultimately are used by small to medium-sized enterprises, and
companies that have large information technology environments.
Our products are currently based on Fibre Channel, SCSI and
iSCSI standards, and we expect that future products may also be
based on technology standards such as Serial Attached SCSI.

Our products include our SANbladeTM
HBAs, SANboxTM Fibre Channel Switches and SANsurfer
Management SuiteTM HBA and Switch management
software. Our Fibre Channel HBAs support SCSI protocol, Internet
Protocol, or IP, Virtual Interface, or VI, and FICON protocol.
In addition, we design and supply controller chips used in hard
drives and tape drives as well as enclosure management and
baseboard management chip solutions that monitor the health of
the physical environment within a server or storage enclosure.



| |                            
| | ---------------------------
| | SAN Infrastructure Products



| |                  
| | -----------------
| | Host Bus Adapters



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our SANblade HBA family consists of board-level
    solutions based on Fibre Channel, SCSI and iSCSI standards. Our
    SANblade products are engineered around a standard, common
    software driver interface so developers can migrate between
    topologies with minimal investment and bring new technology
    products to market quickly. For both direct connect and SAN
    connected environments, we produce a broad line of HBAs and
    SANblade ManagerTM as part of our SANsurfer
    Management Suite software.



| |                     
| | --------------------
| | SANblade 2300 Series



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The SANblade 2300 Series comprise PCI-X,
    CompactPCI, or cPCI, and SBus 2 gigabit (Gb) Fibre
    Channel HBAs. Targeted specifically for SANs and server
    clustering environments, the 2300 Series is optimized for peak
    performance and scalability. Our 2Gb/sec HBAs support a wide
    range of operating system environments and provide reliable,
    high-performance connectivity for the worlds leading
    server and storage subsystem platforms.



| |                     
| | --------------------
| | SANblade 2200 Series



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The SANblade 2200 Series 1Gb Fibre Channel
    HBAs are designed for performance in the SAN environment. The
    2200 Series provides all the benefits of Fibre Channel
    technology in a highly integrated cost-effective package. With
    PCI, cPCI, and SBus models, the high-performance 2200 Series
    supports multiple SAN-enabled features, such as F-port fabric
    login, full duplex, Fibre Channel-tape, VI and IP protocol,
    creating a powerful SAN connectivity solution.



| |               
| | --------------
| | iSCSI Adapters



| |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SANblade iSCSI HBAs extend our award-winning line
    of SCSI and Fibre Channel connectivity products to enable
    Gigabit Ethernet-based SANs. Utilizing the familiar application
    programming interfaces and extensive firmware/driver code base
    of our Fibre Channel products, SANblade iSCSI HBAs allow SAN
    architects to build a reliable, secure and cost-effective IP
    storage infrastructure.



| |                           
| | --------------------------
| | PCI-SCSI Host Bus Adapters



| |                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Designed for maximum performance in real world
    applications, our PCI-SCSI host bus adapter family enables a
    powerful combination of speed and host-central-processing unit
    independence, making our SCSI products among the most scalable
    solutions on the market.



| |                       
| | ----------------------
| | Fibre Channel Switches



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We develop and market Fibre Channel switches and
    SAN management software. Our SANbox switches provide a high
    performance and flexible solution for networking storage. Our
    solutions include 8-port and 16-port fabric switches along with
    a modular fabric switch containing 8 to 64 ports. The
    SANbox product line meets the needs of small to medium-sized
    businesses and the challenging requirements in the global
    enterprise information technology environment. Deployed in
    single or multi-stage fabrics of almost any size,
    these products are essential to the creation of resilient,
    intelligent SANs. Linking multiple host and storage resources,

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| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | SANbox products create the connectivity framework
    that allows users to share and efficiently access stored data.



| |                                
| | -------------------------------
| | SANbox2TMFibre Channel Switches



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our SANbox2 series of 2Gb/1Gb Fibre Channel
    switches ensure complete investment protection for current and
    future SAN infrastructures. The products provide a new 2Gb
    standard of performance, reliability and simplicity for SANs. We
    believe the SANbox2 series of switches, which include 8 and
    16 ports or a modular fabric switch with from 8 to
    64 ports, provide low latency, scalability and easy to
    manage solutions for the SAN market. Built on advanced
    technology from the original SANbox series, SANbox2 adds
    enhanced functionality that meets or exceeds mission-critical
    requirements.



| |         
| | --------
| | Software



| |                           
| | --------------------------
| | SANsurfer Management Suite



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SANsurfer Management Suite is included with all
    of our SANblade HBAs and SANbox2 switches. Through its SANblade
    Manager and SANbox Manager, the software provides everything
    needed to configure and manage a SAN fabric, all from a single
    intelligent interface. With easy-to-follow installation
    instructions and incorporating all the necessary drivers and
    firmware, SANsurfer Management Suite is capable of handling any
    aspect of SANbox2 and SANblade management, providing accurate
    detection of device failures, diagnostic tools to help managers
    troubleshoot, and statistical tools to measure metrics.
    SANsurfer Management Suite can also be launched from
    multi-vendor SAN management software packages from
    VERITAS®, Computer Associates®, BMC Software®,
    Tivoli®, McData Corporation and others. We work with
    industry-leading SAN software providers to ensure that our
    products interoperate with their software.

Silicon
Chips



| |                     
| | --------------------
| | ISP Controller Chips



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our PCI/PCI-X Fibre Channel controllers are
    highly integrated, cost effective solutions. Interoperability is
    key in our unique single-chip design and ultra-scalable
    architecture, making our Fibre Channel products easy to
    implement and transition to next generation products.



| |                       
| | ----------------------
| | Peripheral Controllers



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Peripheral Controllers provide the
    flexibility and performance required for applications in hard
    drives, tape drives, scanners and other peripheral products.



| |                       
| | ----------------------
| | Management Controllers



| |                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Management Controller products monitor and
    control the physical environment in servers and storage
    enclosures. These products detect the presence or absence of
    functional disk drives, power supplies and monitor the
    temperature within the enclosure, and then pass the information
    back to a system for display and/or programmed action.

Sales and Marketing

We market and distribute our products through
OEMs, system integrators, value-added resellers, or VARs, and
our direct sales organization supported by field sales and
systems engineering personnel. In addition, we utilize a network
of independent manufacturers representatives and regional
and international distributors.

In North America and in certain international
markets, we maintain both a direct sales force to serve our
large OEM customers and multiple outside representatives that
are focused on medium-sized and emerging accounts. National
distributors carrying our products serve the VAR market.

We maintain a focused business development and
outbound marketing organization to assist, train, equip and
augment the sales organizations of our major OEM customers and
their respective reseller organizations and partners.

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We market and sell our products throughout the
world. Internationally, we leverage an extensive network of OEM
and global channel distributors to focus on the OEM and VAR
markets. We maintain direct sales and technical relationships
with our major OEM customers in each of the international
markets we address. For information regarding revenue from
independent customers by geographic area, see Note 12 of
Notes to Consolidated Financial Statements, included in
Part II, Item 8 of this report.

We believe that it is important to work closely
with our large peripheral and computer system manufacturers
during their design cycles. We support these customers with
extensive applications and system design support and services,
as well as training classes and seminars conducted both in the
field and from our offices in Aliso Viejo, California, Eden
Prairie, Minnesota, Roseville, California and Austin, Texas. We
also maintain customer support and service through technical
support call centers and web-based or Internet communications.

For our OEM customers, our sales efforts are
focused on establishing and developing long-term relationships.
The sales cycle typically begins with one of our product designs
being selected as a component in a potential customers
computer system or data storage peripheral. Once we secure this
design win with a given customer, the time to product shipment
can range between six and eighteen months. After winning a
design opportunity, we work closely with the customer to
integrate our components or product with the customers
current and next generation products or platforms.

We actively participate within industry
organizations relating to the development and acceptance of
industry standards. We also collaborate with alliance and
industry peer companies in respective markets through
co-marketing activities, collateral development, joint training,
road tours and cooperative testing and certifications. To ensure
and promote multi-vendor interoperation, we maintain extensive
interoperability certification programs and testing laboratories.

Engineering and Development

Our industry is subject to rapid and regular
technological change. Our ability to compete depends upon our
ability to continually design, develop and introduce new
products that take advantage of market opportunities and address
emerging standards. Our strategy is to leverage our substantial
base of architectural and systems expertise to address a broad
range of input/output, or I/O, and SAN solutions.

We are engaged in the design and development of
integrated circuits for Fibre Channel switches, switch
components, SCSI I/O controllers and Fibre Channel HBAs. We also
design and develop SCSI and Fibre Channel hard disk controllers
and management controller semiconductors used in storage
peripherals and server enclosures and circuit boards.

We continue to invest heavily in research and
development and expand our capabilities to address the emerging
technologies in the rapid evolution of the storage networking
industry. During fiscal 2003, 2002 and 2001, we incurred
engineering and development expenses of $81.3 million,
$69.7 million and $56.3 million, respectively.

As of March 30, 2003, we had approximately
400 employees engaged in the development of new products and the
improvement of existing products, including engineers,
technicians and support personnel.

Backlog

Our sales are made primarily pursuant to standard
purchase orders for the delivery of products. Because industry
practice allows customers to cancel or change orders with
limited advance notice, we believe that backlog at any
particular date is not a reliable indicator of our future
revenue levels.

Competition

The markets for SAN infrastructure components are
highly competitive and are characterized by short product life
cycles, price erosion, rapidly changing technology, frequent
product performance improvements and evolving industry standards.

Due to the broad array of components required in
the SAN infrastructure, we compete with several companies. In
the Fibre Channel HBA market, our primary competitors are Emulex
Corporation, LSI Logic Corporation and JNI Corporation. In the
SCSI sector of the I/ O market, we compete primarily with
Adaptec, Inc. and LSI Logic Corporation. Our switch products
compete primarily with Brocade Communications Systems, Inc.,
Cisco Systems, Inc. and McData Corporation.

5



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##### Table of Contents



There are two markets in the Fibre Channel
semiconductor controller business. The first market is
associated with server and storage controller interfaces. In
this market our primary competitors are Agilent Technologies,
Inc. and LSI Logic Corporation. The second market relates to
controllers for enterprise disk drives. We currently believe we
have no direct competitors in this market, except vertically
integrated hard disk drive manufacturers.

Finally, our enclosure and baseboard management
semiconductor controllers compete primarily with Vitesse
Semiconductor Corporation and manufacturers of vertically
integrated solutions.

Manufacturing

We subcontract the manufacturing of our
semiconductor chips and HBA boards and switches to independent
foundries and subcontractors, which allows us to avoid the high
costs of owning, operating and constantly upgrading a wafer
fabrication facility and assembly factory. As a result, we focus
our resources on product design and development, quality
assurance, sales and marketing and customer support. Prior to
the sale of our semiconductors, switches and HBA products, final
tests are performed on these products, including tests required
under our ISO 9001 Certification. We also provide fabrication
process reliability tests and conduct failure analysis to
confirm the integrity of our quality assurance procedures.

Our semiconductors are currently manufactured by
a number of domestic and offshore foundries. Our major
semiconductor suppliers are LSI Logic Corporation and Samsung
Semiconductor, Inc. Most of our products are manufactured using
0.18 or 0.25 micron process technology.

We depend on our foundries to allocate a portion
of their foundry capacity sufficient to meet our needs and to
produce products of acceptable quality and with satisfactory
manufacturing yields in a timely manner. These foundries
fabricate products for other companies and, in certain cases,
manufacture products of their own design. We do not have
long-term agreements with any of our foundries; we purchase both
wafers and finished chips on a purchase order basis. Therefore,
the foundries generally are not obligated to supply products to
us for any specific period, in any specific quantity or at any
specific price, except as may be provided in a particular
purchase order. We work with our existing foundries, and intend
to qualify new foundries, as needed, to obtain additional
manufacturing capacity. However, there can be no assurance that
we will be able to maintain our current foundry relationships or
obtain additional capacity.

We currently purchase our semiconductor products
from our foundries either in finished form or wafer form. We use
subcontractors to assemble our semiconductor products purchased
in wafer form, and to assemble our switches and HBA products. In
the assembly process for our semiconductor products, the silicon
wafers are separated into individual die, which are then
assembled into packages and tested. For our HBA products, we
outsource the material procurement and assembly in a turnkey
model. Following the assembly of our semiconductor and HBA
products, we further test and inspect the products prior to
shipment to our customers. For our switch products, we
subcontract the material procurement, management, assembly and
test processes to a subcontractor.

Most component parts used in our HBA products are
standard off-the-shelf items, which are, or can be,
dual-sourced. We select suppliers on the basis of technology,
manufacturing capacity, quality and cost. Whenever possible and
practicable, we strive to have at least two manufacturing
locations for each HBA and chip product. Nevertheless, our
reliance on third-party manufacturers involves risks, including
possible limitations on availability of products due to market
abnormalities, unavailability of, or delays in obtaining access
to certain product technologies, and the absence of complete
control over delivery schedules, manufacturing yields and total
production costs. The inability of our suppliers to deliver
products of acceptable quality and in a timely manner or our
inability to procure adequate supplies of our products could
have a material adverse effect on our business, financial
condition and results of operations.

Intellectual Property

Although we have several patents issued and many
additional patent applications pending in the United States,
Canada, Europe and Asia, we rely primarily on our trade secrets,
trademarks and copyrights to protect our intellectual property.
We attempt to protect our proprietary information through
confidentiality agreements and contractual provisions with our
customers, suppliers, employees and consultants, and through
other security measures. Although we intend to protect our
rights vigorously, there can be no assurance that these measures
will be successful. In addition, the laws of certain countries
in which our products are or may be developed, manufactured or
sold, including various countries in Asia, may not protect our
products and intellectual property rights to the same extent as
the laws of the United States, or at all.

6



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##### Table of Contents



While our ability to compete may be affected by
our ability to protect our intellectual property, we believe our
technical expertise and ability to introduce new products on a
timely basis at competitive prices will be more important in
maintaining our competitive position than protection of our
intellectual property.

We have received notices of claimed infringement
of intellectual property rights in the past. In addition, we are
currently engaged in litigation with parties who claim we have
infringed on their intellectual property rights. There can be no
assurance that third parties will not assert additional claims
of infringement of intellectual property rights against us with
respect to existing and future products. In the event of a
patent or other intellectual property dispute, we may be
required to expend significant resources to defend such claims,
develop non-infringing technology or to obtain licenses to the
technology which is the subject of the claim. There can be no
assurance that we would be successful in such development or
that any such license would be available on commercially
reasonable terms, if at all. In the event of litigation to
determine the validity of any third partys claims, such
litigation could result in significant expense to us, and divert
the efforts of our technical and management personnel, whether
or not such litigation is determined in our favor.

Employees

We had approximately 740 employees as of
March 30, 2003. We believe our future prospects will
depend, in part, on our ability to continue to attract, train,
motivate, retain and manage skilled engineering, sales,
marketing and executive personnel. None of our employees are
represented by a labor union. We believe that our relations with
our employees are good.






|        |           
|------- | ----------
|Item 2. | Properties

Our principal product development, operations,
sales and corporate offices are currently located in three
buildings comprising approximately 165,000 square feet in
Aliso Viejo, California. We purchased the Aliso Viejo facility
in March 2000 and the facility is held without encumbrance.
Additionally, we have leased design centers in Eden Prairie,
Minnesota, Roseville, California and Austin, Texas comprising
approximately 50,000 square feet, 16,000 square feet
and 16,000 square feet, respectively.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

In January 2003, Raytheon Company filed suit in
the United States District Court for the Eastern District of
Texas, alleging that we, along with seven other defendants,
infringe a Raytheon patent directed to a mass data storage
system. The suit seeks injunctive relief and damages in an
unspecified amount. We filed an answer to the complaint in March
2003 and a trial is currently scheduled to begin in May 2004.
The suit is in its very early stages and discovery has
commenced. We dispute the plaintiffs claims and intend to
defend this lawsuit vigorously.

In February 2003, Vixel Corporation filed suit in
the United States District Court for the District of Delaware
alleging infringement of a Vixel patent directed to a method and
apparatus for Fibre Channel interconnection of private loop
devices. In March 2003, Vixel amended its complaint to add two
additional Vixel patents. These additional patents are directed
to substantially the same technology as the original Vixel
patent. The suit seeks injunctive relief and damages in an
unspecified amount. We filed an answer to the complaint in March
2003 denying all allegations. The suit is in its very early
stages and discovery has commenced. We dispute the
plaintiffs claims and intend to defend this lawsuit
vigorously.

Various lawsuits, claims and proceedings have
been or may be instituted against us, including the matters
discussed above. The outcome of litigation cannot be predicted
with certainty and some lawsuits, claims and proceedings may be
disposed of unfavorably to us. Many intellectual property
disputes have a risk of injunctive relief and there can be no
assurance that a license will be granted. Injunctive relief
could have a material adverse effect on our financial condition
or results of operations. Based on our evaluation of matters
which are pending or asserted, we believe the disposition of
such matters will not have a material adverse effect on our
financial condition or results of operations.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

No matter was submitted during the fourth quarter
of fiscal 2003 to a vote of security holders.

7



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##### Table of Contents






PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Principal Market and Prices

Shares of our common stock are traded and quoted
on The NASDAQ National Market under the symbol QLGC. The
following table sets forth the range of high and low sales
prices per share of our common stock for each quarterly period
of the two most recent years as reported on The NASDAQ National
Market.

|               |  |              |       |     |  |   |       | 
|-------------- |  | ------------ | ----- | --- |  | - | ----- | 
|               |  |             
|               |  | Sales Prices
|               |  |             
|Fiscal 2002    |  | High         |       | Low
|               |  |              |       |    
|First Quarter  |  | $            | 66.16 |     |  | $ | 17.81 | 
|Second Quarter |  |              | 65.67 |     |  |   | 17.21 | 
|Third Quarter  |  |              | 56.99 |     |  |   | 17.30 | 
|Fourth Quarter |  |              | 57.10 |     |  |   | 35.97 | 

|               |  |      |       |     |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | - | ----- | 
|Fiscal 2003    |  | High |       | Low
|               |  |      |       |    
|First Quarter  |  | $    | 52.95 |     |  | $ | 34.68 | 
|Second Quarter |  |      | 44.80 |     |  |   | 26.07 | 
|Third Quarter  |  |      | 45.39 |     |  |   | 19.66 | 
|Fourth Quarter |  |      | 43.68 |     |  |   | 32.13 | 

Number of Common Stockholders

The approximate number of record holders of our
common stock was 684 as of May 30, 2003.

Dividends

We have never paid cash dividends on our common
stock and currently have no intention to do so. We currently
anticipate that we will retain all of our future earnings for
use in the development and expansion of our business and for
general corporate purposes. Any determination to pay dividends
in the future will be at the discretion of our board of
directors and will depend upon our operating results, financial
condition and other factors as the board of directors, in its
discretion, deems relevant.

Recent Sales of Unregistered
Securities

In January 2003, in connection with our prior
acquisition of Little Mountain Group, Inc. (LMG), we issued
approximately 109,000 shares of common stock to the former
shareholders of LMG. These shares were issued in connection with
the achievement of certain future performance milestones that
were specified at the date of the acquisition. This transaction
was exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and Regulation D
promulgated thereunder.

8



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following selected financial data should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and notes thereto
appearing elsewhere in this report.

|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |        |        | 
|------------------------------------------------------- | --------------------------- | ---------------------------------------- | ------- | --------- | ------- | -------- | ------- | -------- | ------- | --------- | ------- | ------ | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------ | 
|                                                        |                             |                                         
|                                                        |                             | Fiscal Year Ended                       
|                                                        |                             |                                         
|                                                        |                             | March 30,                                |         | March 31, |         | April 1, |         | April 2, |         | March 28,
|                                                        |                             | 2003                                     |         | 2002      |         | 2001     |         | 2000     |         | 1999     
|                                                        |                             |                                          |         |           |         |          |         |          |         |          
|                                                        |                             |                                         
|                                                        |                             | (In thousands, except per share amounts)
|Statement of Operations Data                            |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Net revenues                                            |                             | $                                        | 440,809 |           |         | $        | 344,189 |          |         | $         | 357,542 |        |         | $ | 216,093 |        |         | $ | 121,575 |       
|Cost of revenues                                        |                             |                                          | 159,370 |           |         |          | 133,005 |          |         |           | 128,739 |        |         |   | 70,982  |        |         |   | 49,034  |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|                                                        |                             | Gross profit                             |         |           | 281,439 |          |         |          | 211,184 |           |         |        | 228,803 |   |         |        | 145,111 |   |         |        | 72,541 | 
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Operating expenses:                                     |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|                                                        | Engineering and development |                                          |         | 81,253    |         |          |         | 69,684   |         |           |         | 56,315 |         |   |         | 47,451 |         |   |         | 29,809 |       
|                                                        | Selling and marketing       |                                          |         | 44,312    |         |          |         | 38,323   |         |           |         | 36,482 |         |   |         | 22,623 |         |   |         | 15,248 |       
|                                                        | General and administrative  |                                          |         | 14,011    |         |          |         | 16,673   |         |           |         | 14,828 |         |   |         | 11,202 |         |   |         | 8,803  |       
|                                                        | Merger and related expenses |                                          |         |          |         |          |         |         |         |           |         | 22,947 |         |   |         |       |         |   |         |       |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|                                                        |                             | Total operating expenses                 |         |           | 139,576 |          |         |          | 124,680 |           |         |        | 130,572 |   |         |        | 81,276  |   |         |        | 53,860 | 
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Operating income                                        |                             |                                          | 141,863 |           |         |          | 86,504  |          |         |           | 98,231  |        |         |   | 63,835  |        |         |   | 18,681  |       
|Interest and other income                               |                             |                                          | 17,356  |           |         |          | 19,036  |          |         |           | 18,706  |        |         |   | 9,181   |        |         |   | 5,759   |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Income before income taxes                              |                             |                                          | 159,219 |           |         |          | 105,540 |          |         |           | 116,937 |        |         |   | 73,016  |        |         |   | 24,440  |       
|Income taxes                                            |                             |                                          | 55,746  |           |         |          | 34,814  |          |         |           | 48,168  |        |         |   | 24,701  |        |         |   | 8,310   |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Net income                                              |                             |                                          | 103,473 |           |         |          | 70,726  |          |         |           | 68,769  |        |         |   | 48,315  |        |         |   | 16,130  |       
|Accretion on convertible preferred stock                |                             |                                          |        |           |         |          |        |          |         |           |        |        |         |   | 12      |        |         |   | 762     |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Net income attributable to common stockholders          |                             | $                                        | 103,473 |           |         | $        | 70,726  |          |         | $         | 68,769  |        |         | $ | 48,303  |        |         | $ | 15,368  |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Net income per share:                                   |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|                                                        | Basic                       |                                          | $       | 1.11      |         |          | $       | 0.76     |         |           | $       | 0.76   |         |   | $       | 0.56   |         |   | $       | 0.20   |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|                                                        | Diluted                     |                                          | $       | 1.09      |         |          | $       | 0.74     |         |           | $       | 0.72   |         |   | $       | 0.52   |         |   | $       | 0.18   |       
|                                                        |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Balance Sheet Data                                      |                             |                                          |         |           |         |          |         |          |         |           |         |        |         |   |         |        |         |   |         |       
|Cash and cash equivalents and marketable
    securities |                             | $                                        | 643,197 |           |         | $        | 492,546 |          |         | $         | 355,483 |        |         | $ | 244,449 |        |         | $ | 137,994 |       
|Working capital                                         |                             |                                          | 681,496 |           |         |          | 535,612 |          |         |           | 442,702 |        |         |   | 257,127 |        |         |   | 118,790 |       
|Total assets                                            |                             |                                          | 817,419 |           |         |          | 670,015 |          |         |           | 571,497 |        |         |   | 394,969 |        |         |   | 203,479 |       
|Total stockholders equity                              |                             |                                          | 750,735 |           |         |          | 618,983 |          |         |           | 523,702 |        |         |   | 359,325 |        |         |   | 175,710 |       

9



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

This Discussion and Analysis of Financial
Condition and Results of Operations should be read in
conjunction with our financial statements and related notes.
This Discussion and Analysis of Financial Condition and Results
of Operations also contains descriptions of our expectations
regarding future trends affecting our business. These
forward-looking statements and other forward-looking statements
made elsewhere in this report are made in reliance upon safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995. Our actual results could differ materially from
those anticipated in these forward-looking statements as a
result of several factors, including, but not limited to those
factors set forth and discussed under Factors That May
Affect Future Results and elsewhere in this report, which
include without limitation the fact that our operating results
fluctuate significantly, that our business is dependent on the
storage area network market that is new and unpredictable, and
that our financial condition will be adversely impacted if we do
not maintain and gain market or industry acceptance of our
products. Readers of this Annual Report on Form 10-K are
urged to read those sections in their entirety. In light of the
significant uncertainties inherent in the forward-looking
information included in this document, the inclusion of this
information should not be regarded as a representation by us or
any other person that our objectives or plans will be achieved.
We undertake no obligation to update or revise these
forward-looking statements, whether as a result of new
information, future events or otherwise.

RESULTS OF OPERATIONS

The following table sets forth the results of
operations and percentage of net revenues in our consolidated
statements of income:

|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |      |      | 
|-------------------------- | --------------------------- | ------------------------ | ----- | -------------- | ----- | ------------- | ----- | ---- | ---- | - | ----- | ----- | ----- |  | ----- | ---- | ---- | - | ----- | ----- | ----- |  | ----- | ---- | ---- | 
|                           |                             |                         
|                           |                             | Fiscal Year Ended       
|                           |                             |                         
|                           |                             |                          |       |                |       |              
|                           |                             | March 30, 2003           |       | March 31, 2002 |       | April 1, 2001
|                           |                             |                          |       |                |       |              
|                           |                             |                          |       |                |       |               |       |      |      |   |       |      
|                           |                             |                         
|                           |                             | (Dollars in millions)   
|Net revenues               |                             | $                        | 440.8 |                |       |               | 100.0 | %    |      | $ | 344.2 |       |       |  | 100.0 | %    |      | $ | 357.5 |       |       |  | 100.0 | %   
|Cost of revenues           |                             |                          | 159.4 |                |       |               | 36.2  |      |      |   | 133.0 |       |       |  | 38.7  |      |      |   | 128.7 |       |       |  | 36.0  |     
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|                           | Gross profit                |                          |       | 281.4          |       |               |       | 63.8 |      |   |       | 211.2 |       |  |       | 61.3 |      |   |       | 228.8 |       |  |       | 64.0 |     
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|Operating expenses:        |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|                           | Engineering and development |                          |       | 81.3           |       |               |       | 18.4 |      |   |       | 69.7  |       |  |       | 20.2 |      |   |       | 56.3  |       |  |       | 15.8 |     
|                           | Selling and marketing       |                          |       | 44.3           |       |               |       | 10.1 |      |   |       | 38.3  |       |  |       | 11.1 |      |   |       | 36.5  |       |  |       | 10.2 |     
|                           | General and administrative  |                          |       | 14.0           |       |               |       | 3.2  |      |   |       | 16.7  |       |  |       | 4.9  |      |   |       | 14.8  |       |  |       | 4.1  |     
|                           | Merger and related expenses |                          |       |               |       |               |       |     |      |   |       |      |       |  |       |     |      |   |       | 22.9  |       |  |       | 6.4  |     
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|                           |                             | Total operating expenses |       |                | 139.6 |               |       |      | 31.7 |   |       |       | 124.7 |  |       |      | 36.2 |   |       |       | 130.5 |  |       |      | 36.5 | 
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|Operating income           |                             |                          | 141.8 |                |       |               | 32.2  |      |      |   | 86.5  |       |       |  | 25.1  |      |      |   | 98.3  |       |       |  | 27.5  |     
|Interest and other income  |                             |                          | 17.4  |                |       |               | 3.9   |      |      |   | 19.0  |       |       |  | 5.0   |      |      |   | 18.7  |       |       |  | 5.3   |     
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|Income before income taxes |                             |                          | 159.2 |                |       |               | 36.1  |      |      |   | 105.5 |       |       |  | 30.7  |      |      |   | 117.0 |       |       |  | 32.7  |     
|Income taxes               |                             |                          | 55.7  |                |       |               | 12.6  |      |      |   | 34.8  |       |       |  | 10.1  |      |      |   | 48.2  |       |       |  | 13.5  |     
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     
|Net income                 |                             | $                        | 103.5 |                |       |               | 23.5  | %    |      | $ | 70.7  |       |       |  | 20.5  | %    |      | $ | 68.8  |       |       |  | 19.2  | %   
|                           |                             |                          |       |                |       |               |       |      |      |   |       |       |       |  |       |      |      |   |       |       |       |  |       |     

Net Revenues

Our net revenues are derived primarily from the
sale of SCSI and Fibre Channel-based products. We also license
certain designs and receive royalty revenues and non-recurring
engineering fees. Net revenues in fiscal 2003 of
$440.8 million increased $96.6 million, or 28%, from
fiscal 2002. The increase was the result of a $83.3 million
increase in sales of Fibre Channel products and a
$15.0 million increase in sales of SCSI products, partially
offset by a $1.7 million decrease in IDE-based royalties
which had ceased during fiscal 2002.

10



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##### Table of Contents



Net revenues in fiscal 2002 of
$344.2 million decreased $13.4 million, or 4%, from
fiscal 2001. The decrease was the result of a $49.6 million
decrease in sales of SCSI products and a $3.2 million
decrease in IDE-based royalties, partially offset by a
$39.5 million increase in sales of Fibre Channel products.

Export revenues (primarily to Pacific Rim
countries) in fiscal 2003 of $238.7 million increased
$75.3 million, or 46%, from fiscal 2002, primarily due to
increased sales to our peripheral chip customers in Japan.
Export revenues in fiscal 2002 of $163.4 million decreased
$35.5 million, or 18%, from fiscal 2001, primarily due to a
decline in sales to customers in Japan. As a percentage of net
revenues, export revenues accounted for 54% in fiscal 2003, 47%
in fiscal 2002 and 56% in fiscal 2001. Export revenues are
denominated in U.S. dollars.

A small number of our customers account for a
substantial portion of our net revenues, and we expect that a
limited number of customers will continue to represent a
substantial portion of our net revenues for the foreseeable
future. Our three largest customers accounted for 46% of net
revenues in fiscal 2003, 41% in fiscal 2002 and 56% in fiscal
2001. These significant customers included (i) Fujitsu,
which accounted for 18%, 17% and 29% of net revenues in fiscal
2003, 2002 and 2001, respectively; (ii) Sun Microsystems,
which accounted for 17%, 16% and 18% of net revenues in fiscal
2003, 2002 and 2001, respectively; and (iii) Hitachi, which
accounted for 11%, 8% and 9% of net revenues in fiscal 2003,
2002 and 2001.

We believe that our major customers continually
evaluate whether or not to purchase products from alternate or
additional sources. Additionally, customers economic and
market conditions frequently change. Accordingly, there can also
be no assurance that a major customer will not reduce, delay or
eliminate its purchases from us. Any such reduction, delay or
loss of purchases could have a material adverse effect on our
business, financial condition and results of operations.

Gross Profit

Gross profit represents net revenues less cost of
revenues. Cost of revenues consists primarily of raw materials
(including silicon chips from third-party manufacturers),
assembly and test labor, overhead and warranty costs. The gross
profit percentage in fiscal 2003 was 63.8%, an increase from
61.3% in fiscal 2002. The increase in gross profit percentage
was due primarily to increased sales of higher margin Fibre
Channel-based products, as well as manufacturing efficiencies
realized from the increase in production.

The gross profit percentage in fiscal 2002 was
61.3%, a decrease from 64.0% in fiscal 2001. The decline in the
gross profit percentage in fiscal 2002 was due to a reduction in
the contribution of license fees and a decrease in margins on
sales of earlier generation SCSI products.

Our ability to maintain our current gross profit
percentage can be significantly affected by factors such as
supply costs and, in particular, the cost of silicon chips, the
worldwide semiconductor foundry capacity, the mix of products
shipped, competitive price pressures, the timeliness of volume
shipments of new products, the level of royalties received and
our ability to achieve manufacturing cost reductions. We
anticipate that it will be increasingly more difficult to reduce
manufacturing costs. Also, royalty revenues have been irregular
or unpredictable. As a result of these and other factors, it may
be difficult to maintain our gross profit percentage consistent
with historical trends and it may decline in the future.

Operating Expenses

Engineering and
Development.Engineering and
development expenses consist primarily of salaries and other
personnel-related costs, development-related material, occupancy
costs and related computer support costs. Engineering and
development expenses in fiscal 2003 of $81.3 million
increased $11.6 million, or 17%, from fiscal 2002. The
increase in engineering and development expenses for fiscal 2003
primarily reflects an increase in our headcount and
personnel-related costs associated with our expanded development
efforts in support of existing and future technologies and the
accelerated launch of new products. We believe continued
investments in engineering and development activities are
critical to achieving our strategic objectives. As a result, we
expect that the dollar amount of engineering and development
expenses will continue to increase in the future.

11



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##### Table of Contents



Engineering and development expenses in fiscal
2002 of $69.7 million increased $13.4 million, or 24%,
from fiscal 2001. The increase in engineering and development
expenses in fiscal 2002 was largely due to increased personnel
and related costs in support of the design and engineering of
Fibre Channel and SCSI products.

Selling and
Marketing.Selling and marketing
expenses consist primarily of sales and marketing salaries,
sales commissions and related expenses, promotional activities
and travel for sales and marketing personnel. Selling and
marketing expenses in fiscal 2003 of $44.3 million
increased $6.0 million, or 16%, from fiscal 2002. The
increase in selling and marketing expenses for fiscal 2003
primarily reflects an increase in sales commissions earned by
independent sales representatives as a result of the significant
increase in our net revenues, an increase in the headcount and
related personnel costs associated with the expansion of our
sales and marketing groups, and an increase in the costs
associated with promotional and marketing-related programs. We
believe continued investments in our selling and marketing
organizational infrastructure and related marketing programs are
critical to the success of our strategy of expanding our
customer base and enhancing relationships with our existing
customers. As a result, we expect sales and marketing expenses
will continue to increase in the future.

Selling and marketing expenses in fiscal 2002 of
$38.3 million increased $1.8 million, or 5%, from
fiscal 2001. The increase in selling and marketing expenses in
fiscal 2002 primarily reflects an increase in personnel-related
costs to more completely serve our customers.

General and
Administrative.General and
administrative expenses consist primarily of salaries and
personnel-related costs for executive, finance, accounting,
human resources, legal and information technology personnel.
Non-personnel related costs consist of recruiting fees,
professional services and corporate expenses. General and
administrative expenses in fiscal 2003 of $14.0 million
decreased $2.7 million, or 16%, from fiscal 2002. The
decrease in general and administrative expenses for fiscal 2003
resulted principally from a reduction in amortization expense
associated with certain intangible assets and a lower provision
for uncollectible accounts receivable, partially offset by
increases in headcount and personnel-related expenses. The
reduction in the amortization expense in fiscal 2003 includes
$1.1 million associated with certain intangible assets that
were fully amortized in fiscal 2002, and the elimination of
$1.1 million of goodwill amortization in connection with
our adoption of Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets
as of April 1, 2002. The provision for uncollectible
accounts receivable of $(0.6) million for fiscal 2003
resulted from accounts receivable collections more favorable
than previously estimated; in fiscal 2002 the provision for
uncollectible accounts receivable was $1.1 million.
Excluding the effect of the reduction of the amortization
expense and the provision for uncollectible accounts, our
general and administrative expenses for fiscal 2003 increased by
$1.2 million. In connection with the growth of our
business, we would expect general and administrative expenses to
increase in the future.

General and administrative expenses in fiscal
2002 of $16.7 million increased $1.8 million, or 12%,
from fiscal 2001. The increase in general and administrative
expenses was primarily due to increased depreciation costs
related to improved business systems and insurance costs.

Merger and Related Expenses.Merger and related expenses in fiscal
2001 consisted primarily of direct and incremental transaction
costs, such as fees for investment bankers, attorneys,
accountants, and other related fees and expenses. Merger and
related costs of approximately $22.9 million were incurred
in connection with the merger with Ancor Communications,
Incorporated.

Non-Operating Income

Interest and other income for fiscal 2003 of
$17.4 million is comprised principally of interest income
and investment gains related to our portfolio of marketable
securities, partially offset by write-downs of non-marketable
investments. The $1.6 million decline in interest and other
income in fiscal 2003 from the prior year was due to a
$4.0 million write-down of non-marketable investments and
declining interest rates on our portfolio of marketable
securities, partially offset by increased earnings on
investments associated with larger investment balances and
realized gains on sales of marketable securities. During fiscal
2003, the carrying values of certain non-marketable investments
were written down to their estimated fair value of zero. These

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investments consisted of equity interests in
early stage technology companies which we had accounted for
under the cost method. We estimated the fair value of these
investments based on available financial and other information,
including the then-current and projected business prospects for
the subject companies, and determined that the decline in the
fair value of these investments was other than temporary.


Interest and other income for fiscal 2002 of
$19.0 million increased from $18.7 million primarily
due to larger investment balances, partially offset by lower
interest rates.

Income Taxes

Our effective tax rate was 35% in fiscal 2003,
33% in fiscal 2002 and 41% in fiscal 2001. The increase in the
tax rate in fiscal 2003 from the prior year was due primarily to
an increase in income before income taxes, without a
corresponding increase in tax benefits associated with research
activities and export sales. The elevated tax rate in fiscal
2001 was due to nondeductible costs incurred in conjunction with
the merger with Ancor Communications, Incorporated. We expect
our effective income tax rate will continue to increase during
fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

Our combined balances of cash and cash
equivalents and short-term investments have increased to
$643.2 million at March 30, 2003 compared to
$492.5 million at March 31, 2002. The increase was
attributable to positive cash flow from operations, primarily
net income, during the fiscal 2003.

Our primary sources of liquidity are our existing
cash and cash equivalent balances, available-for-sale marketable
securities, and cash expected to be generated from operations.
During fiscal 2003, our working capital increased
$145.9 million to $681.5 million at March 30,
2003. The increase in working capital during fiscal 2003 was
principally attributable to our cash flow from operations.

Cash provided by operating activities was
$155.3 million for fiscal 2003, $149.2 million for
fiscal 2002 and $98.1 million for fiscal 2001. Fiscal 2003
operating cash flows reflect our net income of
$103.5 million, $36.7 million of non-cash charges
(depreciation and amortization, deferred income taxes and
other), and a net decrease in the non-cash components of our
working capital of $15.1 million. The fiscal 2003 changes
in non-cash components of working capital include a
$10.6 million increase in income taxes payable, an
$11.1 million increase in accrued compensation and other
liabilities, and a $5.4 million decrease in inventories due
to an improvement in our inventory turnover during fiscal 2003.
These working capital changes were partially offset by a
$10.8 million increase in accounts receivable resulting
from the increase in sales and a $1.2 million increase in
prepaid expenses and other assets.

Cash used in investing activities of
$102.3 million for fiscal 2003 includes net purchases of
marketable securities of $84.9 million and additions to
property and equipment of $15.7 million. In fiscal 2002,
cash used in investing activities of $210.1 million
principally consisted of net purchases of marketable securities
of $190.7 million and additions to property and equipment
of $14.5 million.

Cash provided by financing activities of
$8.6 million for fiscal 2003 consisted of
$11.6 million of proceeds from the issuance of common stock
under our stock plans, partially offset by our purchase of
$3.0 million of treasury stock. In fiscal 2002, cash
provided by financing activities of $8.8 million resulted
from the proceeds from the issuance of common stock under stock
plans.

We have certain obligations and commitments to
make future payments in the form of non-cancelable purchase
orders to our suppliers and commitments under operating lease
arrangements. At March 30, 2003, we had non-cancelable
purchase orders of approximately $33.0 million, which are
all due within one year. Future commitments under operating
leases as of March 30, 2003 totaled $12.4 million,
which included $5.0 million due in fiscal 2004;
$5.0 million due in fiscal 2005; and an aggregate of
$2.4 million due in fiscal years 2006-2007.

We believe that our existing cash and cash
equivalent balances, short-term investments and cash flows from
operating activities will provide sufficient funds to finance
our operations for at least the next 12 months.

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CRITICAL ACCOUNTING POLICIES AND
ESTIMATES

The preparation of our financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. We
base our estimates on historical experience and on several other
assumptions that we believe to be reasonable under the
circumstances, and which form the basis for making judgments
about the carrying values of assets and liabilities. Actual
results may differ from these estimates under different
assumptions or conditions.

We consider the following accounting policies to
be both those most important to the portrayal of our financial
condition and those that require the most subjective judgment:



| |   |                         
| | - | ------------------------
| |  | revenue recognition; and
|
| |  | inventory valuation.    

Revenue recognition.We sell our products domestically and
internationally primarily through OEM and distribution channel
customers including distributors, system integrators and
value-added resellers. Our significant customers include leading
storage solution providers, server OEMs and storage OEMs.

We recognize revenue from product sales when
goods are shipped and title and risk of loss transfers to the
customer. For all sales, we use a binding purchase order or a
signed agreement as evidence of an arrangement. The
customers obligation to pay and the payment terms are set
at the time of shipment and are not dependent on subsequent
resale of the our products. However, certain of our sales are
made to distributors under agreements allowing for a limited
right to return unsold product. We recognize revenue from these
distributors when the product is sold by the distributor to a
third party. Royalty and service revenue is recognized when
earned and receipt is assured.

Inventory valuation.Inventories are valued at the lower of
cost or market on a first-in, first-out basis. We use a standard
cost system for purposes of determining cost. The standards are
adjusted periodically to ensure they approximate actual costs.
We write down the carrying value of our inventory to market
value for estimated obsolete or excess inventory based upon
assumptions about future demand and market conditions. We
compare current inventory levels on a product basis to our
current sales forecasts in order to assess our inventory
balance. Our sales forecasts are based on economic conditions
and trends (both current and projected), anticipated customer
demand and acceptance of our current products, expected future
products and other assumptions. If actual market conditions are
less favorable than those projected by management, additional
write-downs may be required.

RECENT ACCOUNTING STANDARDS

In November 2002, the Emerging Issues Task Force
(EITF) reached a final consensus on Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. The
Consensus mandates how goods or services, or both, that are to
be delivered separately in a bundled sales arrangement should be
accounted for. EITF 00-21 is effective for transactions entered
into in fiscal periods beginning after June 15, 2003. We do
not believe the adoption of EITF 00-21 will have a significant
impact on our financial position or results of operations.

FACTORS THAT MAY AFFECT FUTURE
RESULTS

Certain information in this report includes
forward-looking statements. Forward-looking statements include
statements regarding our expectations, beliefs, intentions,
plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements that
are other than statements of historical fact. When used in this
report the words shall, should,
forecast, all of, projected,
believes, anticipates,
expects, and similar expressions are intended to
identify these forward-looking statements. In addition, we may
from time to time make oral forward-looking statements. We wish
to caution readers that a number of important factors could
cause actual results to differ materially from those in the
forward-looking statements. Factors that could cause or
contribute to such differences include those discussed

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below, as well as those discussed above in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, elsewhere in this
report or from time to time described in our other filings with
the Securities and Exchange Commission.


Our stock price may be volatile which could
affect the value of your investment.

The market price of our common stock has
fluctuated substantially, and there can be no assurance that
such volatility will not continue. From January 1, 2002
through May 30, 2003, the market price has ranged from a
low of $19.66 per share to a high of $57.10 per share. Several
factors could impact our stock price including, but not limited
to:



| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | announcements concerning us, our competitors or
    our customers;                               
|
| |  | quarterly fluctuations in our operating results;                                                 
|
| |  | introduction of new products or changes in
    product pricing policies by us or our competitors;
|
| |  | conditions in the semiconductor industry;                                                        
|
| |  | changes in market projections by industry
    forecasters;                                       
|
| |  | changes in estimates of our earnings by industry
    analysts;                                   
|
| |  | overall market conditions for high technology
    equities;                                      
|
| |  | rumors or dissemination of false information; and                                                
|
| |  | general economic conditions, including terrorist
    activities or military actions.             

In addition, stock markets have experienced
extreme price and volume volatility in recent years and stock
prices of technology companies have been especially volatile.
This volatility has had a substantial effect on the market
prices of securities of many public companies for reasons
frequently unrelated to the operating performance of the
specific companies. These broad market fluctuations could
adversely affect the market price of our common stock.

Our operating results fluctuate significantly,
which could cause our stock price to decline if our results fail
to meet investors and analysts
expectations.

We have experienced, and expect to continue to
experience, fluctuations in sales and operating results from
quarter to quarter. As a result, we believe that
period-to-period comparisons of our operating results are not
necessarily meaningful, and that such comparisons cannot be
relied upon as indicators of future performance. In addition,
there can be no assurance that we will maintain our current
profitability or gross margins in the future. A significant
portion of our net revenues in each fiscal quarter result from
orders booked in that quarter. Orders placed by major customers
are typically based on their forecasted sales and inventory
levels for our products. Fluctuations in our quarterly operating
results may be the result of:



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in purchasing patterns by one or more of
    our major customers, order changes or rescheduling;                                                                                                                 
|
| |  | gain or loss of significant customers;                                                                                                                                                                                   
|
| |  | customer policies pertaining to desired inventory
    levels of our products;                                                                                                                                            
|
| |  | negotiations of rebates and extended payment
    terms;                                                                                                                                                                  
|
| |  | changes in our ability to anticipate in advance
    the mix of customer orders;                                                                                                                                          
|
| |  | level of inventory our customers require us to
    maintain in our field warehouses;                                                                                                                                     
|
| |  | developing higher performance application
    specific integrated circuits, or ASICs, that create chip level
    solutions that replace selected board level solutions at
    significantly lower average selling prices;
|
| |  | the time, availability and sale of new products;                                                                                                                                                                         

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| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | changes in the mix and/or average selling prices
    of our products;                                     
|
| |  | variations in manufacturing capacities,
    efficiencies and costs;                                       
|
| |  | the availability and cost of components,
    including silicon chips;                                     
|
| |  | warranty expenses;                                                                                        
|
| |  | variations in product development and other
    operating expenses;                                       
|
| |  | adjustments related to product returns;                                                                   
|
| |  | adoption of new accounting pronouncements or
    changes in our policies;                                 
|
| |  | general economic and other conditions affecting
    the timing of customer orders and capital spending; or
|
| |  | a downturn in the global economy that impacts
    information technology spending.                        

Our quarterly results of operations are also
influenced by competitive factors, including the pricing and
availability of our products and our competitors products.
Although we do not maintain our own silicon chip manufacturing
facility, portions of our expenses are fixed and difficult to
reduce in a short period of time. If net revenues do not meet
our expectations, our fixed expenses would magnify the effect on
gross profit and net income of such shortfall in net revenues.
Furthermore, announcements regarding new products and
technologies could cause our customers to defer or cancel
purchases of our products. Order deferrals by our customers,
delays in our introduction of new products, and longer than
anticipated design-in cycles for our products have in the past
adversely affected our quarterly results of operations. Due to
these factors, as well as other unanticipated factors, it is
likely that in some future quarter or quarters our operating
results will be below the expectations of public market analysts
or investors, and as a result, the price of our common stock
could significantly decrease.

Our business is dependent on the storage area
network (SAN) market that is relatively new and unpredictable,
and if this market does not develop and expand as we anticipate,
our business will suffer.

A significant number of our products are used in
SANs and, therefore, our business is dependent on the SAN
market. Accordingly, the widespread adoption of SANs for use in
organizations computing systems is critical to our future
success. Most of the organizations that potentially may purchase
our products from our customers have invested substantial
resources in their existing computing and data storage systems
and, as a result, may be reluctant or slow to adopt a new
approach like SANs. SANs are often implemented in connection
with the deployment of new storage systems and servers.
Therefore, our future success is also substantially dependent on
the market for new storage systems and servers. Furthermore, the
ability of the different components used in a SAN to function
effectively, or interoperate, with each other when placed in a
computing system has not yet been achieved on a widespread
basis. Until greater interoperability is achieved, customers may
be reluctant to deploy SANs. Our success in generating revenue
in the emerging SAN market will depend on, among other things,
our ability to:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | educate potential OEM customers, distributors,
    resellers, system integrators, storage service providers and
    end-user organizations about the benefits of SANs;
|
| |  | maintain and enhance our relationships with OEM
    customers, distributors, resellers, system integrators and
    storage system providers;                          
|
| |  | predict and base our products on standards which
    ultimately become industry standards; and                                                                        
|
| |  | achieve interoperability between our products and
    other SAN components from diverse vendors.                                                                      

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Our financial condition will be materially
harmed if we do not maintain and gain market or industry
acceptance of our products.

The markets in which we compete involve rapidly
changing technology, evolving industry standards and continuing
improvements in products and services. Our future success
depends, in part, on our ability to:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enhance our current products and develop and
    introduce in a timely manner new products that keep pace with
    technological developments and industry standards;
|
| |  | compete effectively on the basis of price and
    performance; and                                                                                                   
|
| |  | adequately address OEM customer and end-user
    customer requirements and achieve market acceptance.                                                                

We believe that to remain competitive in the
future, we will need to continue to develop new products, which
will require a significant investment in new product
development. A significant portion of our revenues is generated
from Fibre Channel technology. Our competitors are developing
alternative technologies that may compete with the market
acceptance of our Fibre Channel products, such as iSCSI,
Infiniband, Serial Attached SCSI (SAS) and Serial Advanced
Technology Attachment (sATA). If alternative standards are
adopted by the industry, we may not be able to develop products
for new standards in a timely manner. Further, even if
alternative technologies do augment Fibre Channel revenues, our
products may not be fully developed in time to be accepted by
our customers. Even if our new products are developed on time,
we may not be able to manufacture them at competitive prices in
sufficient volumes.

We depend on a limited number of customers,
and any decrease in revenue or cash flows from any one of our
customers could adversely affect our results of operations and
cause our stock price to decline.

A small number of customers account for a
substantial portion of our net revenues, and we expect that a
limited number of customers will continue to represent a
substantial portion of our net revenues in the foreseeable
future. During fiscal 2003, we had three customers who each
accounted for more than 10% of our net revenues and aggregated
46% of our total net revenues. Additionally, we are also subject
to credit risk associated with the concentration of our accounts
receivable. The loss of any of our major customers would have a
material adverse effect on our business, financial condition and
results of operations. This risk is increased due to the
potential for some of these customers to exit the markets served
by us, or to merge with one of our competitors.

Additionally, some of these customers are based
in the Pacific Rim region, which is subject to economic and
political uncertainties. Our customers generally order products
through written purchase orders as opposed to long-term supply
contracts and, therefore, such customers are generally not
obligated to purchase products from us for any extended period.
Major customers also have significant leverage over us and may
attempt to change the terms, including pricing, which could
materially adversely affect our business, financial condition
and results of operations. This risk is increased due to the
potential for some of these customers to merge with or acquire
one or more of our other customers. As our OEM customers are
pressured to reduce prices as a result of competitive factors,
we may be required to contractually commit to price reductions
for our products before we know how, or if, cost reductions can
be obtained. If we are unable to achieve such cost reductions,
our gross margins could decline and such decline could have a
material adverse effect on our business, financial condition and
results of operations.

Competition within our product markets is
intense and includes numerous established competitors.

The markets for our products are highly
competitive and are characterized by short product life cycles,
price erosion, rapidly changing technology, frequent product
performance improvements and evolving industry standards. We
currently compete primarily with Adaptec, Inc. and LSI Logic
Corporation in the SCSI sector of the input/output, or I/ O,
market. In the Fibre Channel host bus adapter sector of the I/ O
market, we compete primarily with Emulex Corporation, LSI Logic
Corporation and JNI Corporation. In the Fibre Channel host
controller chip sector of the market, we compete primarily with
Agilent Technologies, Inc. and LSI Logic Corporation. In the
switch products sector, we compete primarily with Brocade
Communications

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Systems, Inc., Cisco Systems, Inc. and McData
Corporation. In the enclosure management sector, we compete
primarily with Vitesse Semiconductor Corporation. We may compete
with some of our larger disk drive and computer systems
customers, some of which have the capability to develop
integrated circuits for use in their own products. At least one
large OEM customer in the past has decided to vertically
integrate and has therefore stopped purchasing from us.


We will need to continue to develop products
appropriate to our markets to remain competitive as our
competitors continue to introduce products with improved
performance characteristics. While we continue to devote
significant resources to research and development, these efforts
may not be successful, or may not be developed and introduced in
a timely manner. Further, several of our competitors have
greater resources devoted to securing semiconductor foundry
capacity because of long-term agreements regarding supply flow,
equity or financing agreements or direct ownership of a foundry.
In addition, while relatively few competitors offer a full range
of SAN products, additional domestic and foreign manufacturers
may increase their presence in these markets. We may not be able
to compete successfully against these or other competitors. If
we are unable to design, develop and introduce competitive new
products on a timely basis, our future operating results will be
materially and adversely affected.

Our distributors may not adequately distribute
our products and their reseller customers may purchase products
from our competitors, which could negatively affect our
operations.

Our distributors generally offer a diverse array
of products from several different manufacturers and suppliers.
Accordingly, we are at risk that these distributors may give
higher priority to selling products from other suppliers, thus
reducing their efforts to sell our products. A reduction in
sales efforts by our current distributors could materially
adversely impact our business or operating results. In addition,
if we decrease our distributor-incentive programs, our
distributors may temporarily decrease the amounts of product
purchased from us. This could result in a change of business
habits, and distributors may decide to decrease the amount of
product held and reduce their inventory levels, which could
impact availability to their customers.

As a result of the aforementioned factors
regarding our distributors or other unrelated factors, the
reseller customers of our distributors could decide to purchase
products developed and manufactured by our competitors. Any loss
of demand for our products by VARs and system integrators could
have a material adverse effect on our business or operating
results.

We depend on our relationships with silicon
chip suppliers and other subcontractors, and a loss of any of
these relationships may lead to unpredictable consequences that
may harm our results of operations if alternative supply sources
are not available.

We currently rely on multiple foundries to
manufacture our semiconductor products either in finished form
or wafer form. We generally conduct business with our foundries
through written purchase orders as opposed to long-term supply
contracts. Therefore, these foundries are generally not
obligated to supply products to us for any specific period, in
any specific quantity or at any specific price, except as may be
provided in a particular purchase order. If a foundry terminates
its relationship with us or if our supply from a foundry is
otherwise interrupted, we may not have a sufficient amount of
time to replace the supply of products manufactured by that
foundry. As a result, we may not be able to meet customer
demands, which could harm our business.

Historically, there have been periods when there
has been a worldwide shortage of advanced process technology
foundry capacity. The manufacture of semiconductor devices is
subject to a wide variety of factors, including the availability
of raw materials, the level of contaminants in the manufacturing
environment, impurities in the materials used, and the
performance of personnel and equipment. We are continuously
evaluating potential new sources of supply. However, the
qualification process and the production ramp-up for additional
foundries have in the past taken, and could in the future take,
longer than anticipated. New supply sources may not be able or
willing to satisfy our silicon chip requirements on a timely
basis or at acceptable quality or unit prices.

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We have not developed alternate sources of supply
for our products. For example, our integrated single chip Fibre
Channel controller is manufactured by LSI Logic and integrates
LSI Logics transceiver technology. In the event that LSI
Logic is unable or unwilling to satisfy our requirements for
this technology, our marketing efforts related to Fibre Channel
products would be delayed and, as such, our results of
operations could be materially and adversely affected. The
requirement that a customer perform separate product
qualifications, or a customers inability to obtain a
sufficient supply of products from us, may cause that customer
to satisfy its product requirements from our competitors.
Constraints or delays in the supply of our products, due to
capacity constraints, unexpected disruptions at our foundries or
with our subcontractors, delays in obtaining additional
production at the existing foundries or in obtaining production
from new foundries, shortages of raw materials or other reasons,
could result in the loss of customers.

Our products are complex and may contain
undetected software or hardware errors that could lead to an
increase in our costs, reduce our net revenues or damage our
reputation.

Our products are complex and may contain
undetected software or hardware errors when first introduced or
as newer versions are released. We are also exposed to risks
associated with latent defects in existing products. We have
from time to time found errors in existing, new or enhanced
products. The occurrence of hardware or software errors could
adversely affect the sales of our products, cause us to incur
significant warranty and repair costs, divert the attention of
our engineering personnel from our product development efforts
and cause significant customer relations problems.

The migration of our customers toward new
products may result in fluctuations of our operating
results.

As new or enhanced products are introduced, we
must successfully manage the transition from older products in
order to minimize the effects of product inventories that may
become excess and obsolete, as well as ensure that sufficient
supplies of new products can be delivered to meet customer
demands. Our failure to manage the transition to newer products
in the future or to develop and successfully introduce new
products and product enhancements could adversely affect our
business and financial results. When we introduce new products
and product enhancements, we face risks relating to product
transitions, including risks relating to forecasting demand, as
well as possible product and software defects. If any of these
factors were to occur, it could have a material adverse effect
on our business, financial condition and results of operations.

Terrorist activities and resulting military
actions could adversely affect our business.

Terrorist attacks have disrupted commerce
throughout the United States and Europe. The continued threat of
terrorism within the United States, Europe and the Pacific Rim,
and the military action and heightened security measures in
response to such threat, may cause significant disruption to
commerce throughout the world. To the extent that such
disruptions result in delays or cancellations of customer
orders, delays in collecting cash, a general decrease in
corporate spending on information technology, or our inability
to effectively market, manufacture or ship our products, our
business and results of operations could be materially and
adversely affected. We are unable to predict whether the threat
of terrorism or the responses thereto will result in any
long-term commercial disruptions or if such activities or
responses will have any long-term material adverse effect on our
business, financial condition or results of operations.

Because we depend on foreign customers and
suppliers, we are subject to international economic, regulatory,
political and other risks that could harm our financial
condition and result of operations.

We expect that export revenues will continue to
account for a significant percentage of our net revenues for the
foreseeable future. As a result, we are subject to several
risks, which include:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | a greater difficulty of administering our
    business globally;                                                                              
|
| |  | compliance with multiple and potentially
    conflicting regulatory requirements, such as export
    requirements, tariffs and other barriers;
|
| |  | differences in intellectual property protections;                                                                                             

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| |   |                                                              
| | - | -------------------------------------------------------------
| |  | difficulties in staffing and managing foreign
    operations;
|
| |  | potentially longer accounts receivable cycles;               
|
| |  | currency fluctuations;                                       
|
| |  | export control restrictions;                                 
|
| |  | overlapping or differing tax structures;                     
|
| |  | political and economic instability; and                      
|
| |  | general trade restrictions.                                  

A significant number of our customers and
suppliers are located in Pacific Rim countries. Historically,
the Asian markets have suffered from economic uncertainty. This
uncertainty has taken place especially in countries that have
had a collapse in both their currency and stock markets. These
economic pressures have reduced liquidity in the banking systems
of the affected countries and, when coupled with excess
industrial production capacity, could lead to widespread
financial difficulty among the companies in this region. Our
export sales are invoiced in U.S. dollars and, accordingly,
if the relative value of the U.S. dollar in comparison to
the currency of our foreign customers should increase, the
resulting effective price increase of our products to such
foreign customers could result in decreased sales. In addition,
because we have customers and suppliers located in Asia, the
outbreak of Severe Acute Respiratory Syndrome (SARS) could
have an adverse impact on our business. If there is a
significant spread of SARS beyond Asia, other aspects of our
business could be negatively impacted. There can be no assurance
that any of the foregoing factors will not have a material
adverse effect on our business, financial condition and results
of operations.

We may need to enter into agreements to
guarantee we have production capacity, which may require us to
seek additional financing and result in dilution to our
stockholders.

The semiconductor industry has, in the past,
experienced shortages of available foundry capacity.
Accordingly, in order to secure an adequate supply of silicon
chips, we may consider various possible supply agreements. These
agreements include the use of take or pay contracts,
making equity investments in, or advances to, silicon chip
manufacturing companies in exchange for guaranteed production
capacity, or the formation of joint ventures to own and operate
or construct foundries or to develop certain products. Any of
these arrangements would involve financial risk to us and could
require us to commit a substantial amount of our funds or
provide technology licenses in return for guaranteed production
capacity. The need to commit our own funds may require us to
seek additional equity or debt financing. The sale or issuance
of additional equity or convertible debt securities could result
in dilution to our stockholders. This kind of additional
financing, if necessary, may not be available on terms
acceptable to us or at all.

We may engage in mergers, acquisitions and
strategic investments and these activities may adversely affect
our results of operations and stock price.

We anticipate that our future growth may depend
in part on our ability to identify and acquire complementary
businesses, technologies or product lines that are compatible
with ours. Mergers and acquisitions involve numerous risks,
including:



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | uncertainties in identifying and pursuing target
    companies;                                                                  
|
| |  | difficulties in the assimilation of the
    operations, technologies and products of the acquired companies;                     
|
| |  | the diversion of managements attention from
    other business concerns;                                                        
|
| |  | risks associated with entering markets or
    conducting operations with which we have no or limited direct
    prior experience;
|
| |  | the potential loss of current customers or
    retention of the acquired companys customers; and                                
|
| |  | the potential loss of key employees of the
    acquired company.                                                                 

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Further, we may never realize the perceived
benefits of a business combination. Future acquisitions by us
could dilute stockholders investment and cause us to incur
debt, contingent liabilities and amortization/ impairment
charges related to intangible assets, all of which could
materially adversely affect our financial position or results of
operations.

We have made, and plan to continue to make,
investments in technology companies, including privately held
companies in a development stage. Many of these private equity
investments are inherently risky because the companies
businesses may never develop, and we may incur losses related to
these investments. In addition, we may be required to write down
the carrying value of these investments to reflect other than
temporary declines in their value, which could have a materially
adverse effect on our financial position and results of
operations.

Our business could be materially adversely
affected as a result of the risks associated with strategic
alliances.

We have alliances with leading information
technology companies and we plan to continue our strategy of
developing key alliances in order to expand our reach into
emerging markets. There can be no assurance that we will be
successful in our ongoing strategic alliances or that we will be
able to find further suitable business relationships as we
develop new products and strategies. Any failure to continue or
expand such relationships could have a material adverse effect
on our business, financial condition or results of operations.

There can be no assurance that companies with
which we have strategic alliances, certain of which have
substantially greater financial, marketing and technological
resources than us, will not develop or market products in
competition with us in the future, discontinue their alliances
with us or form alliances with our competitors.

Continued rapid growth will strain our
operations and require that we incur costs to upgrade our
infrastructure.

We have experienced a period of rapid growth and
expansion in the past. This rapid growth and expansion has
placed, and continues to place, a significant strain on our
resources. Unless we manage this growth effectively, we may
encounter challenges in executing our business, such as sales
forecasting, material planning and inventory management, which
may result in unanticipated fluctuations in our operating
results. We may not be able to install adequate control systems
in an efficient and timely manner, and our current or planned
personnel, systems, procedures and controls may not be adequate
to support our future operations. In addition, we test most of
our products prior to shipment. If our capacity to conduct this
testing does not expand concurrently with the anticipated growth
of our business, product shipments could be delayed, which could
result in delayed or lost revenues and customer dissatisfaction.

If we are unable to attract and retain key
personnel, we may not be able to sustain or grow our
business.

Our future success largely depends on our key
engineering, sales, marketing and executive personnel, including
highly skilled semiconductor design personnel and software
developers. We also must identify and hire additional personnel.
If we lose the services of key personnel, our business would be
adversely affected. We believe that the market for key personnel
in the industries in which we compete is highly competitive. In
particular, periodically we have experienced difficulty in
attracting and retaining qualified engineers and other technical
personnel and anticipate that competition for such personnel
will increase in the future. We may not be able to attract and
retain key personnel with the skills and expertise necessary to
develop new products in the future or to manage our business,
both in the United States and abroad.

Our proprietary rights may be inadequately
protected and current and future infringement claims or adverse
judgments could harm our competitive position.

Although we have patent protection on certain
aspects of our technology in some jurisdictions, we rely
primarily on trade secrets, copyrights and contractual
provisions to protect our proprietary rights. There can be no
assurance that these protections will be adequate to protect our
proprietary rights, that others will not

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independently develop or otherwise acquire
equivalent or superior technology or that we can maintain such
technology as trade secrets. There also can be no assurance that
any patents we possess will not be invalidated, circumvented or
challenged. In addition, the laws of certain countries in which
our products are or may be developed, manufactured or sold,
including various countries in Asia, may not protect our
products and intellectual property rights to the same extent as
the laws of the United States or at all. If we fail to protect
our intellectual property rights, our business would be
negatively impacted.


We have received notices of claimed infringement
of intellectual property rights in the past. In addition, we are
currently engaged in litigation with parties who claim we have
infringed on their intellectual property rights. There can be no
assurance that third parties will not assert additional claims
of infringement of intellectual property rights against us with
respect to existing and future products. Although patent and
intellectual property disputes may be settled through licensing
or similar arrangements, costs associated with these
arrangements may be substantial and the necessary licenses or
similar arrangements may not be available to us on satisfactory
terms or at all. As a result, we could be prevented from
manufacturing and selling some of our products. In addition, if
we litigate these kinds of claims, the litigation could be
expensive and time consuming and could divert managements
attention from other matters. Our business could suffer
regardless of the outcome of the litigation. Our supply of
silicon chips and other components can also be interrupted by
intellectual property infringement claims against our suppliers.

Our charter document and shareholder rights
plan may discourage companies from acquiring us and offering our
stockholders a premium for their stock.

Pursuant to our certificate of incorporation, our
board of directors is authorized to approve the issuance of
shares of currently undesignated preferred stock without any
vote or future action by the stockholders. Pursuant to this
authority, in June 1996, our board of directors adopted a
shareholder rights plan and declared a dividend of a right to
purchase preferred stock for each outstanding share of our
common stock. After adjustment for stock splits, our common
stock now carries one-eighth of a preferred stock purchase right
per share. The shareholder rights plan may have the effect of
delaying, deferring or preventing a change in control of our
stock. This may discourage bids for our common stock at a
premium over the market price of the common stock and may
adversely affect the market price of the common stock.

Our corporate headquarters and principal
design facilities are located in a region that is subject to
earthquakes and other natural disasters.

Our California facilities, including our
principal executive offices, our principal design facilities,
and our critical business operations are located near major
earthquake faults. We are not specifically insured for
earthquakes, or other such natural disasters. Any personal
injury or damage to the facilities as a result of such
occurrences could have a material adverse effect on our
business, results of operations and financial condition.




Item 7a.     Quantitative
and Qualitative Disclosures About Market Risk

We maintain a marketable securities investment
portfolio of various holdings, types and maturities. In
accordance with our investment guidelines, we only invest in
instruments with high credit quality standards and we limit our
credit exposure to any one issuer or type of investment. We do
not use derivative financial instruments.

Our cash and cash equivalents are not subject to
significant interest rate risk due to the short maturities of
these instruments. As of March 30, 2003, the carrying value
of our cash and cash equivalents approximates fair value.

Our short-term investment portfolio consists
primarily of marketable debt securities, including government
securities, corporate bonds, municipal bonds and other debt
securities, which principally have remaining terms of two years
or less. Consequently, such securities are not subject to
significant interest rate risk. All of our marketable securities
are classified as available for sale and, as of March 30,
2003, unrealized gains of $4.3 million (net of related
income taxes) on these securities are included in accumulated
other comprehensive income.

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Item 8.     Financial
Statements and Supplementary Data




INDEPENDENT AUDITORS REPORT

The Board of Directors

QLogic Corporation:


We have audited the consolidated financial
statements of QLogic Corporation and subsidiaries as listed in
Item 15(a)(1). In connection with our audits of the
consolidated financial statements, we have also audited the
financial statement schedule as listed in Item 15(a)(2).
These consolidated financial statements and the financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement
schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of QLogic Corporation and
subsidiaries as of March 30, 2003 and March 31, 2002,
and the results of their operations and their cash flows for
each of the years in the three-year period ended March 30,
2003, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in Note 1 to the consolidated
financial statements, the Company changed its method of
accounting for goodwill and intangible assets as of
April 1, 2002.

/s/ KPMG LLP

Orange County, California

April 29, 2003


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QLOGIC CORPORATION






CONSOLIDATED BALANCE SHEETS


March 30, 2003 and March 31,
2002


|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |         |         | 
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                         |                                                                                                                                                                                                       | 2003                       |         | 2002   
|                                         |                                                                                                                                                                                                       |                            |         |        
|                                         |                                                                                                                                                                                                       |                           
|                                         |                                                                                                                                                                                                       | (In thousands, except     
|                                         |                                                                                                                                                                                                       | share and per share       
|                                         |                                                                                                                                                                                                       | amounts)                  
|ASSETS                                  
|Current assets:                          |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         | Cash and cash equivalents                                                                                                                                                                             |                            | $       | 137,810 |         |   | $       | 76,124  |        
|                                         | Short-term investments                                                                                                                                                                                |                            |         | 505,387 |         |   |         | 416,422 |        
|                                         | Accounts receivable, less allowance for doubtful
    accounts of $2,830 and $3,429 as of March 30, 2003 and
    March 31, 2002, respectively                                                          |                            |         | 49,694  |         |   |         | 38,360  |        
|                                         | Inventories                                                                                                                                                                                           |                            |         | 19,365  |         |   |         | 24,758  |        
|                                         | Deferred income taxes                                                                                                                                                                                 |                            |         | 31,914  |         |   |         | 27,635  |        
|                                         | Prepaid expenses and other current assets                                                                                                                                                             |                            |         | 4,010   |         |   |         | 3,345   |        
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         |                                                                                                                                                                                                       | Total current assets       |         |         | 748,180 |   |         |         | 586,644 | 
|Property and equipment, net              |                                                                                                                                                                                                       |                            | 59,813  |         |         |   | 60,293  |        
|Other assets                             |                                                                                                                                                                                                       |                            | 9,426   |         |         |   | 23,078  |        
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         |                                                                                                                                                                                                       | $                          | 817,419 |         |         | $ | 670,015 |        
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         | Accounts payable                                                                                                                                                                                      |                            | $       | 15,301  |         |   | $       | 15,025  |        
|                                         | Accrued compensation                                                                                                                                                                                  |                            |         | 21,997  |         |   |         | 15,142  |        
|                                         | Income taxes payable                                                                                                                                                                                  |                            |         | 19,201  |         |   |         | 8,595   |        
|                                         | Other accrued liabilities                                                                                                                                                                             |                            |         | 10,185  |         |   |         | 12,270  |        
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         |                                                                                                                                                                                                       | Total current liabilities  |         |         | 66,684  |   |         |         | 51,032  | 
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|Commitments and contingencies            |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|Stockholders equity:                    |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         | Preferred stock, $0.001 par value; 1,000,000
    shares authorized (200,000 shares designated as Series A
    Junior Participating Preferred, $0.001 par value); no shares
    issued and outstanding |                            |         |        |         |   |         |        |        
|                                         | Common stock, $0.001 par value;
    500,000,000 shares authorized; 93,945,000 and
    93,029,000 shares issued at March 30, 2003 and
    March 31, 2002, respectively                                 |                            |         | 94      |         |   |         | 93      |        
|                                         | Additional paid-in capital                                                                                                                                                                            |                            |         | 442,594 |         |   |         | 417,343 |        
|                                         | Retained earnings                                                                                                                                                                                     |                            |         | 308,453 |         |   |         | 204,980 |        
|                                         | Accumulated other comprehensive income                                                                                                                                                                |                            |         | 4,346   |         |   |         | 245     |        
|                                         | Treasury stock, at cost: 91,000 shares at
    March 30, 2003                                                                                                                                          |                            |         | (2,978  | )       |   |         |        |        
|                                         | Deferred stock-based compensation                                                                                                                                                                     |                            |         | (1,774  | )       |   |         | (3,678  | )      
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         |                                                                                                                                                                                                       | Total stockholders equity |         |         | 750,735 |   |         |         | 618,983 | 
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        
|                                         |                                                                                                                                                                                                       | $                          | 817,419 |         |         | $ | 670,015 |        
|                                         |                                                                                                                                                                                                       |                            |         |         |         |   |         |        

See accompanying notes to consolidated financial
statements.

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QLOGIC CORPORATION






CONSOLIDATED STATEMENTS OF INCOME


Years Ended March 30, 2003,
March 31, 2002 and April 1, 2001


|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |         |         | 
|------------------------------------------------ | --------------------------- | ------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                 |                             | 2003                      |         | 2002    |         | 2001
|                                                 |                             |                           |         |         |         |     
|                                                 |                             |                          
|                                                 |                             | (In thousands, except per
|                                                 |                             | share amounts)           
|Gross revenues                                   |                             | $                         | 444,037 |         |         | $    | 349,690 |         |         | $ | 362,781 |        
|Stock-based sales discounts                      |                             |                           | 3,228   |         |         |      | 5,501   |         |         |   | 5,239   |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Net revenues                                     |                             |                           | 440,809 |         |         |      | 344,189 |         |         |   | 357,542 |        
|Cost of revenues                                 |                             |                           | 159,370 |         |         |      | 133,005 |         |         |   | 128,739 |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Gross profit                |                           |         | 281,439 |         |      |         | 211,184 |         |   |         | 228,803 |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Operating expenses:                              |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Engineering and development |                           |         | 81,253  |         |      |         | 69,684  |         |   |         | 56,315  |        
|                                                 | Selling and marketing       |                           |         | 44,312  |         |      |         | 38,323  |         |   |         | 36,482  |        
|                                                 | General and administrative  |                           |         | 14,011  |         |      |         | 16,673  |         |   |         | 14,828  |        
|                                                 | Merger and related expenses |                           |         |        |         |      |         |        |         |   |         | 22,947  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 |                             | Total operating expenses  |         |         | 139,576 |      |         |         | 124,680 |   |         |         | 130,572 | 
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Operating income                                 |                             |                           | 141,863 |         |         |      | 86,504  |         |         |   | 98,231  |        
|Interest and other income                        |                             |                           | 17,356  |         |         |      | 19,036  |         |         |   | 18,706  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Income before income taxes                       |                             |                           | 159,219 |         |         |      | 105,540 |         |         |   | 116,937 |        
|Income taxes                                     |                             |                           | 55,746  |         |         |      | 34,814  |         |         |   | 48,168  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Net income                                       |                             | $                         | 103,473 |         |         | $    | 70,726  |         |         | $ | 68,769  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Net income per share:                            |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Basic                       |                           | $       | 1.11    |         |      | $       | 0.76    |         |   | $       | 0.76    |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Diluted                     |                           | $       | 1.09    |         |      | $       | 0.74    |         |   | $       | 0.72    |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|Number of shares used in per share computations: |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Basic                       |                           |         | 93,469  |         |      |         | 92,645  |         |   |         | 91,073  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        
|                                                 | Diluted                     |                           |         | 95,354  |         |      |         | 95,126  |         |   |         | 95,139  |        
|                                                 |                             |                           |         |         |         |      |         |         |         |   |         |        

See accompanying notes to consolidated financial
statements.

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QLOGIC CORPORATION






CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME


Years Ended March 30, 2003,
March 31, 2002 and April 1, 2001


|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |         |         | 
|-------------------------- | --------------------------------------------------------------------------------- | -------------------- | ------ | ---------- | - | ------- | -- | ----------- |  | ------------- | ------- | -------- |  | ------------ | ------- | ------------- |  | - | ----- | ------ | - | - | ------ | ------ | - | - | ------ | ------ | - | - | ------- | ------- | ------- | 
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |             
|                           |                                                                                   | Common Stock         |        |            |   |         |    | Accumulated |  |               |         |          |  |             
|                           |                                                                                   |                      |        | Additional |   |         |    | Other       |  |               |         | Deferred |  | Total       
|                           |                                                                                   | Outstanding          |        |            |   | Paid-In |    | Retained    |  | Comprehensive |         | Treasury |  | Stock-Based  |         | Shareholders
|                           |                                                                                   | Shares               |        | Amount     |   | Capital |    | Earnings    |  | Income (loss) |         | Stock    |  | Compensation |         | Equity       
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |              
|                           |                                                                                   |                     
|                           |                                                                                   | (In thousands)      
|Balance at April 2, 2000.  |                                                                                   |                      | 89,715 |            |   | $       | 90 |             |  | $             | 293,992 |          |  | $            | 65,485  |               |  | $ | (242  | )      |   | $ |       |        |   | $ |       |        |   | $ | 359,325 |        
|                           | Net income                                                                        |                      |        |           |   |         |    |            |  |               |         |         |  |              |         | 68,769        |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 68,769  |        
|                           | Change in unrealized gains on investments                                         |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       | 1,966  |   |   |        |       |   |   |        |       |   |   |         | 1,966   |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|                           |                                                                                   | Comprehensive income |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |         | 70,735  | 
|                           | Issuance of common stock under stock plans
    (including tax benefit of $52,742) |                      |        | 2,586      |   |         |    | 2           |  |               |         | 82,749   |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 82,751  |        
|                           | Common stock issued related to business
    acquisition                           |                      |        | 23         |   |         |    |            |  |               |         | 11,403   |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        | (5,891 | ) |   |         | 5,512   |        
|                           | Warrants issued in connection with product sales                                  |                      |        |           |   |         |    |            |  |               |         | 5,239    |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 5,239   |        
|                           | Amortization of deferred stock-based compensation                                 |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        | 140    |   |   |         | 140     |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|Balance at April 1, 2001.  |                                                                                   |                      | 92,324 |            |   |         | 92 |             |  |               | 393,383 |          |  |              | 134,254 |               |  |   | 1,724 |        |   |   |       |        |   |   | (5,751 | )      |   |   | 523,702 |        
|                           | Net income                                                                        |                      |        |           |   |         |    |            |  |               |         |         |  |              |         | 70,726        |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 70,726  |        
|                           | Change in unrealized gains on investments                                         |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       | (1,479 | ) |   |        |       |   |   |        |       |   |   |         | (1,479  | )      
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|                           |                                                                                   | Comprehensive income |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |         | 69,247  | 
|                           | Issuance of common stock under stock plans
    (including tax benefit of $7,512)  |                      |        | 664        |   |         |    | 1           |  |               |         | 16,277   |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 16,278  |        
|                           | Common stock issued related to business
    acquisition                           |                      |        | 41         |   |         |    |            |  |               |         | 2,182    |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 2,182   |        
|                           | Warrants issued in connection with product sales                                  |                      |        |           |   |         |    |            |  |               |         | 5,501    |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 5,501   |        
|                           | Amortization of deferred stock-based compensation                                 |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        | 2,073  |   |   |         | 2,073   |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|Balance at March 31, 2002. |                                                                                   |                      | 93,029 |            |   |         | 93 |             |  |               | 417,343 |          |  |              | 204,980 |               |  |   | 245   |        |   |   |       |        |   |   | (3,678 | )      |   |   | 618,983 |        
|                           | Net income                                                                        |                      |        |           |   |         |    |            |  |               |         |         |  |              |         | 103,473       |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 103,473 |        
|                           | Change in unrealized gains on investments                                         |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       | 4,101  |   |   |        |       |   |   |        |       |   |   |         | 4,101   |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|                           |                                                                                   | Comprehensive income |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |         | 107,574 | 
|                           | Issuance of common stock under stock plans
    (including tax benefit of $6,037)  |                      |        | 807        |   |         |    | 1           |  |               |         | 17,659   |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 17,660  |        
|                           | Common stock issued related to business
    acquisition                           |                      |        | 109        |   |         |    |            |  |               |         | 4,364    |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 4,364   |        
|                           | Purchase of treasury stock                                                        |                      |        | (91        | ) |         |    |            |  |               |         |         |  |              |         |              |  |   |       |       |   |   |        | (2,978 | ) |   |        |       |   |   |         | (2,978  | )      
|                           | Warrants issued in connection with product sales                                  |                      |        |           |   |         |    |            |  |               |         | 3,228    |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        |       |   |   |         | 3,228   |        
|                           | Amortization of deferred stock-based compensation                                 |                      |        |           |   |         |    |            |  |               |         |         |  |              |         |              |  |   |       |       |   |   |        |       |   |   |        | 1,904  |   |   |         | 1,904   |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        
|Balance at March 30, 2003  |                                                                                   |                      | 93,854 |            |   | $       | 94 |             |  | $             | 442,594 |          |  | $            | 308,453 |               |  | $ | 4,346 |        |   | $ | (2,978 | )      |   | $ | (1,774 | )      |   | $ | 750,735 |        
|                           |                                                                                   |                      |        |            |   |         |    |             |  |               |         |          |  |              |         |               |  |   |       |        |   |   |        |        |   |   |        |        |   |   |         |        

See accompanying notes to consolidated financial
statements.

26



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##### Table of Contents



QLOGIC CORPORATION






CONSOLIDATED STATEMENTS OF CASH
FLOWS


Years Ended March 30, 2003,
March 31, 2002 and April 1, 2001


|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |          |        |         |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------- | -------- | ------ | -------- | ------- | -------- | ------ | -------- | ------- | -------- | ------ | ------- | -
|                                                                          |                                                                                       | 2003                                                     |                                           | 2002     |        | 2001    
|                                                                          |                                                                                       |                                                          |                                           |          |        |         
|                                                                          |                                                                                       |                                                         
|                                                                          |                                                                                       | (In thousands)                                          
|Cash flows from operating activities:                                     |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Net income                                                                            |                                                          | $                                         | 103,473  |        |          | $       | 70,726   |        |          | $       | 68,769   |       
|                                                                          | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                          |                                           |          |        |          |         |          |        |          |         |          |       
|                                                                          |                                                                                       | Depreciation and amortization                            |                                           |          | 14,706 |          |         |          | 12,967 |          |         |          | 10,666 |        
|                                                                          |                                                                                       | Stock-based sales discounts                              |                                           |          | 3,228  |          |         |          | 5,501  |          |         |          | 5,239  |        
|                                                                          |                                                                                       | Tax benefit from issuance of stock under stock
    plans |                                           |          | 6,037  |          |         |          | 7,512  |          |         |          | 52,742 |        
|                                                                          |                                                                                       | Deferred income taxes                                    |                                           |          | 5,937  |          |         |          | 9,338  |          |         |          | (5,829 | )      
|                                                                          |                                                                                       | Provision for losses on accounts receivable              |                                           |          | (550   | )        |         |          | 1,125  |          |         |          | 1,392  |        
|                                                                          |                                                                                       | Loss on disposal of property and equipment               |                                           |          | 1,478  |          |         |          | 254    |          |         |          | 449    |        
|                                                                          |                                                                                       | Write-down of non-marketable investments                 |                                           |          | 4,000  |          |         |          |       |          |         |          |       |        
|                                                                          |                                                                                       | Amortization of deferred stock-based compensation        |                                           |          | 1,904  |          |         |          | 2,073  |          |         |          | 140    |        
|                                                                          |                                                                                       | Write-off of acquired in-process technology              |                                           |          |       |          |         |          | 699    |          |         |          | 554    |        
|                                                                          |                                                                                       | Changes in assets and liabilities:                       |                                           |          |        |          |         |          |        |          |         |          |        |        
|                                                                          |                                                                                       |                                                          | Accounts receivable                       |          |        | (10,784  | )       |          |        | 14,103   |         |          |        | (27,491 | )
|                                                                          |                                                                                       |                                                          | Inventories                               |          |        | 5,393    |         |          |        | 21,752   |         |          |        | (21,418 | )
|                                                                          |                                                                                       |                                                          | Prepaid expenses and other current assets |          |        | (665     | )       |          |        | (987     | )       |          |        | (642    | )
|                                                                          |                                                                                       |                                                          | Other assets                              |          |        | (564     | )       |          |        | (2,520   | )       |          |        | 1,389   |  
|                                                                          |                                                                                       |                                                          | Accounts payable                          |          |        | 276      |         |          |        | (2,992   | )       |          |        | 10,059  |  
|                                                                          |                                                                                       |                                                          | Accrued compensation                      |          |        | 6,855    |         |          |        | (271     | )       |          |        | 4,322   |  
|                                                                          |                                                                                       |                                                          | Income taxes payable                      |          |        | 10,606   |         |          |        | 2,300    |         |          |        | 6,088   |  
|                                                                          |                                                                                       |                                                          | Other liabilities                         |          |        | 3,974    |         |          |        | 7,606    |         |          |        | (8,289  | )
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          |                                                                                       |                                                          | Net cash provided by operating activities |          |        | 155,304  |         |          |        | 149,186  |         |          |        | 98,140  |  
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Cash flows from investing activities:                                     |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Purchases of marketable securities                                                    |                                                          |                                           | (858,202 | )      |          |         | (404,751 | )      |          |         | (236,726 | )     
|                                                                          | Sales and maturities of marketable securities                                         |                                                          |                                           | 773,338  |        |          |         | 214,059  |        |          |         | 169,041  |       
|                                                                          | Additions to property and equipment                                                   |                                                          |                                           | (15,704  | )      |          |         | (14,486  | )      |          |         | (16,705  | )     
|                                                                          | Acquisition of business, net of cash acquired                                         |                                                          |                                           | (1,695   | )      |          |         | (1,923   | )      |          |         | (2,346   | )     
|                                                                          | Purchase of non-marketable investments                                                |                                                          |                                           |         |        |          |         | (3,000   | )      |          |         |         |       
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          |                                                                                       |                                                          | Net cash used in investing activities     |          |        | (102,263 | )       |          |        | (210,101 | )       |          |        | (86,736 | )
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Cash flows from financing activities:                                     |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Proceeds from issuance of stock under stock plans                                     |                                                          |                                           | 11,623   |        |          |         | 8,766    |        |          |         | 30,009   |       
|                                                                          | Purchase of treasury stock                                                            |                                                          |                                           | (2,978   | )      |          |         |         |        |          |         |         |       
|                                                                          | Principal payments on other non-current
    liabilities                               |                                                          |                                           |         |        |          |         |         |        |          |         | (29      | )     
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          |                                                                                       |                                                          | Net cash provided by financing activities |          |        | 8,645    |         |          |        | 8,766    |         |          |        | 29,980  |  
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Net increase (decrease) in cash and cash
    equivalents                  |                                                                                       |                                                          | 61,686                                    |          |        |          | (52,149 | )        |        |          | 41,384  |         
|Cash and cash equivalents at beginning of year                            |                                                                                       |                                                          | 76,124                                    |          |        |          | 128,273 |          |        |          | 86,889  |         
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Cash and cash equivalents at end of year                                  |                                                                                       | $                                                        | 137,810                                   |          |        | $        | 76,124  |          |        | $        | 128,273 |         
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Supplemental disclosure of cash flow information:                         |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Cash paid during the year for:                                            |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Interest                                                                              |                                                          | $                                         |         |        |          | $       | 17       |        |          | $       | 60       |       
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Income taxes                                                                          |                                                          | $                                         | 35,370   |        |          | $       | 14,993   |        |          | $       | 2,318    |       
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|Supplemental schedule of non-cash investing and
    financing activities: |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Common stock issued in connection with business
    acquisition                       |                                                          | $                                         | 4,364    |        |          | $       | 2,182    |        |          | $       | 2,010    |       
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         
|                                                                          | Stock option plan assumed in acquisition                                              |                                                          | $                                         |         |        |          | $       |         |        |          | $       | 5,891    |       
|                                                                          |                                                                                       |                                                          |                                           |          |        |          |         |          |        |          |         |         

See accompanying notes to consolidated financial
statements.

27



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##### Table of Contents



QLOGIC CORPORATION






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


Note 1.     Description
of Business and Summary of Significant Accounting
Policies



| |                             
| | ----------------------------
| | General Business Information

QLogic Corporation (QLogic or the Company)
designs and supplies semiconductor and board level input/output
(I/ O) products, full fabric switches, and enclosure management
semiconductors. The Companys I/ O products provide a high
performance interface between computer systems and their
attached data storage peripherals, such as hard disk drives,
tape drives, removable disk drives and redundant array of
independent disks subsystems, or RAID subsystems. The Company
markets and distributes its products through a direct sales
organization supported by field application engineers, as well
as through a network of independent manufacturers
representatives and regional and international distributors. The
Companys primary original equipment manufacturer
(OEM) customers are major domestic and international
suppliers and manufacturers of servers, workstations and data
storage peripherals.



| |                                                               
| | --------------------------------------------------------------
| | Principles of Consolidation and Financial
    Reporting Period

The consolidated financial statements include the
financial statements of QLogic Corporation and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

The Company maintains a fifty-two/fifty-three
week fiscal year ending on the Sunday nearest March 31.
Fiscal years 2003, 2002 and 2001 each comprised fifty-two weeks
and ended on March 30, 2003, March 31, 2002 and
April 1, 2001, respectively.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
accordance with accounting principles generally accepted in the
United States of America requires management to make estimates
that affect the amounts reported in the Companys
consolidated financial statements and accompanying notes. Actual
results could differ from these estimates.



| |                    
| | -------------------
| | Revenue Recognition

The Company recognizes revenue from product sales
when goods are shipped and title and risk of loss transfers to
the customer. The customers obligation to pay, and the
payment terms, are set at the time of shipment and are not
dependent on subsequent resale of the Companys product.
However, certain of the Companys sales are made to
distributors under agreements allowing for a limited right to
return unsold product. The Company recognizes revenue from these
distributors when the product is sold by the distributor to a
third party. Royalty and service revenue is recognized when
earned and receipt is assured.



| |                         
| | ------------------------
| | Research and Development

Research and development costs, including costs
related to the development of new products and process
technology, as well as acquired in-process technology, are
expensed as incurred.



| |             
| | ------------
| | Income Taxes

Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period

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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

that includes the enactment date. A valuation
allowance to reduce deferred tax assets is established when it
is more likely than not that some portion or all of the deferred
tax assets will not be realized.



| |                     
| | --------------------
| | Net Income per Share

The Company computes basic net income per share
based on the weighted-average number of common shares
outstanding during the periods presented. Diluted net income per
share is computed based on the weighted-average number of common
and dilutive potential common shares outstanding using the
treasury stock method during the periods presented. The Company
has granted certain stock options and warrants which have been
treated as dilutive potential common shares in computing diluted
net income per share.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist
principally of cash equivalents, investments in marketable
securities and trade accounts receivable. The Company invests
its marketable securities primarily in municipal bonds,
corporate bonds and government securities, all of which are high
investment grade. The Company, by policy, limits the amount of
credit exposure through diversification and investment in highly
rated securities. Sales to customers are denominated in U.S.
dollars. As a result, the Company believes its foreign currency
risk is minimal.

The Company sells its products to OEMs and
distributors throughout the world. The Companys three
largest customers, all large OEMs, comprised 38% of total
accounts receivable at March 30, 2003 and 30% at
March 31, 2002. The Company performs ongoing credit
evaluations of its customers financial condition and,
generally, requires no collateral from its customers.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid investments
purchased with original maturities of three months or less on
their acquisition date to be cash equivalents. The carrying
amounts of cash and cash equivalents approximate their fair
values.



| |                                          
| | -----------------------------------------
| | Marketable Securities and
    Investments

The Companys marketable securities are
invested primarily in debt securities, including municipal
bonds, corporate bonds and government securities. All of the
Companys marketable securities are classified as available
for sale and are recorded at fair value, based on quoted market
prices. The Companys available-for-sale marketable
securities are included in short-term investments in the
accompanying consolidated balance sheets. Unrealized gains and
losses, net of related income taxes, are excluded from earnings
and reported as a separate component of other comprehensive
income until realized. Realized gains or losses and other than
temporary declines in fair value are determined on a specific
identification basis and reported in other income and expense as
incurred. Realized gains and losses on marketable securities are
included in interest and other income in the accompanying
consolidated statements of income and aggregated
$4.2 million and $0.8 million in fiscal year 2003 and
2002, respectively, and were insignificant in fiscal 2001.

Non-marketable investments, where the Company is
unable to exercise significant influence over the investee, are
accounted for under the cost method. Such investments are
included in other assets in the accompanying consolidated
balance sheets. Under the cost method, investments are carried
at cost and are adjusted only for other-than-temporary declines
in fair value, distributions of earnings or additional
investments.

During fiscal 2003, the Company recorded charges
of $4.0 million to write down the carrying value of certain
non-marketable investments to their estimated fair value of
zero. These investments consisted of equity interests in early
stage technology companies which the Company had accounted for
under the cost method.

29



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Management estimated the fair value of these
investments based upon available financial and other
information, including then-current and projected business
prospects for the subject companies and determined that the
decline in the fair value of these investments was other than
temporary.



| |            
| | -----------
| | Inventories

Inventories are stated at the lower of cost
(first-in, first-out) or net realizable value.



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over
estimated useful lives of 39.5 years for buildings, seven
to fifteen years for building and land improvements, and two to
five years for equipment. Leasehold improvements are amortized
on a straight-line basis over the shorter of the lease term or
the estimated useful life of the related asset.



| |         
| | --------
| | Goodwill

On April 1, 2002, the Company adopted
Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible
Assets. SFAS 142 requires that goodwill and intangible
assets that have indefinite lives not be amortized but rather be
tested at least annually for impairment, or more frequently when
events or changes in circumstances indicate that the asset might
be impaired.

The following table presents the impact of SFAS
142 on net income and net income per share had SFAS 142 been in
effect for fiscal years 2002 and 2001:

|                         |                      |                       |         |      |  |      |        |      |  |   |        |      | 
|------------------------ | -------------------- | --------------------- | ------- | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                         |                      | 2003                  |         | 2002 |  | 2001
|                         |                      |                       |         |      |  |     
|                         |                      |                      
|                         |                      | (In thousands, except
|                         |                      | per share amounts)   
|Net income, as reported  |                      | $                     | 103,473 |      |  | $    | 70,726 |      |  | $ | 68,769 |     
|Amortization of goodwill |                      |                       |        |      |  |      | 1,109  |      |  |   | 82     |     
|                         |                      |                       |         |      |  |      |        |      |  |   |        |     
|Net income, as adjusted  |                      | $                     | 103,473 |      |  | $    | 71,835 |      |  | $ | 68,851 |     
|                         |                      |                       |         |      |  |      |        |      |  |   |        |     
|Net income per share:    |                      |                       |         |      |  |      |        |      |  |   |        |     
|                         | Basic, as reported   |                       | $       | 1.11 |  |      | $      | 0.76 |  |   | $      | 0.76 | 
|                         | Diluted, as reported |                       | $       | 1.09 |  |      | $      | 0.74 |  |   | $      | 0.72 | 
|                         | Basic, as adjusted   |                       | $       | 1.11 |  |      | $      | 0.78 |  |   | $      | 0.76 | 
|                         | Diluted, as adjusted |                       | $       | 1.09 |  |      | $      | 0.76 |  |   | $      | 0.72 | 

The adjusted net income and related per share
amounts do not reflect an adjustment for the income tax effect
related to the amortization of goodwill, since no income tax
benefit was recorded in connection with the goodwill
amortization included in the Companys consolidated
financial statements.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Impairment of Long-Lived Assets and
    Long-Lived Assets to be Disposed Of

Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be
held and used is measured by the comparison of the carrying
amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.

30



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |         
| | --------
| | Warranty

The Companys products typically carry a
warranty for periods of one to five years. The Company records a
liability for product warranty obligations at the time of sale
based on historical warranty experience.



| |                     
| | --------------------
| | Comprehensive Income

Comprehensive income includes all changes in
equity other than transactions with stockholders. The
Companys accumulated other comprehensive income consists
of unrealized gains on the available-for-sale securities, net of
income taxes.



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company accounts for its stock-based awards
to employees in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations, rather
than the alternative fair value accounting allowed by SFAS
No. 123, Accounting for Stock Based
Compensation. APB 25 provides that compensation expense
relative to the Companys employee stock options is
measured based on the intrinsic value of stock options granted
and the Company recognizes compensation expense in its statement
of income using the straight-line method over the vesting period
for fixed awards. Under SFAS 123, the fair value of stock
options at the date of grant is recognized in earnings over the
vesting period of the options. In December 2002, the Financial
Accounting Standards Board (FASB) issued SFAS 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. SFAS 148 amends SFAS 123 to
provide alternative methods of transition for a voluntary change
to the fair value method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosures in
both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method on reported results. The Company adopted the
disclosure provisions of SFAS 148 as of March 30, 2003 and
continues to follow APB 25 for stock-based employee compensation.

The following table shows pro forma net income as
if the fair value method of SFAS 123 had been used to account
for stock-based compensation expense:

|                                                                                                                                                  |                      |                       |         |      |  |      |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | --------------------- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                                                                  |                      | 2003                  |         | 2002 |  | 2001
|                                                                                                                                                  |                      |                       |         |      |  |     
|                                                                                                                                                  |                      |                      
|                                                                                                                                                  |                      | (In thousands, except
|                                                                                                                                                  |                      | per share amounts)   
|Net income, as reported                                                                                                                           |                      | $                     | 103,473 |      |  | $    | 70,726  |      |  | $ | 68,769  |     
|Add: Stock-based employee compensation expense
    included in reported net income, net of related tax effects                                    |                      |                       | 1,237   |      |  |      | 1,369   |      |  |   | 93      |     
|Deduct: Stock-based employee compensation expense
    determined under the fair value based method for all awards, net
    of related tax effects |                      |                       | (37,613 | )    |  |      | (29,961 | )    |  |   | (24,035 | )   
|                                                                                                                                                  |                      |                       |         |      |  |      |         |      |  |   |         |     
|Pro forma net income                                                                                                                              |                      | $                     | 67,097  |      |  | $    | 42,134  |      |  | $ | 44,827  |     
|                                                                                                                                                  |                      |                       |         |      |  |      |         |      |  |   |         |     
|Net income per share:                                                                                                                             |                      |                       |         |      |  |      |         |      |  |   |         |     
|                                                                                                                                                  | Basic, as reported   |                       | $       | 1.11 |  |      | $       | 0.76 |  |   | $       | 0.76 | 
|                                                                                                                                                  | Diluted, as reported |                       | $       | 1.09 |  |      | $       | 0.74 |  |   | $       | 0.72 | 
|                                                                                                                                                  | Basic, pro forma     |                       | $       | 0.72 |  |      | $       | 0.45 |  |   | $       | 0.49 | 
|                                                                                                                                                  | Diluted, pro forma   |                       | $       | 0.70 |  |      | $       | 0.44 |  |   | $       | 0.47 | 

31



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The fair value of the options granted has been
estimated at the date of grant using the Black-Scholes
option-pricing model. The following represents the
weighted-average fair value of options granted and the
assumptions used for the calculations:

|                                               |  |      |       |      |  |      |       |   |  |   |           |  
|---------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | --------- | -
|                                               |  | 2003 |       | 2002 |  | 2001
|                                               |  |      |       |      |  |     
|Weighted-average fair value of options granted |  | $    | 21.13 |      |  | $    | 37.15 |   |  | $ | 61.10     |  
|Expected volatility                            |  |      | 74    | %    |  |      | 106   | % |  |   | 99  137  | %
|Risk-free interest rate                        |  |      | 2.5   | %    |  |      | 5.4   | % |  |   | 4.9  5.9 | %
|Expected life (years)                          |  |      | 4.0   |      |  |      | 5.0   |   |  |   | 5.0       |  
|Dividend yield                                 |  |      |      |      |  |      |      |   |  |   |          |  

The Black-Scholes option valuation model was
developed for use in estimating the value of traded options that
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions, including expected stock price
volatility. Because the Companys employee stock options
have characteristics significantly different than those of
traded options, and because changes in the subjective input
assumptions can materially affect the estimate, in
managements opinion, the existing models do not provide a
reliable single measure of the fair value of the Companys
options.



| |                            
| | ---------------------------
| | Recent Accounting Standards

In November 2002, the Emerging Issues Task Force
(EITF) reached a final consensus on Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. The
Consensus mandates how goods or services or both that are to be
delivered separately in a bundled sales arrangement should be
accounted for. EITF 00-21 is effective for transactions entered
into in fiscal periods beginning after June 15, 2003.
Management does not believe the adoption of EITF 00-21 will have
a significant impact on the Companys results of operations.



| |                  
| | -----------------
| | Reclassifications

Certain prior year amounts have been reclassified
to conform to the current year presentation.



|        |                      
|------- | ---------------------
|Note 2. | Business Combinations



| |                            
| | ---------------------------
| | Little Mountain Group, Inc.

On January 23, 2001, the Company acquired
the outstanding common stock of Little Mountain Group, Inc.
(LMG), for cash, stock and additional consideration related to
performance milestones which could aggregate up to
$30 million over a four-year period. LMG is a designer of
iSCSI silicon and board level products to enable an ethernet
Storage Area Network. The Company accounted for the transaction
as a purchase. Accordingly, the excess purchase price paid over
the fair value of the LMG net assets acquired of
$7.1 million was recorded as goodwill. This goodwill was
being amortized over five years until the adoption of SFAS 142
in fiscal 2003. Pro forma information regarding the acquisition
is not included as the results of operations of LMG were not
material. The structure of the acquisition includes payments of
stock based on performance milestones to be achieved over the
next four fiscal years. These payments will be charged to
engineering and development expense as the performance
milestones are achieved. During fiscal 2003 and 2002, the
Company issued approximately 109,000 and 41,000 shares of common
stock in connection with the achievement of the performance
milestones. The fair value of the shares issued in fiscal 2003
and 2002 was $4.4 million and $2.2 million,
respectively.

At March 30, 2003, a performance payment to
the former shareholders of LMG of $1.2 million was included
in other accrued liabilities in the accompanying consolidated
balance sheets.

32



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                       
| | --------------------------------------
| | Ancor Communications,
    Incorporated

On August 1, 2000, the Company completed its
merger with Ancor Communications, Incorporated (Ancor). Ancor
was a leading provider of Fibre Channel switches. In connection
with the merger, the Company issued 15.5 million shares of its
common stock in exchange for all shares of Ancors common
stock and reserved 1.7 million shares of its common stock
for issuance upon exercise of outstanding Ancor employee stock
options and other rights assumed by the Company. The merger was
accounted for as a pooling of interests. Accordingly, the
Companys consolidated financial statements have been
restated to include the pooled operations of Ancor as if it had
combined with the Company since Ancors inception. Included
in net revenues for the year ended April 1, 2001 was
$9.4 million from Ancor, recognized prior to the closing of
the merger on August 1, 2000. Included in net income for
the year ended April 1, 2001 were losses totaling
$3.8 million from Ancor, incurred prior to August 1,
2000. There were no transactions between the Company and Ancor
prior to the consummation of the merger.

In connection with the merger with Ancor, the
Company recorded $22.9 million in charges for direct and other
merger-related costs, including fees of investment bankers,
attorneys, accountants and other direct and incremental costs.

Adaptive RAID
Technology

On January 10, 2000, the Company acquired
certain intellectual property (AdaptiveRAID® technology)
from Borg Adaptive Technologies, Inc., a wholly owned subsidiary
of nStor Corporation. The AdaptiveRAID® technology, which
was expected to provide next generation embedded RAID storage
solutions for the Intel Architecture workstation market, was
purchased for $7.5 million in cash. At the time of the
acquisition, the AdaptiveRAID® technology was in the
development stage with no completed commercially viable storage
solution products and thus the entire purchase price was written
off to acquired in-process technology. On February 26,
2001, the technology was sold to YottaYotta, Inc. in exchange
for a $7.5 million note receivable. The note is immediately
payable upon completion of YottaYotta, Inc.s qualified
financing, or at the notes maturity in January 2004. Due
to the uncertainty regarding collection of the note, the Company
will record the ultimate gain from the sale of this technology
upon the collection of the note receivable from YottaYotta, Inc.

Silicon
Design Resources, Inc.

On August 20, 1998, the Company acquired the
net assets of Silicon Design Resources, Inc. (SDR) for
$2 million in cash. In addition, the Company was obligated
to pay up to an additional $8 million in cash provided that
certain performance targets were achieved through fiscal year
2002. These payments were accounted for as additional purchase
price and allocated to the intangible assets acquired,
specifically the in-process technology and the completed
technology.

At March 31, 2002 and April 1, 2001, a
performance payment to the former shareholders of SDR of
$1.7 million and $1.2 million, respectively, was
included in other accrued liabilities in the accompanying
consolidated balance sheets. These payments were allocated to
the intangible assets acquired in fiscal 2002 and 2001:
$1.1 million and $0.8 million, respectively, were
written-off as acquired in-process technology and
$0.6 million and $0.4 million, respectively, were
capitalized as completed technology.



|        |                     
|------- | --------------------
|Note 3. | Net Income per Share

Basic net income per share is based on the
weighted-average number of common shares outstanding during the
periods presented. Diluted income per share is based on the
weighted-average number of common and dilutive potential common
shares outstanding during the periods presented. The Company has
granted certain stock options and warrants which have been
treated as dilutive potential common shares.

33



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the computations
of basic and diluted net income per share:

|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |        |      | 
|--------------------- | ----------------------------------------------------------------- | --------------------- | ------- | ------ | ---- | ---- | ------ | ------ | ---- | - | ------ | ------ | ---- | 
|                      |                                                                   | 2003                  |         | 2002   |      | 2001
|                      |                                                                   |                       |         |        |      |     
|                      |                                                                   |                      
|                      |                                                                   | (In thousands, except
|                      |                                                                   | per share amounts)   
|Net income            |                                                                   | $                     | 103,473 |        |      | $    | 70,726 |        |      | $ | 68,769 |       
|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|Shares:               |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|                      | Weighted-average shares outstanding 
    basic                   |                       |         | 93,469 |      |      |        | 92,645 |      |   |        | 91,073 |     
|                      | Dilutive potential common shares, using treasury
    stock method |                       |         | 1,885  |      |      |        | 2,481  |      |   |        | 4,066  |     
|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|                      | Weighted-average shares outstanding 
    diluted                 |                       |         | 95,354 |      |      |        | 95,126 |      |   |        | 95,139 |     
|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|Net income per share: |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|                      |                                                                   | Basic                 |         | $      | 1.11 |      |        | $      | 0.76 |   |        | $      | 0.76 | 
|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |       
|                      |                                                                   | Diluted               |         | $      | 1.09 |      |        | $      | 0.74 |   |        | $      | 0.72 | 
|                      |                                                                   |                       |         |        |      |      |        |        |      |   |        |       

Options to purchase 6,879,000, 4,089,000 and
717,000 shares of common stock were outstanding as of
March 30, 2003, March 31, 2002 and April 1, 2001,
respectively, but were not included in the computation of
diluted net income per share, as the effect would be
antidilutive.

Note 4.     Marketable
Securities

As of March 30, 2003, unrealized gains of
$4.3 million (net of related income taxes of
$2.4 million) are included in accumulated other
comprehensive income. The Companys portfolio of
available-for-sale securities consist of the following:

|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |         | 
|------------------------------------------- | ----------------------------------- | -------------- | ------- | ---------- |  | ---------- | ----- | ---------- |  | - | ------ | ------ | - | - | ------- | ------- | 
|                                            |                                     |                |         | Gross      |  | Gross      |       |           
|                                            |                                     | Amortized      |         | Unrealized |  | Unrealized |       | Estimated 
|                                            |                                     | Cost           |         | Gains      |  | Losses     |       | Fair Value
|                                            |                                     |                |         |            |  |            |       |           
|                                            |                                     |               
|                                            |                                     | (In thousands)
|March 30, 2003                              |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|Municipal bonds                             |                                     | $              | 18,960  |            |  | $          | 212   |            |  | $ |       |        |   | $ | 19,172  |        
|Corporate bonds                             |                                     |                | 107,967 |            |  |            | 2,808 |            |  |   | (95    | )      |   |   | 110,680 |        
|U.S. Government securities                  |                                     |                | 399,220 |            |  |            | 3,778 |            |  |   | (166   | )      |   |   | 402,832 |        
|Other debt securities                       |                                     |                | 111,943 |            |  |            | 180   |            |  |   |       |        |   |   | 112,123 |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|                                            | Total available-for-sale securities |                |         | 638,090    |  |            |       | 6,978      |  |   |        | (261   | ) |   |         | 644,807 | 
|Less amounts classified as cash equivalents |                                     |                | 139,420 |            |  |            |      |            |  |   |       |        |   |   | 139,420 |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|                                            |                                     | $              | 498,670 |            |  | $          | 6,978 |            |  | $ | (261   | )      |   | $ | 505,387 |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|March 30, 2002                              |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|Municipal bonds                             |                                     | $              | 59,892  |            |  | $          | 541   |            |  | $ | (26    | )      |   | $ | 60,407  |        
|Corporate bonds                             |                                     |                | 108,648 |            |  |            | 1,231 |            |  |   | (723   | )      |   |   | 109,156 |        
|U.S. Government securities                  |                                     |                | 237,624 |            |  |            | 783   |            |  |   | (1,439 | )      |   |   | 236,968 |        
|Other debt securities                       |                                     |                | 86,577  |            |  |            | 162   |            |  |   | (111   | )      |   |   | 86,628  |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|                                            | Total available for sale securities |                |         | 492,741    |  |            |       | 2,717      |  |   |        | (2,299 | ) |   |         | 493,159 | 
|Less amounts classified as cash equivalents |                                     |                | 76,737  |            |  |            |      |            |  |   |       |        |   |   | 76,737  |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        
|                                            |                                     | $              | 416,004 |            |  | $          | 2,717 |            |  | $ | (2,299 | )      |   | $ | 416,422 |        
|                                            |                                     |                |         |            |  |            |       |            |  |   |        |        |   |   |         |        

34



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The amortized cost and estimated fair value of
debt securities as of March 30, 2003, by contractual maturity,
are as follows:

|                                         |  |                |         |            |  |   |         | 
|---------------------------------------- |  | -------------- | ------- | ---------- |  | - | ------- | 
|                                         |  | Amortized      |         | Estimated 
|                                         |  | Cost           |         | Fair Value
|                                         |  |                |         |           
|                                         |  |               
|                                         |  | (In thousands)
|Due in one year or less                  |  | $              | 209,004 |            |  | $ | 209,669 | 
|Due after one year through three years   |  |                | 354,728 |            |  |   | 359,328 | 
|Due after three years through five years |  |                | 74,358  |            |  |   | 75,810  | 
|                                         |  |                |         |            |  |   |         | 
|                                         |  | $              | 638,090 |            |  | $ | 644,807 | 
|                                         |  |                |         |            |  |   |         | 



|        |            
|------- | -----------
|Note 5. | Inventories

Components of inventories are as follows:

|                |  |                |        |      |  |   |        | 
|--------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                |  | 2003           |        | 2002
|                |  |                |        |     
|                |  |               
|                |  | (In thousands)
|Raw materials   |  | $              | 9,368  |      |  | $ | 18,271 | 
|Work in process |  |                | 1,519  |      |  |   | 2,571  | 
|Finished goods  |  |                | 8,478  |      |  |   | 3,916  | 
|                |  |                |        |      |  |   |        | 
|                |  | $              | 19,365 |      |  | $ | 24,758 | 
|                |  |                |        |      |  |   |        | 



|        |                       
|------- | ----------------------
|Note 6. | Property and Equipment

Components of property and equipment are as
follows:

|                                               |  |                |         |      |  |   |        | 
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------ | 
|                                               |  | 2003           |         | 2002
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (In thousands)
|Land                                           |  | $              | 11,663  |      |  | $ | 11,663 | 
|Building and improvements                      |  |                | 22,402  |      |  |   | 22,038 | 
|Product and test equipment                     |  |                | 60,310  |      |  |   | 55,326 | 
|Furniture and fixtures                         |  |                | 3,840   |      |  |   | 4,366  | 
|Semiconductor tooling                          |  |                | 6,589   |      |  |   | 5,751  | 
|                                               |  |                |         |      |  |   |        | 
|                                               |  |                | 104,804 |      |  |   | 99,144 | 
|Less accumulated depreciation and amortization |  |                | 44,991  |      |  |   | 38,851 | 
|                                               |  |                |         |      |  |   |        | 
|                                               |  | $              | 59,813  |      |  | $ | 60,293 | 
|                                               |  |                |         |      |  |   |        | 



|        |                     
|------- | --------------------
|Note 7. | Stockholders Equity

Capital
Stock

The Companys authorized capital consists of
1 million shares of preferred stock, par value $0.001 per
share, and 500 million shares of common stock, par value
$0.001 per share. The preferred stock, of which no shares have
been issued, includes 200,000 shares designated as
Series A Junior Participating Preferred Stock
(Series A Preferred Stock). As of March 30, 2003 and
March 31, 2002, the Company had 93.9 million and
93.0 million shares of common stock issued, respectively.
At March 30, 2003, 18.5 million shares of common stock
were reserved for the exercise of issued and unissued common
stock options, 2.0 million shares were reserved for
issuance in connection with the Companys Employee Stock
Purchase Plan, and 0.4 million shares were reserved for the
exercise of issued common stock warrants.

35



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Treasury
Stock

In October 2002, the Companys Board of
Directors approved a stock repurchase program that authorizes
the Company to repurchase up to $100 million of the
Companys outstanding common stock for a two-year period.
During fiscal 2003, the Company purchased 91,000 shares of
treasury stock totaling $3.0 million.

Shareholder
Rights Plan

On June 4, 1996, the Board of Directors of
the Company unanimously adopted a Shareholder Rights Plan (the
Rights Plan) pursuant to which it declared a dividend
distribution of preferred stock purchase rights (a Right) upon
all of the outstanding shares of the common stock.

The Rights dividend was paid on June 20,
1996 to the holders of record of shares of common stock on that
date, at the rate of one-eighth of one whole Right per one share
of common stock, as adjusted pursuant to the Companys
stock splits. Each share of common stock presently outstanding
that had been issued since June 20, 1996 also includes
one-eighth Right, and each share of common stock that may be
issued after the date hereof and prior to the Distribution Date
(as defined below) also will include one-eighth Right.

The Rights become exercisable (i) the 10th
business day following the date of a public announcement that a
person or a group of affiliated or associated persons (an
Acquiring Person) has acquired beneficial ownership of 15% or
more of the outstanding shares of common stock, or (ii) the
10th business day following the commencement of, or announcement
of an intention to make a tender offer or exchange offer the
consummation of which would result in the person or group making
the offer becoming an Acquiring Person (the earlier of the dates
described in clauses (i) and (ii) being called the
Distribution Date).

The Rights held by an Acquiring Person or its
affiliates are not exercisable. All shares of common stock that
will be issued prior to the Distribution Date will include such
Rights. The Rights will expire at the close of business on
June 4, 2006 (the Scheduled Expiration Date), unless prior
thereto the Distribution Date occurs, or unless the Scheduled
Expiration Date is extended.

Pursuant to the Rights Plan, as amended to date,
each Right entitles the registered holder, on and after the
Distribution Date and until redemption of all Rights, to
purchase from the Company 1/100th of one whole share (a Unit) of
the Companys Series A Preferred Stock. The purchase
price is $425.00 per Unit. In the event of certain acquisitions
involving the Acquiring Person, directly or indirectly, the
holder of each Right will be entitled to purchase for $425.00
certain shares or assets of the Company or an Acquiring Person
that have a market value of $850.00 at such time.

The Company has 200,000 whole shares of
Series A Preferred Stock authorized (40,000,000 Units
authorized), of which no shares or Units are issued or
outstanding at March 30, 2003. Each Unit would entitle the
holder to (A) one vote, voting together with the shares of
common stock; (B) in the event the Companys assets
are liquidated, a payment of one dollar ($1.00) or an amount
equal to the payment to be distributed per share of common
stock, whichever is greater; and (C) in the event of any
merger, consolidation or other transaction in which shares of
common stock are exchanged, a payment in an amount equal to the
payment received per share of common stock. The number of Rights
per share of common stock, and the purchase price, is subject to
adjustment in the event of each and any stock split, stock
dividend or similar event.



|        |            
|------- | -----------
|Note 8. | Stock Plans



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan
(the ESPP) that operates in accordance with Section 423 of
the Internal Revenue Code. The ESPP is administered by the
Compensation Committee of the Board of Directors. Under the
ESPP, employees of the Company who elect to participate are
granted options to purchase common stock at a 15% discount from
the lower of the market value of the common stock at the

36



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

beginning or end of each three-month offering
period. The ESPP permits an enrolled employee to make
contributions to purchase shares of common stock by having
withheld from their salary an amount between 1% and 10% of
compensation. As of March 30, 2003 and March 31, 2002,
ESPP participant contributions of $0.5 million and
$0.6 million, respectively, were included in other current
liabilities in the accompanying consolidated balance sheets. The
total number of shares issued under the ESPP was 121,000,
104,000 and 43,000 during fiscal 2003, 2002 and 2001,
respectively.

Incentive
Compensation Plans

On January 12, 1994, the Companys
Board of Directors adopted the QLogic Corporation Stock Awards
Plan (the Stock Awards Plan) and the QLogic Corporation
Non-Employee Director Stock Option Plan (the Director Plan)
(collectively, the Stock Option Plans). Additionally, the
Company issues options on an ad hoc basis from time to time.

The Stock Awards Plan provides for the issuance
of incentive and non-qualified stock options, restricted stock
and other stock-based incentive awards for officers and key
employees. The Stock Awards Plan permits the Compensation
Committee of the Board of Directors to select eligible employees
to receive awards and to determine the terms and conditions of
awards. As of March 30, 2003, no shares of restricted stock
were issued, options to purchase 9.8 million shares of
common stock were outstanding, and there were 7.0 million
shares available for future grants.

Options granted under the Companys Stock
Awards Plan provide that an employee holding a stock option may
exchange mature stock, which the employee already owns as
payment against the exercise of an option. This provision
applies to all options outstanding as of March 30, 2003.
All stock options granted under the Companys Stock Awards
Plan have ten-year terms and vest over four years from the date
of grant.

Under the terms of the Director Plan, new
directors receive an option grant, at fair market value, to
purchase 40,000 shares of common stock of the Company upon
election to the Board, and the plan provides for annual grants
to each non-employee director (other than the Chairman of the
Board) of options to purchase 20,000 shares of common
stock. The plan also provides for annual grants of options to
purchase 54,000 shares of common stock to any non-employee
Chairman of the Board. As of March 30, 2003, options for a
total of 550,000 shares were outstanding and
645,000 shares were available for grant. All stock options
granted under the Director Plan have ten-year terms and vest
over three years from the date of grant.

As of March 30, 2003, options to purchase an
additional 40,000 shares of common stock were outstanding,
which were granted outside of the Companys Stock Option
Plans.

As a result of the Companys acquisitions,
the Company assumed stock options granted under stock option
plans established by each acquired company; no additional
options will be granted under those plans. As of March 30,
2003, options to purchase 478,000 shares were outstanding.

Warrants

As part of an agreement with Sun Microsystems,
Inc. (Sun), the Company granted a warrant to Sun to purchase a
certain number of shares of the Companys common stock
based upon the volume of revenue received from Sun. The warrant
shares were earned at the rate of one share for each $127.00 of
switch product revenue the Company received from Sun through
September 30, 2002. In each period in which the warrant
shares were earned, a non-cash sales discount was recorded. The
amount of the non-cash sales discount was the fair value of the
warrant shares, which were earned in the period. The fair value
of the warrant shares was calculated by using the Black-Scholes
valuation model. The assumptions used in the fair value
calculation of the warrant shares were generally consistent with
those assumptions used in computing the Companys
stock-based compensation pro forma disclosures (see
Note 1), except as to the term of the warrants, which is
the contractual term. In connection with this agreement, the
Company issued warrants to purchase 390,000 shares

37



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of its common stock, all of which were
outstanding as of March 30, 2003. The warrants have an
exercise price of $13.84 per share and are exercisable through
their expiration date in June 2004.

Stock
Options

A summary of stock option activity follows
(shares in thousands):

|                                                                 |  |           |        |           |  |           |       |           |  |           |       |           |  |   |       |  |  |  |        |   |  |   |       | 
|---------------------------------------------------------------- |  | --------- | ------ | --------- |  | --------- | ----- | --------- |  | --------- | ----- | --------- |  | - | ----- |  |  |  | ------ | - |  | - | ----- | 
|                                                                 |  |           |        |           |  |          
|                                                                 |  | 2003      |        | 2002      |  | 2001     
|                                                                 |  |           |        |           |  |          
|                                                                 |  |           |        | Weighted- |  |           |       | Weighted- |  |           |       | Weighted-
|                                                                 |  |           |        | Average   |  |           |       | Average   |  |           |       | Average  
|                                                                 |  | Number of |        | Exercise  |  | Number of |       | Exercise  |  | Number of |       | Exercise 
|                                                                 |  | Shares    |        | Price     |  | Shares    |       | Price     |  | Shares    |       | Price    
|                                                                 |  |           |        |           |  |           |       |           |  |           |       |          
|Outstanding at beginning of year                                 |  |           | 9,352  |           |  | $         | 42.41 |           |  |           | 7,499 |           |  | $ | 39.94 |  |  |  | 7,517  |   |  | $ | 21.35 | 
|Granted and assumed in business combination (in
    fiscal 2001) |  |           | 2,924  |           |  |           | 42.00 |           |  |           | 2,928 |           |  |   | 46.83 |  |  |  | 2,671  |   |  |   | 68.71 | 
|Exercised                                                        |  |           | (686   | )         |  |           | 11.20 |           |  |           | (560  | )         |  |   | 9.46  |  |  |  | (2,429 | ) |  |   | 10.81 | 
|Cancelled                                                        |  |           | (746   | )         |  |           | 55.94 |           |  |           | (515  | )         |  |   | 67.34 |  |  |  | (260   | ) |  |   | 58.07 | 
|                                                                 |  |           |        |           |  |           |       |           |  |           |       |           |  |   |       |  |  |  |        |   |  |   |       | 
|Outstanding at end of year                                       |  |           | 10,844 |           |  |           | 43.34 |           |  |           | 9,352 |           |  |   | 42.41 |  |  |  | 7,499  |   |  |   | 39.94 | 
|                                                                 |  |           |        |           |  |           |       |           |  |           |       |           |  |   |       |  |  |  |        |   |  |   |       | 
|Exercisable at end of year                                       |  |           | 5,565  |           |  |           | 40.22 |           |  |           | 4,232 |           |  |   | 33.35 |  |  |  | 2,697  |   |  |   | 22.95 | 
|                                                                 |  |           |        |           |  |           |       |           |  |           |       |           |  |   |       |  |  |  |        |   |  |   |       | 

In connection with the acquisition of LMG in
fiscal 2001, the Company assumed options to purchase
108,000 shares of common stock having a weighted-average
exercise price of $.03 per share and a weighted-average fair
value of $86.98 per share.

The following table summarizes stock options
outstanding at March 30, 2003 (shares in thousands):

|                         |                  |             |        |                |  |              |       |           |  |                |     |     |  |  |       |       |  |   |       |       | 
|------------------------ | ---------------- | ----------- | ------ | -------------- |  | ------------ | ----- | --------- |  | -------------- | --- | --- |  |  | ----- | ----- |  | - | ----- | ----- | 
|                         |                  |             |        |               
|                         |                  | Outstanding |        | Exercisable   
|                         |                  |             |        |               
|                         |                  |             |        | Weighted-      |  | Remaining    |       |           |  | Weighted-     
|                         |                  | Number      |        | Average        |  | Contractual  |       | Number    |  | Average       
|Range of Exercise Prices |                  | of Shares   |        | Exercise Price |  | Life (Years) |       | of Shares |  | Exercise Price
|                         |                  |             |        |                |  |              |       |           |  |               
|$ 0.00 to $ 30.00        |                  |             | 1,667  |                |  | $            | 6.99  |           |  |                | 5.0 |     |  |  | 1,583 |       |  | $ | 6.38  |      
|                         | 30.01 to   40.00 |             |        | 2,680          |  |              |       | 34.55     |  |                |     | 7.8 |  |  |       | 1,391 |  |   |       | 32.58 | 
|                         | 40.01 to   45.00 |             |        | 2,226          |  |              |       | 43.22     |  |                |     | 9.1 |  |  |       | 49    |  |   |       | 41.61 | 
|                         | 45.01 to   60.00 |             |        | 2,111          |  |              |       | 53.01     |  |                |     | 8.0 |  |  |       | 1,032 |  |   |       | 53.17 | 
|                         | 60.01 to  151.00 |             |        | 2,160          |  |              |       | 72.98     |  |                |     | 7.1 |  |  |       | 1,510 |  |   |       | 73.84 | 
|                         |                  |             |        |                |  |              |       |           |  |                |     |     |  |  |       |       |  |   |       |      
|                         |                  |             | 10,844 |                |  |              | 43.34 |           |  |                | 7.5 |     |  |  | 5,565 |       |  |   | 40.22 |      
|                         |                  |             |        |                |  |              |       |           |  |                |     |     |  |  |       |       |  |   |       |      

Note 9.     Employee
Retirement Savings Plan

The Company has established a pretax savings and
profit sharing plan under Section 401(k) of the Internal
Revenue Code for substantially all domestic employees. Under the
plan, eligible employees are able to contribute up to 15% of
their compensation. Company contributions match up to 3% of a
participants compensation. The Companys direct
contributions on behalf of its employees were $1.5 million,
$1.3 million and $0.9 million in fiscal 2003, 2002 and
2001, respectively.

38



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 10.     Commitments
and Contingencies



| |       
| | ------
| | Leases

The Company leases certain equipment and
facilities under non-cancelable operating lease agreements,
which expire at various dates through fiscal year 2007. At
March 30, 2003, future minimum lease commitments under
operating leases are as follows:

|                                    |  |                |        | 
|----------------------------------- |  | -------------- | ------ | 
|Fiscal Year:                        |  |               
|                                    |  | (In thousands)
|2004                                |  | $              | 5,028  | 
|2005                                |  |                | 4,961  | 
|2006                                |  |                | 1,999  | 
|2007                                |  |                | 366    | 
|                                    |  |                |        | 
|Total future minimum lease payments |  | $              | 12,354 | 
|                                    |  |                |        | 

Rent expense for fiscal 2003, 2002 and 2001 was
$4.0 million, $1.3 million and $1.4 million,
respectively.



| |           
| | ----------
| | Warranties

The changes in the Companys product
warranty obligation for fiscal 2003 is as follows (in thousands):

|                           |  |   |       |  
|-------------------------- |  | - | ----- | -
|Balance at March 31, 2002. |  | $ | 3,184 |  
|Current period accruals    |  |   | 458   |  
|Costs incurred             |  |   | (683  | )
|                           |  |   |       |  
|Balance at March 30, 2003. |  | $ | 2,959 |  
|                           |  |   |       |  



| |           
| | ----------
| | Litigation

In January 2003, Raytheon Company filed suit in
the United States District Court for the Eastern District of
Texas, alleging that the Company, along with seven other
defendants, infringe a Raytheon patent directed to a mass data
storage system. The suit seeks injunctive relief and damages in
an unspecified amount. The Company filed an answer to the
complaint in March 2003 and a trial is currently scheduled to
begin in May 2004. The suit is in its very early stages and
discovery has commenced. The Company disputes the
plaintiffs claims and intends to defend the lawsuit
vigorously.

In February 2003, Vixel Corporation filed suit in
the United States District Court for the District of Delaware
alleging infringement of a Vixel patent directed to a method and
apparatus for Fibre Channel interconnection of private loop
devices. In March 2003, Vixel amended its complaint to add two
additional Vixel patents. These additional patents are directed
to substantially the same technology as the original Vixel
patent. The suit seeks injunctive relief and damages in an
unspecified amount. The Company filed an answer to the complaint
in March 2003 denying all allegations. The suit is in its very
early stages and discovery has commenced. The Company disputes
the plaintiffs claims and intends to defend the lawsuit
vigorously.

Various lawsuits, claims and proceedings have
been or may be instituted against the Company, including the
matters discussed above. The outcome of litigation cannot be
predicted with certainty and some lawsuits, claims and
proceedings may be disposed of unfavorably to the Company. Many
intellectual property disputes have a risk of injunctive relief
and there can be no assurance that a license will be granted.
Injunctive relief could have a material adverse effect on the
financial condition or results of operations of the Company.
Based on its evaluation of matters which are pending or
asserted, management believes the disposition of such matters
will not have a material adverse effect on the financial
condition or results of operations of the Company.

39



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 11.     Income
Taxes

Income before income taxes consists of the
following components:

|              |  |                |         |      |  |      |         |   |  |   |         |  
|------------- |  | -------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|              |  | 2003           |         | 2002 |  | 2001
|              |  |                |         |      |  |     
|              |  |               
|              |  | (In thousands)
|United States |  | $              | 159,276 |      |  | $    | 105,795 |   |  | $ | 117,303 |  
|Foreign       |  |                | (57     | )    |  |      | (255    | ) |  |   | (366    | )
|              |  |                |         |      |  |      |         |   |  |   |         |  
|              |  | $              | 159,219 |      |  | $    | 105,540 |   |  | $ | 116,937 |  
|              |  |                |         |      |  |      |         |   |  |   |         |  

The components of the income tax provision are as
follows:

|                           |         |                |        |        |        |      |        |        |        |   |        |        |        |  
|-------------------------- | ------- | -------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                           |         | 2003           |        | 2002   |        | 2001
|                           |         |                |        |        |        |     
|                           |         |               
|                           |         | (In thousands)
|Current:                   |         |                |        |        |        |      |        |        |        |   |        |       
|                           | Federal |                | $      | 42,200 |        |      | $      | 22,620 |        |   | $      | 45,597 |       
|                           | State   |                |        | 7,609  |        |      |        | 2,855  |        |   |        | 7,952  |       
|                           | Foreign |                |        |       |        |      |        | 1      |        |   |        | 448    |       
|                           |         |                |        |        |        |      |        |        |        |   |        |       
|                           |         | Total current  |        |        | 49,809 |      |        |        | 25,476 |   |        |        | 53,997 |  
|Deferred:                  |         |                |        |        |        |      |        |        |        |   |        |       
|                           | Federal |                |        | 6,174  |        |      |        | 8,572  |        |   |        | (3,544 | )     
|                           | State   |                |        | (237   | )      |      |        | 766    |        |   |        | (2,285 | )     
|                           |         |                |        |        |        |      |        |        |        |   |        |       
|                           |         | Total deferred |        |        | 5,937  |      |        |        | 9,338  |   |        |        | (5,829 | )
|                           |         |                |        |        |        |      |        |        |        |   |        |       
|Total income tax provision |         | $              | 55,746 |        |        | $    | 34,814 |        |        | $ | 48,168 |       
|                           |         |                |        |        |        |      |        |        |        |   |        |       

The tax benefits associated with dispositions
from employee stock plans of approximately $6.0 million,
$7.5 million and $52.7 million in fiscal 2003, 2002
and 2001 respectively, were recorded directly to additional
paid-in capital.

A reconciliation of the income tax provision with
the amount computed by applying the federal statutory tax rate
to income before income taxes is as follows:

|                                                        |  |                |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                        |  | 2003           |        | 2002 |  | 2001
|                                                        |  |                |        |      |  |     
|                                                        |  |               
|                                                        |  | (In thousands)
|Expected income tax provision at the statutory
    rate |  | $              | 55,727 |      |  | $    | 36,834 |   |  | $ | 40,928 |  
|State income taxes, net of federal tax benefit          |  |                | 4,792  |      |  |      | 2,354  |   |  |   | 3,683  |  
|Benefit from research and other credits                 |  |                | (2,500 | )    |  |      | (2,600 | ) |  |   | (1,304 | )
|Benefit from export sales                               |  |                | (3,465 | )    |  |      | (1,750 | ) |  |   | (1,137 | )
|Nondeductible business combination related costs        |  |                | 2,246  |      |  |      | 1,435  |   |  |   | 7,609  |  
|Tax exempt income                                       |  |                | (358   | )    |  |      | (571   | ) |  |   | (326   | )
|Other, net                                              |  |                | (696   | )    |  |      | (888   | ) |  |   | (1,285 | )
|                                                        |  |                |        |      |  |      |        |   |  |   |        |  
|                                                        |  | $              | 55,746 |      |  | $    | 34,814 |   |  | $ | 48,168 |  
|                                                        |  |                |        |      |  |      |        |   |  |   |        |  

40



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and
liabilities are as follows:

|                          |                                                |                                      |   |        |        |  |   |        |        | 
|------------------------- | ---------------------------------------------- | ------------------------------------ | - | ------ | ------ |  | - | ------ | ------ | 
|                          |                                                | 2003                                 |   | 2002  
|                          |                                                |                                      |   |       
|                          |                                                |                                     
|                          |                                                | (In thousands)                      
|Deferred tax assets:      |                                                |                                      |   |        |        |  |   |       
|                          | Reserves and accruals not currently deductible |                                      | $ | 24,180 |        |  | $ | 23,400 |       
|                          | Stock warrants                                 |                                      |   | 5,883  |        |  |   | 4,593  |       
|                          | Net operating loss carryforwards               |                                      |   | 5,256  |        |  |   | 6,255  |       
|                          | Acquired in-process technology                 |                                      |   | 2,031  |        |  |   | 2,188  |       
|                          | Research credits                               |                                      |   | 613    |        |  |   | 6,614  |       
|                          | Other                                          |                                      |   | 2,434  |        |  |   | 634    |       
|                          |                                                |                                      |   |        |        |  |   |       
|                          |                                                | Total gross deferred tax assets      |   |        | 40,397 |  |   |        | 43,684 | 
|                          |                                                |                                      |   |        |        |  |   |       
|Deferred tax liabilities: |                                                |                                      |   |        |        |  |   |       
|                          | Research and development expenditures          |                                      |   | 2,575  |        |  |   | 1,134  |       
|                          | Property and equipment                         |                                      |   | 1,462  |        |  |   | 253    |       
|                          |                                                |                                      |   |        |        |  |   |       
|                          |                                                | Total gross deferred tax liabilities |   |        | 4,037  |  |   |        | 1,387  | 
|                          |                                                |                                      |   |        |        |  |   |       
|                          | Net deferred tax assets                        |                                      | $ | 36,360 |        |  | $ | 42,297 |       
|                          |                                                |                                      |   |        |        |  |   |       

Based upon the Companys current and
historical pre-tax earnings, management believes it is more
likely than not that the Company will realize the benefit of the
existing net deferred tax assets as of March 30, 2003.
Management believes the existing net deductible temporary
differences will reverse during periods in which the Company
generates net taxable income or that there would be sufficient
tax carry backs available; however, there can be no assurance
that the Company will generate any earnings or any specific
level of continuing earnings in future years.

As of March 30, 2003, the Company has
federal net operating loss carryforwards of approximately
$14.9 million and aggregate state net operating loss
carryforwards of approximately $15.3 million. The federal
net operating loss carryforwards expire on various dates between
2011 and 2020. The aggregate state net operating loss
carryforwards expire on various dates between 2012 and 2015. All
net operating loss carryforwards relate to acquired companies
and are subject to limitations on their utilization.

As of March 30, 2003, the Company has state
tax credit carryforwards of approximately $0.9 million. If
not utilized, the state tax credit carryforwards will begin to
expire in 2014. Approximately $0.3 million of the state tax
credits carryforwards relate to acquired companies and are
subject to limitations on their utilization.

The Companys U.S. income tax return
for the 2000 fiscal year is presently under review by the
Internal Revenue Service. Management does not expect a material
impact on the consolidated financial statements from this
examination.

Note 12.     Product
Revenues, Geographic Revenues and Significant
Customers

Operating segments, as defined by SFAS 131,
are components of an enterprise for which separate financial
information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources
and in assessing performance. SFAS 131 also requires
disclosures about products and services, geographic areas and
significant customers. The Company operates in one operating
segment for purposes of SFAS 131.

41



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QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | Product Revenues

The Company designs and supplies switch products,
semiconductor and board I/O, and enclosure management products.
These products generally utilize one of three technology
standards: Fibre Channel, Small Computer Systems
Interface (SCSI) and Integrated Drive
Electronics (IDE). Net revenues for the Companys
products grouped by technology standard as they function using
similar technologies are as follows:

|              |  |                |         |      |  |      |         |  |  |   |         | 
|------------- |  | -------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|              |  | 2003           |         | 2002 |  | 2001
|              |  |                |         |      |  |     
|              |  |               
|              |  | (In thousands)
|Fibre Channel |  | $              | 307,920 |      |  | $    | 224,553 |  |  | $ | 185,085 | 
|SCSI          |  |                | 132,889 |      |  |      | 117,936 |  |  |   | 167,527 | 
|IDE           |  |                |        |      |  |      | 1,700   |  |  |   | 4,930   | 
|              |  |                |         |      |  |      |         |  |  |   |         | 
|              |  | $              | 440,809 |      |  | $    | 344,189 |  |  | $ | 357,542 | 
|              |  |                |         |      |  |      |         |  |  |   |         | 



| |                    
| | -------------------
| | Geographic Revenues

Revenues by geographic area are presented based
upon the country of destination. No other country represented
10% or more of net revenues for any of the fiscal years
presented. Net revenues by geographic area are as follows:

|               |  |                |         |      |  |      |         |  |  |   |         | 
|-------------- |  | -------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|               |  | 2003           |         | 2002 |  | 2001
|               |  |                |         |      |  |     
|               |  |               
|               |  | (In thousands)
|United States  |  | $              | 202,119 |      |  | $    | 180,794 |  |  | $ | 158,665 | 
|Japan          |  |                | 130,152 |      |  |      | 98,360  |  |  |   | 131,691 | 
|United Kingdom |  |                | 31,781  |      |  |      | 34,699  |  |  |   | 32,908  | 
|Rest of world  |  |                | 76,757  |      |  |      | 30,336  |  |  |   | 34,278  | 
|               |  |                |         |      |  |      |         |  |  |   |         | 
|               |  | $              | 440,809 |      |  | $    | 344,189 |  |  | $ | 357,542 | 
|               |  |                |         |      |  |      |         |  |  |   |         | 



| |                      
| | ---------------------
| | Significant Customers

The following table represents sales to customers
accounting for greater than 10% of the Companys net
revenues. With the exception of these customers, management
believes that the loss of any one customer would not have a
material adverse effect on its operations.

|           |  |      |    |      |  |      |    |   |  |  |    |  
|---------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|           |  | 2003 |    | 2002 |  | 2001
|           |  |      |    |      |  |     
|Customer 1 |  |      | 18 | %    |  |      | 17 | % |  |  | 29 | %
|Customer 2 |  |      | 17 | %    |  |      | 16 | % |  |  | 18 | %
|Customer 3 |  |      | 11 | %    |  |      | 8  | % |  |  | 9  | %

42



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##### Table of Contents



QLOGIC CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 13.     Condensed
Quarterly Results (Unaudited)

The following table summarizes certain unaudited
quarterly financial information for fiscal 2003 and 2002:

|                               |  |                                          |        |           |  |          |         |       |  |   |         |  |  |   |         | 
|------------------------------ |  | ---------------------------------------- | ------ | --------- |  | -------- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                               |  |                                         
|                               |  | Three Months Ended                      
|                               |  |                                         
|                               |  | June                                     |        | September |  | December |         | March
|                               |  |                                          |        |           |  |          |         |      
|                               |  |                                         
|                               |  | (In thousands, except per share amounts)
|Fiscal 2003:                   |  |                                          |        |           |  |          |         |       |  |   |         |  |  |   |         | 
|Net revenues                   |  | $                                        | 98,962 |           |  | $        | 107,115 |       |  | $ | 114,167 |  |  | $ | 120,565 | 
|Gross profit                   |  |                                          | 61,855 |           |  |          | 66,915  |       |  |   | 73,259  |  |  |   | 79,410  | 
|Operating income               |  |                                          | 29,864 |           |  |          | 32,196  |       |  |   | 37,234  |  |  |   | 42,569  | 
|Net income                     |  |                                          | 23,056 |           |  |          | 23,015  |       |  |   | 27,513  |  |  |   | 29,889  | 
|Net income per share  basic   |  |                                          | 0.25   |           |  |          | 0.25    |       |  |   | 0.29    |  |  |   | 0.32    | 
|Net income per share  diluted |  |                                          | 0.24   |           |  |          | 0.24    |       |  |   | 0.29    |  |  |   | 0.31    | 
|Fiscal 2002:                   |  |                                          |        |           |  |          |         |       |  |   |         |  |  |   |         | 
|Net revenues                   |  | $                                        | 89,901 |           |  | $        | 80,879  |       |  | $ | 82,587  |  |  | $ | 90,822  | 
|Gross profit                   |  |                                          | 55,590 |           |  |          | 48,272  |       |  |   | 51,131  |  |  |   | 56,191  | 
|Operating income               |  |                                          | 23,604 |           |  |          | 19,039  |       |  |   | 20,779  |  |  |   | 23,082  | 
|Net income                     |  |                                          | 19,180 |           |  |          | 15,862  |       |  |   | 17,028  |  |  |   | 18,656  | 
|Net income per share  basic   |  |                                          | 0.21   |           |  |          | 0.17    |       |  |   | 0.18    |  |  |   | 0.20    | 
|Net income per share  diluted |  |                                          | 0.20   |           |  |          | 0.17    |       |  |   | 0.18    |  |  |   | 0.20    | 

43



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Reference is made to the Companys
Definitive Proxy Statement for its 2003 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 2003,
for information relating to the Companys Directors under
the heading Proposal One  Nomination and
Election of Directors, for information relating to the
Companys executive officers under the heading
Executive Officers and for information relating to
reporting compliance under the heading Section 16(a)
Beneficial Ownership Reporting Compliance. Such
information is incorporated herein by reference.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Reference is made to the Companys
Definitive Proxy Statement for its 2003 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 2003,
for information relating to executive compensation under the
heading Executive Compensation and Other
Information. Such information is incorporated herein by
reference.






|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

Reference is made to the Companys
Definitive Proxy Statement for its 2003 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 2003,
for information relating to security ownership of certain
beneficial owners and management under the headings
Principal Stockholders and Stock Ownership of
Management. Such information is incorporated herein by
reference.

There are no arrangements, known to the Company,
which might at a subsequent date result in a change in control
of the Company.

Reference is made to the Companys
Definitive Proxy Statement for its 2003 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 2003,
for information relating to shares authorized for issuance under
equity compensation plans under the heading Equity
Compensation Plan Information. Such information is
incorporated herein by reference.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

None.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

Within the 90 days prior to the date of this
report, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures pursuant
to Rules 13a-14 and 15d-14(c) under the Securities Exchange
Act of 1934, as amended. Disclosure controls and procedures are
designed to ensure that information required to be disclosed in
our periodic reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are
effective.

There have been no significant changes in our
internal controls or in other factors that could significantly
affect our internal controls subsequent to the date of our most
recent evaluation.

44



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##### Table of Contents






PART IV






|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statements, Schedules
    and Reports on Form 8-K

(a)(1) Consolidated Financial
Statements



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following consolidated financial statements
    of the Company for the years ended March 30, 2003,
    March 31, 2002 and April 1, 2001 are filed as part of
    this report:

FINANCIAL STATEMENT INDEX

|                                                                                                                                                      |  |        |    | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|                                                                                                                                                      |  | Page  
|                                                                                                                                                      |  | Number
|                                                                                                                                                      |  |       
|Independent Auditors Report                                                                                                                          |  |        | 23 | 
|Consolidated Balance Sheets as of March 30,
    2003 and March 31, 2002                                                                               |  |        | 24 | 
|Consolidated Statements of Income for the years
    ended March 30, 2003, March 31, 2002 and April 1,
    2001                                        |  |        | 25 | 
|Consolidated Statements of Stockholders
    Equity and Comprehensive Income for the years ended
    March 30, 2003, March 31, 2002 and April 1, 2001 |  |        | 26 | 
|Consolidated Statements of Cash Flows for the
    years ended March 30, 2003, March 31, 2002 and
    April 1, 2001                                    |  |        | 27 | 
|Notes to Consolidated Financial Statements                                                                                                            |  |        | 28 | 

(a)(2) Financial Statement Schedule



| |                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following consolidated financial statement
    schedule of the Company for the years ended March 30, 2003,
    March 31, 2002 and April 1, 2001 is filed as part of
    this report and is incorporated herein by reference:

Schedule II  Valuation and
Qualifying Accounts



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All other schedules have been omitted because the
    required information is presented in the financial statements or
    notes thereto, the amounts involved are not significant or the
    schedules are not applicable.

(a)(3) Exhibits



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | An exhibit index has been filed as part of this
    Report and is incorporated herein by reference.

(b) Reports on Form 8-K



| |      
| | -----
| | None.

45



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                                          
| | -----------------------------------------
| | QLOGIC CORPORATION                       
|
| | /s/ H.K. DESAI                           
| |                                          
| | H.K. Desai                               
| | Chairman of the Board,                   
| | Chief Executive Officer and
    President

Date: June 18, 2003

POWER OF ATTORNEY

Each person whose signature appears below hereby
authorizes H.K. Desai and/or Frank A. Calderoni, as
attorney-in-fact, to sign in his behalf and in each capacity
stated below, and to file all amendments and/or supplements to
this Annual Report on Form 10-K.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities indicated.

|                                                |  |                                                                  |  |               |  | 
|----------------------------------------------- |  | ---------------------------------------------------------------- |  | ------------- |  | 
|                                                |  |                                                                  |  |              
|Signature                                       |  | Title                                                            |  | Date         
|                                                |  |                                                                  |  |              
|                                               
|Principal Executive Officer:                    |  |                                                                  |  |              
|/s/ H.K. DESAIH.K. Desai                        |  | Chairman of the Board, Chief Executive Officer
    and President |  | June 18, 2003
|                                               
|Principal Financial and Accounting
    Officer: |  |                                                                  |  |              
|                                               
|/s/ FRANK A. CALDERONIFrank A. Calderoni        |  | Senior Vice President and Chief Financial Officer                |  | June 18, 2003
|                                               
|/s/ GEORGE D. WELLSGeorge D. Wells              |  | Director                                                         |  | June 12, 2003
|                                               
|/s/ CAROL L. MILTNERCarol L. Miltner            |  | Director                                                         |  | June 12, 2003
|                                               
|/s/ LARRY R. CARTERLarry R. Carter              |  | Director                                                         |  | June 16, 2003
|                                               
|/s/ JAMES R. FIEBIGERJames R. Fiebiger          |  | Director                                                         |  | June 12, 2003
|                                               
|**Balakrishnan S. Iyer                          |  | Director                                                         |  |              

** Mr. Iyer was appointed to the Board of
Directors effective June 12, 2003.

46



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##### Table of Contents






CERTIFICATIONS

Certification Pursuant to Rule 15d-14 of
the Securities Exchange Act of 1934,

as amended, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002


I, H.K. Desai, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of QLogic Corporation;                                                                                                                                                                                                                                                                      
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |     |               
| | --- | --------------
| | By: | /s/ H.K. DESAI

| |                        
| | -----------------------
| |                        
| | H.K. Desai             
| | Chief Executive Officer

Date: June 18, 2003

47



---



##### Table of Contents



Certification Pursuant to Rule 15d-14 of
the Securities Exchange Act of 1934,

as amended, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002


I, Frank A. Calderoni, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of QLogic Corporation;                                                                                                                                                                                                                                                                      
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |     |                       
| | --- | ----------------------
| | By: | /s/ FRANK A. CALDERONI

| |                        
| | -----------------------
| |                        
| | Frank A. Calderoni     
| | Chief Financial Officer

Date: June 18, 2003

48



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##### Table of Contents






Schedule II

QLOGIC CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

|                                 |                           |                |   |            |  |                  |   |            |   |  |   |    |  |  |   |       | 
|-------------------------------- | ------------------------- | -------------- | - | ---------- |  | ---------------- | - | ---------- | - |  | - | -- |  |  | - | ----- | 
|                                 |                           |                |   | Additions: |  | Deductions:      |   |           
|                                 |                           | Balance at     |   | Charged to |  | Amounts          |   | Balance at
|                                 |                           | Beginning of   |   | Costs and  |  | Written Off, Net |   | End of    
|                                 |                           | Year           |   | Expenses   |  | of Recoveries    |   | Year      
|                                 |                           |                |   |            |  |                  |   |           
|                                 |                           |               
|                                 |                           | (In thousands)
|Allowance for doubtful accounts: |                           |                |   |            |  |                  |   |            |   |  |   |    |  |  |   |      
|                                 | Year ended March 30, 2003 |                | $ | 3,429      |  |                  | $ | (550       | ) |  | $ | 49 |  |  | $ | 2,830 | 
|                                 | Year ended March 31, 2002 |                | $ | 2,372      |  |                  | $ | 1,125      |   |  | $ | 68 |  |  | $ | 3,429 | 
|                                 | Year ended April 1, 2001  |                | $ | 1,014      |  |                  | $ | 1,392      |   |  | $ | 34 |  |  | $ | 2,372 | 

49



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##### Table of Contents






EXHIBIT INDEX

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 2.1  |             |  | Agreement and Plan of Merger dated as of
    May 8, 2000 by and among QLogic Corporation, Amino
    Acquisition Corp. and Ancor Communications, Incorporated.
    (incorporated by reference to Exhibit 2.1 of the
    Registrants Amendment No. 1 to Registration Statement
    on Form S-4 filed on June 22, 2000)                                                                                                                                                                                            
|        | 3.1  |             |  | Certificate of Incorporation of Emulex Micro
    Devices Corporation, dated November 13, 1992. (incorporated
    by reference to Exhibit 3.1 of the Registrants
    Registration Statement on Form 10 filed on April 3,
    1994)                                                                                                                                                                                                                                                                               
|        | 3.2  |             |  | EMD Incorporation Agreement, dated as of
    January 1, 1993. (incorporated by reference to
    Exhibit 3.2 of the Registrants Registration Statement
    on Form 10 filed on April 3, 1994)                                                                                                                                                                                                                                                                                                                    
|        | 3.3  |             |  | Certificate of Amendment of Certificate of
    Incorporation, dated May 26, 1993. (incorporated by
    reference to Exhibit 3.3 of the Registrants
    Registration Statement on Form 10 filed on April 3,
    1994)                                                                                                                                                                                                                                                                                            
|        | 3.4  |             |  | Certificate of Amendment of Certificate of
    Incorporation, dated February 24, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3.5  |             |  | Certificate of Designation of Rights, Preferences
    and Privileges of Series A Junior Participating Preferred
    Stock, dated June 4, 1996.                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.6  |             |  | Certificate of Amendment of Certificate of
    Incorporation, dated February 5, 1999. (incorporated by
    reference to Exhibit 3.6 of the Registrants Annual
    Report on Form 10-K for the year ended March 28, 1999)                                                                                                                                                                                                                                                                                        
|        | 3.7  |             |  | Certificate of Amendment of Certificate of
    Incorporation, dated January 4, 2000. (incorporated by
    reference to Exhibit 3.7 of the Registrants Quarterly
    Report on Form 10-Q for the quarter ended December 26,
    1999)                                                                                                                                                                                                                                                                            
|        | 3.8  |             |  | Certificate of Amendment of Certificate of
    Incorporation, dated September 28, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.9  |             |  | By-Laws of QLogic Corporation. (incorporated by
    reference to Exhibit 3.4 of the Registrants
    Registration Statement on Form 10 filed on April 3,
    1994)                                                                                                                                                                                                                                                                                                                                               
|        | 3.10 |             |  | Amendments to By-Laws of QLogic Corporation.
    (incorporated by reference to Exhibit 3.5 of the
    Registrants Annual Report on Form 10-K for the year
    ended April 2, 1995)                                                                                                                                                                                                                                                                                                                              
|        | 4.1  |             |  | Rights Agreement, dated as of June 4, 1996
    between QLogic Corporation and Harris Trust and Savings Bank, as
    Rights Agent, which includes as Exhibit A thereto a form of
    the Certificate of Designation for Preferred Stock, as
    Exhibit B thereto the form of Rights Certificate and as
    Exhibit C thereto a Summary of Terms of Shareholders Rights
    Plan. (incorporated by reference to Exhibit 2.1 of the
    Registrants Registration Statement on Form 8-A filed
    on June 19, 1996)
|        | 4.2  |             |  | Amendment to Rights Agreement, dated as of
    November 19, 1997 between QLogic Corporation and Harris
    Trust and Savings Bank, as Rights Agent. (incorporated by
    reference to Exhibit 2 of the Registrants
    Registration Statement on Form 8-A/ A filed on
    November 25, 1997)                                                                                                                                                                                                                    
|        | 4.3  |             |  | Second Amendment to Rights Agreement, dated as of
    January 24, 2000 between QLogic Corporation and Harris
    Trust and Savings Bank, as Rights Agent. (incorporated by
    reference to Exhibit 3 of the Registrants
    Registration Statement on Form 8-A filed on June 1,
    2000)                                                                                                                                                                                                                      
|        | 4.4  |             |  | Third Amendment to Rights Agreement, dated as of
    January 9, 2003 between QLogic Corporation and Harris Trust
    and Savings Bank, as Rights Agent. (incorporated by reference to
    Exhibit 4 of the Registrants Registration Statement
    on Form 8-A filed on January 10, 2003)                                                                                                                                                                                                                        
|        | 10.1 |             |  | Form of QLogic Corporation Non-Employee Director
    Stock Option Plan, as amended.* (incorporated by reference to
    Exhibit 10.1.2 of the Registrants Registration
    Statement on Form S-8 filed on September 25, 2001
    (File No. 333-70112))                                                                                                                                                                                                                                                           
|        | 10.2 |             |  | Form of QLogic Corporation Stock Awards Plan, as
    amended.*(incorporated by reference to Exhibit 10.2.2 of
    the Registrants Registration Statement on Form S-8
    filed on September 25, 2001 (File No. 333-70112))                                                                                                                                                                                                                                                                                      
|        | 10.3 |             |  | Form of QLogic Corporation Savings
    Plan.*(incorporated by reference to Exhibit 10.8 of the
    Registrants Registration Statement on Form 10 filed
    on April 3, 1994)                                                                                                                                                                                                                                                                                                                                    

50



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##### Table of Contents



|        |      |             |  |                                                                                                                                                                                                                                                            
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 10.4 |             |  | Form of QLogic Corporation Savings Plan
    Trust.*(incorporated by reference to Exhibit 10.9 of the
    Registrants Registration Statement on Form 10 filed
    on April 3, 1994)                                                                        
|        | 10.5 |             |  | Form of Indemnification Agreement between QLogic
    Corporation and Directors.*(incorporated by reference to
    Exhibit 10.11 of the Registrants Annual Report on
    Form 10-K for the year ended April 2, 1995)                                       
|        | 10.6 |             |  | Industrial Lease Agreement between the
    Registrant, as lessee, and AEW/ Parker South, LLC, as lessor.
    (incorporated by reference to Exhibit 10.13 of the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended December 27, 1998)
|        | 10.7 |             |  | Form QLogic Corporation 1998 Employee Stock
    Purchase Plan.*(incorporated by reference to Exhibit 10.15
    of the Registrants Annual Report on Form 10-K for the
    year ended March 28, 1999)                                                       
|        | 21.1 |             |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                            
|        | 23.1 |             |  | Consent of KPMG LLP.                                                                                                                                                                                                                                       
|        | 99.1 |             |  | Certification of Chief Executive Officer Pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                 
|        | 99.2 |             |  | Certification of Chief Financial Officer Pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                 



---



|  |                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Compensation plan, contract or arrangement
    required to be filed as an exhibit pursuant to applicable rules
    of the Securities and Exchange Commission.

51