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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 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 28, 2010
 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 ParkwayAliso Viejo, California
    
    92656(Address of principal executive offices)
    
    (Zip Code)
 (949) 389-6000  (Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.001 Par Value
    
    The NASDAQ Stock Market LLC(NASDAQ Global Select Market)
 Securities registered pursuant to Section 12(g) of the Act:
None  (Title of class)
 
 þ o
 o þ
 þ o
 o o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Removed and ReservedPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7a. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEXHIBIT INDEXEX-21.1EX-23.1EX-31.1EX-31.2EX-32    Table of Contents  
 PART I
 
 Item 1.
    
    Business
 Introduction
    Our Networking Products
    
    
    General business information technology requirements;
    
    Data warehousing, data mining and online transaction processing;
    
    Media-rich environments such as film and video, broadcast, medical imaging,
computer-aided design, or CAD, and computer-aided manufacturing, or CAM;
    
    Server clustering, high-speed backup and data replication; and
    
    Research and scientific applications.
  1




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Storage Networking
    HPC Networking
   Converged Networking
  2




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Customers
   2010
    
    2009
    
    2008Hewlett-Packard
    
    
    24
    %
    
    
    21
    %
    
    
    20
    %IBM
    
    
    20
    %
    
    
    18
    %
    
    
    16
    %Sun Microsystems (acquired by Oracle in fiscal 2010)
    
    
    *
    
    
    
    11
    %
    
    
    11
    %
 
 *
    
    Less than 10% of net revenues.    Sales and Marketing
     3




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Engineering and Development
    Backlog
  Competition
  
    
    time-to-market;
 
    
    features and functionality;
 
    
    product quality, reliability and performance;
 
    
    price;
 
    
    new product innovation;
 
    
    customer relationships;
 
    
    design capabilities;
 
    
    customer service and technical support; and
 
    
    interoperability of components in storage, HPC and converged networks.
 4




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Manufacturing
       5




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Intellectual Property
     Environment
    6




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Working Capital
  Employees
  7




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Item 1A.
    
    Risk Factors
  Economic weakness and uncertainty has resulted in a decrease in information technology spending
levels and could result in further deterioration of our revenues and operating results.
    Our operating results may fluctuate in future periods, which could cause our stock price to
decline.
   
    
    the timing, size and mix of orders from customers;
    
    gain or loss of significant customers;
    
    customer policies pertaining to desired inventory levels of our products;
    
    sales discounts and customer incentives;
    
    the availability and sale of new products;
    
    changes in our average selling prices;
    
    variations in manufacturing capacities, efficiencies and costs;
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
    
    the availability and cost of components, including silicon chips;
    
    variations in product development costs, especially related to advanced technologies;
    
    variations in operating expenses;
    
    changes in effective income tax rates, including those resulting from changes in tax laws;
    
    our ability to timely produce products that comply with new environmental restrictions or
related requirements of our original equipment manufacturer, or OEM, customers;
    
    actual events, circumstances, outcomes and amounts differing from judgments, assumptions and
estimates used in determining the value of certain assets (including the amounts of related
valuation allowances), liabilities and other items reflected in our consolidated financial
statements;
    
    the timing of revenue recognition and revenue deferrals;
    
    gains or losses related to our investment securities;
    
    changes in accounting rules or our accounting policies;
    
    general economic and other conditions affecting the timing of customer orders and capital
spending; or
    
    changes in the global economy that impact IT spending.
  We expect gross margin to vary over time, and our recent level of gross margin may not be
sustainable.
  
    
    changes in product mix;
    
    changes in manufacturing volumes over which fixed costs are absorbed;
    
    increased price competition;
    
    introduction of new products by us or our competitors, including products with advantages
in price, performance or features;
    
    our inability to reduce manufacturing-related or component costs;
    
    entry into new markets or the acquisition of new businesses;
    
    amortization and impairments of purchased intangible assets;
    
    sales discounts and customer incentives;
    
    increases in material, labor or overhead costs;
    
    excess inventory and inventory holding charges;
 9




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
    
    changes in distribution channels; and
    
    increased warranty costs.
 Our stock price may be volatile.
  
    
    differences between our actual revenues and operating results and the published
expectations of public market analysts;
    
    quarterly fluctuations in our revenues and operating results;
    
    introduction of new products or changes in product pricing policies by our competitors or
us;
    
    conditions in the markets in which we operate;
    
    changes in market projections by industry forecasters;
    
    changes in estimates of our earnings or rating upgrades/downgrades of our stock by public
market analysts;
    
    operating results or forecasts of our major customers or competitors;
    
    rumors or dissemination of false information; and
    
    general economic and geopolitical conditions.
  Our business is dependent, in large part, on the continued growth of the networking markets that we
serve and if these markets do not continue to develop, our business will suffer.
  
    
    educate potential OEM customers, distributors, resellers, system integrators, storage system
providers and end-user organizations about the benefits of our products;
    
    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 and maintain interoperability between our products and other equipment and
components from diverse vendors.
 Our business could be adversely affected by a significant increase in the market acceptance of
blade servers.
  10




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Our financial condition will be materially harmed if we do not maintain and gain market acceptance
of our products.
  
    
    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 and end-user customer requirements and achieve market acceptance.
   We depend on a small number of customers, and any decrease in revenues or cash flows from any one
of our major customers could adversely affect our results of operations and cause our stock price
to decline.
   Our business may be subject to seasonal fluctuations and uneven sales patterns in the future.
  
    
    the tendency of our customers to close a disproportionate percentage of their sales
transactions in the last month, weeks and days of each quarter;
    
    spikes in sales during the fourth quarter of each calendar year that some of our customers
experience; and
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
    
    differences between our quarterly fiscal periods and the fiscal periods of our customers.
  Competition within the markets for our products is intense and includes various established
competitors.
   We expect the pricing of our products to continue to decline, which could reduce our revenues,
gross margins and profitability.
  Our distributors may not adequately stock and sell our products and their reseller customers may
purchase products from our competitors, which could negatively affect our results of operations.
  12




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We are dependent on sole source and limited source suppliers for certain key components.
  We are dependent on worldwide third-party subcontractors and contract manufacturers.
   Our investment securities portfolio could experience a decline in market value, which could
materially and adversely affect our financial results.
    13




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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.
  The migration of our customers toward new products could adversely affect our results of
operations.
   Unanticipated changes in our tax provisions or adverse outcomes resulting from examination of our
income tax returns could adversely affect our results of operations.
  14




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Environmental compliance costs could adversely affect our results of operations.
  Because we have operations in foreign countries and depend on foreign customers and suppliers, we
are subject to international economic, currency, regulatory, political and other risks that could
harm our business, financial condition and results of operations.
  
    
    a greater difficulty of administering and managing our business globally;
    
    compliance with multiple and potentially conflicting regulatory requirements, such as import
or export requirements, tariffs and other barriers;
    
    less effective intellectual property protections;
    
    currency fluctuations;
    
    overlapping or differing tax structures;
    
    political and economic instability, including terrorism and war; and
    
    general trade restrictions.
    15




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We may engage in mergers, acquisitions and strategic investments and these activities may adversely
affect our results of operations and stock price.
  
    
    the failure of markets for the products of acquired companies to develop as expected;
    
    uncertainties in identifying and pursuing target companies;
    
    difficulties in the assimilation of the operations, technologies and products of the acquired
companies;
    
    the existence of unknown defects in acquired companies products or assets that may not be
identified due to the inherent limitations involved in the due diligence process of an
acquisition;
    
    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;
    
    risks associated with assuming the legal obligations of acquired companies;
    
    risks related to the effect that acquired companies internal control processes might have on
our financial reporting and managements report on our internal control over financial
reporting;
    
    the potential loss of, or impairment of our relationships with, current customers or failure
to retain the acquired companies customers;
    
    the potential loss of key employees of acquired companies; and
    
    the incurrence of significant exit charges if products or technologies acquired in business
combinations are unsuccessful.
   If we are unable to attract and retain key personnel, we may not be able to sustain or grow our business.
  16




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We may experience difficulties in transitioning to smaller geometry process technologies.
  Our proprietary rights may be inadequately protected and difficult to enforce.
  Disputes relating to claimed infringement of intellectual property rights may adversely affect our business.
  If we fail to carefully manage the use of open source software in our products, we may be
required to license key portions of our products on a royalty-free basis or expose key parts of our
source code.
  17




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Our business could be materially adversely affected by changes in regulations or standards
regarding energy use of our products.
  Computer viruses and other forms of tampering with our computer systems or servers may disrupt our
operations and adversely affect our business.
  Our facilities and the facilities of our suppliers and customers are located in regions that are
subject to natural disasters.
  18




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Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Removed and Reserved
 19




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Principal Market and Prices
  Sales PricesFiscal 2010
    
    High
    
    LowFirst Quarter
    
    $
    14.76
    
    
    $
    10.91Second Quarter
    
    
    18.20
    
    
    
    11.99Third Quarter
    
    
    19.62
    
    
    
    16.39Fourth Quarter
    
    
    21.28
    
    
    
    16.44
 Sales PricesFiscal 2009
    
    High
    
    LowFirst Quarter
    
    $
    16.84
    
    
    $
    14.57Second Quarter
    
    
    20.21
    
    
    
    13.64Third Quarter
    
    
    16.37
    
    
    
    8.69Fourth Quarter
    
    
    13.90
    
    
    
    8.82
 Number of Common Stockholders
  Dividends
  Recent Sales of Unregistered Securities
  Issuer Purchases of Equity Securities
  Total Number of
    
    
    Approximate DollarShares Purchased
    
    
    Value of Shares thatTotal Number of
    
    
    Average Price
    
    
    as Part of Publicly
    
    
    May Yet be PurchasedPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Announced Plan
    
    
    Under the PlanDecember 28, 2009  January 24, 2010
    
    
    371,400
    
    
    $
    19.33
    
    
    
    371,400
    
    
    $
    154,065,000January 25, 2010  February 21, 2010
    
    
    1,130,600
    
    
    $
    17.32
    
    
    
    1,130,600
    
    
    $
    134,481,000February 22, 2010  March 28, 2010
    
    
    1,561,200
    
    
    $
    19.27
    
    
    
    1,561,200
    
    
    $
    104,401,000Total
    
    
    3,063,200
    
    
    $
    18.56
    
    
    
    3,063,200
    
    
    $
    104,401,000
  20




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Stockholder Return Performance
   COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNS*
AMONG QLOGIC CORPORATION, THE STANDARD & POORS 500 INDEX
AND THE NASDAQ COMPUTER INDEX
 
 Cumulative Total Return4/3/05
    
    4/2/06
    
    4/1/07
    
    3/30/08
    
    3/29/09
    
    3/28/10QLogic Corporation
    
    $
    100.00
    
    
    $
    95.98
    
    
    $
    84.33
    
    
    $
    76.04
    
    
    $
    58.13
    
    
    $
    100.00S&P 500 Index
    
    
    100.00
    
    
    
    111.73
    
    
    
    124.95
    
    
    
    118.60
    
    
    
    73.43
    
    
    
    109.97NASDAQ Computer Index
    
    
    100.00
    
    
    
    113.57
    
    
    
    119.86
    
    
    
    115.99
    
    
    
    82.23
    
    
    
    139.54
 
 *
    
    $100 invested on 4/3/05 in stock or 3/31/05 in index, including reinvestment of dividends. Indexes
calculated on month-end basis. 21




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Item 6.
    
    Selected Financial Data
  Fiscal Year EndedMarch 28,
    
    
    March 29,
    
    
    March 30,
    
    
    April 1,
    
    
    April 2,2010 (1)
    
    
    2009
    
    
    2008
    
    
    2007 (2)
    
    
    2006 (3)(In thousands, except per share amounts)Statement of Operations DataNet revenues
    
    $
    549,070
    
    
    $
    633,862
    
    
    $
    597,866
    
    
    $
    586,697
    
    
    $
    494,077Cost of revenues
    
    
    196,127
    
    
    
    210,075
    
    
    
    205,959
    
    
    
    191,982
    
    
    
    144,246Gross profit
    
    
    352,943
    
    
    
    423,787
    
    
    
    391,907
    
    
    
    394,715
    
    
    
    349,831Operating expenses:Engineering and development
    
    
    136,831
    
    
    
    133,252
    
    
    
    134,668
    
    
    
    135,315
    
    
    
    89,753Sales and marketing
    
    
    77,601
    
    
    
    86,959
    
    
    
    84,166
    
    
    
    86,731
    
    
    
    64,416General and administrative
    
    
    34,242
    
    
    
    32,639
    
    
    
    34,049
    
    
    
    31,044
    
    
    
    17,295Special charges
    
    
    5,163
    
    
    
    4,063
    
    
    
    5,328
    
    
    
    
    
    
    
    Purchased in-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,710
    
    
    
    10,510Total operating expenses
    
    
    253,837
    
    
    
    256,913
    
    
    
    258,211
    
    
    
    256,800
    
    
    
    181,974Operating income
    
    
    99,106
    
    
    
    166,874
    
    
    
    133,696
    
    
    
    137,915
    
    
    
    167,857Interest and other income, net
    
    
    10,601
    
    
    
    2,134
    
    
    
    14,024
    
    
    
    16,872
    
    
    
    32,627Income from continuing operations before income taxes
    
    
    109,707
    
    
    
    169,008
    
    
    
    147,720
    
    
    
    154,787
    
    
    
    200,484Income taxes
    
    
    54,759
    
    
    
    60,219
    
    
    
    51,510
    
    
    
    49,369
    
    
    
    78,653Income from continuing operations
    
    
    54,948
    
    
    
    108,789
    
    
    
    96,210
    
    
    
    105,418
    
    
    
    121,831Income from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,757Net income
    
    $
    54,948
    
    
    $
    108,789
    
    
    $
    96,210
    
    
    $
    105,418
    
    
    $
    283,588Income from continuing operations per share:Basic
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.68
    
    
    $
    0.66
    
    
    $
    0.71Diluted
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.67
    
    
    $
    0.66
    
    
    $
    0.70Income from discontinued operations per share:Basic
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.95Diluted
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.93Net income per share:Basic
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.68
    
    
    $
    0.66
    
    
    $
    1.66Diluted
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.67
    
    
    $
    0.66
    
    
    $
    1.63Balance Sheet DataCash and cash equivalents and investment securities
    
    $
    375,673
    
    
    $
    378,269
    
    
    $
    376,409
    
    
    $
    543,922
    
    
    $
    665,640Total assets
    
    
    750,737
    
    
    
    780,290
    
    
    
    810,966
    
    
    
    971,359
    
    
    
    937,707Total stockholders equity
    
    
    583,339
    
    
    
    626,545
    
    
    
    665,916
    
    
    
    874,531
    
    
    
    859,354
 
 (1)
    
    In fiscal 2010, we completed the acquisition of NetXen, Inc.(2)
    
    In fiscal 2007, we adopted Financial Accounting Standards Board (FASB) Accounting Standards
Codification Topic 718, CompensationStock Compensation, which requires the recognition of
compensation expense for all stock-based awards made to employees and non-employee directors.
In addition, we completed the acquisitions of PathScale, Inc. and SilverStorm Technologies,
Inc.(3)
    
    In fiscal 2006, we completed the sale of our hard disk drive controller and tape drive
controller business and have presented the operating results of such business as discontinued
operations. In addition, we completed the acquisition of Troika Networks, Inc. 22




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Managements Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with our audited consolidated financial statements and related notes.
In this discussion and elsewhere in this report, we make forward-looking statements. These
forward-looking statements are made in reliance upon safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements include, without
limitation, descriptions of our expectations regarding future trends affecting our business and
other statements regarding future events or our objectives, goals, strategies, beliefs and
underlying assumptions that are other than statements of historical fact. When used in this report,
the words anticipates, believes, can, continue, could, estimates, expects, intends,
may, plans, potential, predicts, should, will and similar expressions, or the negative
of such expressions, are intended to identify these forward-looking statements. Statements
concerning current conditions may also be forward-looking if they imply a continuation of current
conditions. 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 in Part I, Item 1A Risk Factors and elsewhere in this report. In
light of the significant uncertainties inherent in the forward-looking information included in this
report, 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. You are cautioned, therefore, not to
place undue reliance on these forward-looking statements, which are made only as of the date of
this report. We undertake no obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise.
 Overview
     Business Combination
  23




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##### Table of Contents



Fiscal Year and Fourth Quarter Financial Highlights and Other Information
   
    
    Net revenues of $145.7 million for the fourth quarter of fiscal 2010 increased 12% from
$130.5 million in the fourth quarter of fiscal 2009. Revenue from Host Products was $103.7
million and increased from $88.4 million in the same quarter last year and revenue from
Network Products was $22.6 million compared to $25.1 million in the same quarter of fiscal
2009.
    
    Gross profit as a percentage of net revenues was 65.1% for the fourth quarter of fiscal
2010, compared to 65.9% for the fourth quarter of fiscal 2009.
    
    Operating income as a percentage of net revenues for the fourth quarter of fiscal 2010
increased to 18.8% from 18.3% in the fourth quarter of fiscal 2009.
    
    Net loss was $4.8 million, or $0.04 per diluted share, in the fourth quarter of fiscal
2010, compared to net income of $19.2 million, or $0.16 per diluted share, in the fourth
quarter of fiscal 2009. Our net loss in the fourth quarter of fiscal 2010 included a $29.7
million tax charge related to our globalization initiative.
    
    Cash, cash equivalents and investment securities was $375.7 million at March 28, 2010,
compared to $378.3 million at March 29, 2009.
    
    Accounts receivable was $73.3 million as of March 28, 2010, compared to $68.5 million as
of March 29, 2009. Days sales outstanding (DSO) in receivables as of March 28, 2010
decreased to 46 days from 48 days as of March 29, 2009.
    
    Inventories as of March 28, 2010 decreased to $19.4 million from $40.3 million as of
March 29, 2009. Our annualized inventory turns in the fourth quarter of fiscal 2010
increased to 10.5 turns from 4.4 turns in the fourth quarter of fiscal 2009.
  Results of Operations
 Net Revenues
  2010
    
    
    2009
    
    
    2008(Dollars in millions)Net revenues:Host Products
    
    $
    396.5
    
    
    $
    440.9
    
    
    $
    437.9Network Products
    
    
    99.5
    
    
    
    117.6
    
    
    
    101.8Silicon Products
    
    
    42.4
    
    
    
    61.4
    
    
    
    44.3Royalty and Service
    
    
    10.7
    
    
    
    14.0
    
    
    
    13.9Total net revenues
    
    $
    549.1
    
    
    $
    633.9
    
    
    $
    597.9Percentage of net revenues:Host Products
    
    
    72
    %
    
    
    70
    %
    
    
    73
    %Network Products
    
    
    18
    
    
    
    18
    
    
    
    17Silicon Products
    
    
    8
    
    
    
    10
    
    
    
    8Royalty and Service
    
    
    2
    
    
    
    2
    
    
    
    2Total net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 24




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2010
    
    2009
    
    2008Hewlett-Packard
    
    
    24
    %
    
    
    21
    %
    
    
    20
    %IBM
    
    
    20
    %
    
    
    18
    %
    
    
    16
    %Sun Microsystems (acquired by Oracle in fiscal 2010)
    
    
    *
    
    
    
    11
    %
    
    
    11
    %
 
 *
    
    Less than 10% of net revenues.  25




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##### Table of Contents



2010
    
    
    2009
    
    
    2008(In millions)United States
    
    $
    250.3
    
    
    $
    303.7
    
    
    $
    305.2Asia-Pacific and Japan
    
    
    138.8
    
    
    
    139.9
    
    
    
    113.1Europe, Middle East and Africa
    
    
    127.0
    
    
    
    154.5
    
    
    
    144.6Rest of world
    
    
    33.0
    
    
    
    35.8
    
    
    
    35.0$
    549.1
    
    
    $
    633.9
    
    
    $
    597.9
  Gross Profit
  2010
    
    
    2009
    
    
    2008(Dollars in millions)Gross profit
    
    $
    352.9
    
    
    $
    423.8
    
    
    $
    391.9Percentage of net revenues
    
    
    64.3
    %
    
    
    66.9
    %
    
    
    65.6
    %
    26




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##### Table of Contents



Operating Expenses
  2010
    
    
    2009
    
    
    2008(Dollars in millions)Operating expenses:Engineering and development
    
    $
    136.8
    
    
    $
    133.2
    
    
    $
    134.7Sales and marketing
    
    
    77.6
    
    
    
    87.0
    
    
    
    84.2General and administrative
    
    
    34.2
    
    
    
    32.6
    
    
    
    34.0Special charges
    
    
    5.2
    
    
    
    4.1
    
    
    
    5.3Total operating expenses
    
    $
    253.8
    
    
    $
    256.9
    
    
    $
    258.2Percentage of net revenues:Engineering and development
    
    
    24.9
    %
    
    
    21.0
    %
    
    
    22.5
    %Sales and marketing
    
    
    14.1
    
    
    
    13.7
    
    
    
    14.1General and administrative
    
    
    6.2
    
    
    
    5.2
    
    
    
    5.7Special charges
    
    
    1.0
    
    
    
    0.6
    
    
    
    0.9Total operating expenses
    
    
    46.2
    %
    
    
    40.5
    %
    
    
    43.2
    %
 Engineering and Development.
   Sales and Marketing.
   General and Administrative.
 27




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##### Table of Contents



Special Charges.
    Interest and Other Income, Net
  2010
    
    
    2009
    
    
    2008(In millions)Interest income
    
    $
    5.4
    
    
    $
    11.3
    
    
    $
    20.6Net gains on investment securities
    
    
    5.0
    
    
    
    7.1
    
    
    
    0.6Impairment of investment securities
    
    
    
    
    
    
    (16.4
    )
    
    
    (6.9
    )Other
    
    
    0.2
    
    
    
    0.1
    
    
    
    (0.3
    )$
    10.6
    
    
    $
    2.1
    
    
    $
    14.0
     28




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##### Table of Contents



Income Taxes
    Liquidity and Capital Resources
    29




---



##### Table of Contents



2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    Total(In millions)Operating leases
    
    $
    7.6
    
    
    $
    5.3
    
    
    $
    3.7
    
    
    $
    3.7
    
    
    $
    2.9
    
    
    $
    5.9
    
    
    $
    29.1Non-cancelable purchase obligations
    
    
    72.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72.4Total
    
    $
    80.0
    
    
    $
    5.3
    
    
    $
    3.7
    
    
    $
    3.7
    
    
    $
    2.9
    
    
    $
    5.9
    
    
    $
    101.5
  30




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##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
     Stock-Based Compensation
  31




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##### Table of Contents



Income Taxes
     Investment Securities
      32




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##### Table of Contents



Inventories
  Goodwill and Other Intangible Assets
    Long-Lived Assets
  33




---



##### Table of Contents



Recently Issued Accounting Standards Not Yet Effective
    34




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##### Table of Contents



Item 7a. Quantitative and Qualitative Disclosures About Market Risk
        35




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control  Integrated Framework
 /s/ KPMG LLPIrvine, CaliforniaMay 20, 2010 36




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework
    Internal
Control  Integrated Framework
  /s/ KPMG LLPIrvine, CaliforniaMay 20, 2010 37




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##### Table of Contents



QLOGIC CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
March 28, 2010 and March 29, 2009
 2010
    
    
    2009(In thousands, except shareand per share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    190,308
    
    
    $
    203,722Short-term investment securities
    
    
    185,365
    
    
    
    139,561Accounts receivable, less allowance for doubtful accounts of $1,505 and $1,366 as of March 28, 2010
and March 29, 2009, respectively
    
    
    73,301
    
    
    
    68,519Inventories
    
    
    19,403
    
    
    
    40,293Deferred tax assets
    
    
    10,976
    
    
    
    19,002Other current assets
    
    
    9,845
    
    
    
    10,854Total current assets
    
    
    489,198
    
    
    
    481,951Long-term investment securities
    
    
    
    
    
    
    34,986Property and equipment, net
    
    
    83,496
    
    
    
    92,547Goodwill
    
    
    119,748
    
    
    
    118,859Purchased intangible assets, net
    
    
    17,394
    
    
    
    19,117Deferred tax assets
    
    
    36,917
    
    
    
    28,785Other assets
    
    
    3,984
    
    
    
    4,045$
    750,737
    
    
    $
    780,290LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    36,766
    
    
    $
    36,874Accrued compensation
    
    
    22,727
    
    
    
    28,702Accrued taxes
    
    
    2,633
    
    
    
    13,499Deferred revenue
    
    
    9,240
    
    
    
    7,470Other current liabilities
    
    
    11,069
    
    
    
    6,728Total current liabilities
    
    
    82,435
    
    
    
    93,273Accrued taxes
    
    
    70,577
    
    
    
    47,116Deferred revenue
    
    
    7,401
    
    
    
    8,559Other liabilities
    
    
    6,985
    
    
    
    4,797Total liabilities
    
    
    167,398
    
    
    
    153,745Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 500,000,000 shares authorized; 204,893,000 and 202,009,000 shares issued at March 28, 2010 and March 29, 2009, respectively
    
    
    205
    
    
    
    202Additional paid-in capital
    
    
    778,853
    
    
    
    712,064Retained earnings
    
    
    1,248,675
    
    
    
    1,193,727Accumulated other comprehensive income
    
    
    1,206
    
    
    
    634Treasury stock, at cost: 92,586,000 and 82,478,000 shares at March 28, 2010 and March 29, 2009, respectively
    
    
    (1,445,600
    )
    
    
    (1,280,082
    )Total stockholders equity
    
    
    583,339
    
    
    
    626,545$
    750,737
    
    
    $
    780,290
  38




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##### Table of Contents



QLOGIC CORPORATION
 
 CONSOLIDATED STATEMENTS OF INCOME
Years Ended March 28, 2010, March 29, 2009 and March 30, 2008
 2010
    
    
    2009
    
    
    2008(In thousands, except pershare amounts)Net revenues
    
    $
    549,070
    
    
    $
    633,862
    
    
    $
    597,866Cost of revenues
    
    
    196,127
    
    
    
    210,075
    
    
    
    205,959Gross profit
    
    
    352,943
    
    
    
    423,787
    
    
    
    391,907Operating expenses:Engineering and development
    
    
    136,831
    
    
    
    133,252
    
    
    
    134,668Sales and marketing
    
    
    77,601
    
    
    
    86,959
    
    
    
    84,166General and administrative
    
    
    34,242
    
    
    
    32,639
    
    
    
    34,049Special charges
    
    
    5,163
    
    
    
    4,063
    
    
    
    5,328Total operating expenses
    
    
    253,837
    
    
    
    256,913
    
    
    
    258,211Operating income
    
    
    99,106
    
    
    
    166,874
    
    
    
    133,696Interest and other income, net
    
    
    10,601
    
    
    
    2,134
    
    
    
    14,024Income before income taxes
    
    
    109,707
    
    
    
    169,008
    
    
    
    147,720Income taxes
    
    
    54,759
    
    
    
    60,219
    
    
    
    51,510Net income
    
    $
    54,948
    
    
    $
    108,789
    
    
    $
    96,210Net income per share:Basic
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.68Diluted
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.67Number of shares used in per share calculations:Basic
    
    
    116,037
    
    
    
    127,776
    
    
    
    142,167Diluted
    
    
    117,364
    
    
    
    128,570
    
    
    
    142,901
  39




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##### Table of Contents



QLOGIC CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
Years Ended March 28, 2010, March 29, 2009 and March 30, 2008
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalOutstanding
    
    
    
    
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    Equity(In thousands)Balance at April 1, 2007
    
    
    155,417
    
    
    $
    198
    
    
    $
    608,515
    
    
    $
    988,728
    
    
    $
    169
    
    
    $
    (723,079
    )
    
    $
    874,531Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,210
    
    
    
    
    
    
    
    
    
    
    
    96,210Change in unrealized gains and losses on investment
securities, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,699
    )
    
    
    
    
    
    
    (2,699
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,511Issuance of common stock under stock-based awards
    
    
    1,591
    
    
    
    2
    
    
    
    14,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,696Increase in excess tax benefits from stock-based awards
    
    
    
    
    
    
    
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    31,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,764Common stock issued related to business acquisition
    
    
    154
    
    
    
    
    
    
    
    2,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,632Purchases of treasury stock
    
    
    (24,148
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351,506
    )
    
    
    (351,506
    )Balance at March 30, 2008
    
    
    133,014
    
    
    
    200
    
    
    
    657,893
    
    
    
    1,084,938
    
    
    
    (2,530
    )
    
    
    (1,074,585
    )
    
    
    665,916Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,789
    
    
    
    
    
    
    
    
    
    
    
    108,789Change in unrealized gains and losses on investment
securities, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,164
    
    
    
    
    
    
    
    3,164Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,953Issuance of common stock under stock-based awards
    
    
    2,246
    
    
    
    2
    
    
    
    23,539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,541Increase in excess tax benefits from stock-based awards
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    279Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    28,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,646Common stock issued related to business acquisition
    
    
    111
    
    
    
    
    
    
    
    1,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,707Purchases of treasury stock
    
    
    (15,840
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205,497
    )
    
    
    (205,497
    )Balance at March 29, 2009
    
    
    119,531
    
    
    
    202
    
    
    
    712,064
    
    
    
    1,193,727
    
    
    
    634
    
    
    
    (1,280,082
    )
    
    
    626,545Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,948
    
    
    
    
    
    
    
    
    
    
    
    54,948Change in unrealized gains and losses on investment
securities, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    572
    
    
    
    
    
    
    
    572Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,520Issuance of common stock under stock-based awards
    
    
    2,772
    
    
    
    3
    
    
    
    31,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,500Decrease in excess tax benefits from stock-based awards
    
    
    
    
    
    
    
    
    
    
    (1,278
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,278
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    35,232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,232Common stock issued related to business acquisition
    
    
    112
    
    
    
    
    
    
    
    1,338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,338Purchases of treasury stock
    
    
    (10,108
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165,518
    )
    
    
    (165,518
    )Balance at March 28, 2010
    
    
    112,307
    
    
    $
    205
    
    
    $
    778,853
    
    
    $
    1,248,675
    
    
    $
    1,206
    
    
    $
    (1,445,600
    )
    
    $
    583,339
  40




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##### Table of Contents



QLOGIC CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 28, 2010, March 29, 2009 and March 30, 2008
 2010
    
    
    2009
    
    
    2008(In thousands)Cash flows from operating activities:Net income
    
    $
    54,948
    
    
    $
    108,789
    
    
    $
    96,210Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    31,803
    
    
    
    32,525
    
    
    
    30,857Stock-based compensation
    
    
    35,694
    
    
    
    28,819
    
    
    
    32,973Amortization of acquisition-related intangible assets
    
    
    8,331
    
    
    
    15,032
    
    
    
    16,725Deferred income taxes
    
    
    5,999
    
    
    
    16,660
    
    
    
    (14,549
    )Net gains on investment securities
    
    
    (4,982
    )
    
    
    (7,095
    )
    
    
    (607
    )Impairment of investment securities
    
    
    
    
    
    
    16,407
    
    
    
    6,867Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    2,338Other non-cash charges
    
    
    1,090
    
    
    
    680
    
    
    
    1,727Changes in operating assets and liabilities, net of acquisition:Accounts receivable
    
    
    (4,432
    )
    
    
    12,845
    
    
    
    (8,503
    )Inventories
    
    
    21,920
    
    
    
    (12,773
    )
    
    
    11,415Other assets
    
    
    487
    
    
    
    (2,126
    )
    
    
    3,593Accounts payable
    
    
    240
    
    
    
    707
    
    
    
    7,282Accrued compensation
    
    
    (6,036
    )
    
    
    (884
    )
    
    
    (1,940
    )Accrued taxes
    
    
    11,827
    
    
    
    7,190
    
    
    
    20,635Deferred revenue
    
    
    612
    
    
    
    2,249
    
    
    
    6,412Other liabilities
    
    
    4,271
    
    
    
    688
    
    
    
    (453
    )Net cash provided by operating activities
    
    
    161,772
    
    
    
    219,713
    
    
    
    210,982Cash flows from investing activities:Purchases of available-for-sale securities
    
    
    (244,083
    )
    
    
    (122,437
    )
    
    
    (185,707
    )Proceeds from sales and maturities of available-for-sale securities
    
    
    223,729
    
    
    
    162,884
    
    
    
    425,640Proceeds from disposition of trading securities
    
    
    11,425
    
    
    
    4,550
    
    
    
    Reclassification from cash equivalents to other investment securities
    
    
    
    
    
    
    (57,209
    )
    
    
    Distributions from other investment securities
    
    
    5,464
    
    
    
    48,855
    
    
    
    Purchases of property and equipment
    
    
    (24,528
    )
    
    
    (30,721
    )
    
    
    (30,001
    )Acquisition of business, net of cash acquired
    
    
    (14,931
    )
    
    
    
    
    
    
    67Net cash provided by (used in) investing activities
    
    
    (42,924
    )
    
    
    5,922
    
    
    
    209,999Cash flows from financing activities:Proceeds from issuance of common stock under stock-based awards
    
    
    34,375
    
    
    
    25,522
    
    
    
    15,960Excess tax benefits from stock-based awards
    
    
    591
    
    
    
    279
    
    
    
    288Minimum tax withholding paid on behalf of employees for restricted stock units
    
    
    (2,875
    )
    
    
    (1,981
    )
    
    
    (1,264
    )Purchases of treasury stock
    
    
    (163,419
    )
    
    
    (205,742
    )
    
    
    (352,760
    )Payoff of line of credit assumed in acquisition
    
    
    (934
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (132,262
    )
    
    
    (181,922
    )
    
    
    (337,776
    )Net increase (decrease) in cash and cash equivalents
    
    
    (13,414
    )
    
    
    43,713
    
    
    
    83,205Cash and cash equivalents at beginning of year
    
    
    203,722
    
    
    
    160,009
    
    
    
    76,804Cash and cash equivalents at end of year
    
    $
    190,308
    
    
    $
    203,722
    
    
    $
    160,009Supplemental disclosure of cash flow information:Cash paid during the year for:Income taxes
    
    $
    36,937
    
    
    $
    37,101
    
    
    $
    41,475
  41




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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
   Principles of Consolidation
  Financial Reporting Period
  Use of Estimates
   Revenue Recognition
  42




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Stock-Based Compensation
  Research and Development
  43




---



##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Advertising Costs
  Income Taxes
   Net Income per Share
  Concentration of Credit Risk
    44




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Cash and Cash Equivalents
  Investment Securities
       Allowance for Doubtful Accounts
  Inventories
  Property and Equipment
  45




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Goodwill and Other Intangible Assets
   Long-Lived Assets
   Warranty
  Comprehensive Income
  Foreign Currency Translation
  46




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Recently Adopted Accounting Standards
    Note 2. Business Acquisition
    (In thousands)Cash
    
    $
    2,659Accounts receivable
    
    
    716Inventories
    
    
    1,030Property and equipment
    
    
    854Goodwill
    
    
    889Identifiable intangible assets
    
    
    6,410Deferred tax assets
    
    
    8,302Other assets
    
    
    352Accounts payable and other liabilities
    
    
    (1,751
    )Accrued compensation
    
    
    (937
    )Line of credit
    
    
    (934
    )$
    17,590
 47




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  WeightedAverageUseful Lives
    
    
    Amount(Years)
    
    
    (In thousands)Intangible Assets:Core technology
    
    
    7
    
    
    $
    5,400Contractual licenses
    
    
    5
    
    
    
    1,010$
    6,410
  Note 3. Investment Securities
  March 28,
    
    
    March 29,2010
    
    
    2009(In thousands)Available-for-sale securities
    
    $
    161,609
    
    
    $
    136,027Trading securities
    
    
    23,756
    
    
    
    34,891Other investment securities
    
    
    
    
    
    
    3,629Total investment securities
    
    
    185,365
    
    
    
    174,547Less long-term investment securities
    
    
    
    
    
    
    34,986Short-term investment securities
    
    $
    185,365
    
    
    $
    139,561
 Available-For-Sale Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)March 28, 2010U.S. Government and agency securities
    
    $
    37,677
    
    
    $
    326
    
    
    $
    (27
    )
    
    $
    37,976Corporate debt obligations
    
    
    81,424
    
    
    
    1,600
    
    
    
    (21
    )
    
    
    83,003Asset and mortgage-backed securities
    
    
    18,721
    
    
    
    410
    
    
    
    (16
    )
    
    
    19,115Municipal bonds
    
    
    5,923
    
    
    
    3
    
    
    
    (3
    )
    
    
    5,923Total debt securities
    
    
    143,745
    
    
    
    2,339
    
    
    
    (67
    )
    
    
    146,017Certificates of deposit
    
    
    15,592
    
    
    
    
    
    
    
    
    
    
    
    15,592Total available-for-sale securities
    
    $
    159,337
    
    
    $
    2,339
    
    
    $
    (67
    )
    
    $
    161,609March 29, 2009U.S. Government and agency securities
    
    $
    51,776
    
    
    $
    868
    
    
    $
    (4
    )
    
    $
    52,640Corporate debt obligations
    
    
    39,434
    
    
    
    390
    
    
    
    (190
    )
    
    
    39,634Asset and mortgage-backed securities
    
    
    20,691
    
    
    
    418
    
    
    
    (96
    )
    
    
    21,013Municipal bonds
    
    
    2,530
    
    
    
    61
    
    
    
    
    
    
    
    2,591Total debt securities
    
    
    114,431
    
    
    
    1,737
    
    
    
    (290
    )
    
    
    115,878Certificate of deposit
    
    
    20,054
    
    
    
    
    
    
    
    
    
    
    
    20,054Auction rate preferred securities
    
    
    100
    
    
    
    
    
    
    
    (5
    )
    
    
    95Total available-for-sale securities
    
    $
    134,585
    
    
    $
    1,737
    
    
    $
    (295
    )
    
    $
    136,027
 48




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Amortized
    
    
    EstimatedCost
    
    
    Fair Value(In thousands)Due in one year or less
    
    $
    13,884
    
    
    $
    14,322Due after one year through three years
    
    
    83,568
    
    
    
    84,776Due after three years through five years
    
    
    23,038
    
    
    
    23,277Due after five years
    
    
    23,255
    
    
    
    23,642$
    143,745
    
    
    $
    146,017
    Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalFairDescription of Securities
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Value
    
    
    Unrealized Losses(In thousands)March 28, 2010U.S. Government and agency securities
    
    $
    6,661
    
    
    $
    (27
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,661
    
    
    $
    (27
    )Corporate debt obligations
    
    
    11,337
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    11,337
    
    
    
    (21
    )Asset and mortgage-backed securities
    
    
    3,557
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    3,557
    
    
    
    (16
    )Municipal bonds
    
    
    317
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    317
    
    
    
    (3
    )Total
    
    $
    21,872
    
    
    $
    (67
    )
    
    $
    
    
    
    $
    
    
    
    $
    21,872
    
    
    $
    (67
    )March 29, 2009U.S. Government and agency securities
    
    $
    2,002
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,002
    
    
    $
    (4
    )Corporate debt obligations
    
    
    10,605
    
    
    
    (190
    )
    
    
    
    
    
    
    
    
    
    
    10,605
    
    
    
    (190
    )Asset and mortgage-backed securities
    
    
    2,842
    
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    2,842
    
    
    
    (96
    )Auction rate preferred securities
    
    
    95
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    (5
    )Total
    
    $
    15,544
    
    
    $
    (295
    )
    
    $
    
    
    
    $
    
    
    
    $
    15,544
    
    
    $
    (295
    )
  49




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Trading Securities
  March 28,
    
    
    March 29,2010
    
    
    2009(In thousands)Auction rate debt securities
    
    $
    17,951
    
    
    $
    20,741Auction rate preferred securities
    
    
    4,366
    
    
    
    4,869Put options related to auction rate securities
    
    
    1,439
    
    
    
    9,281Total trading securities
    
    $
    23,756
    
    
    $
    34,891
     Other Investment Securities
    50




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Fair Value Measurements
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  Fair Value Measurements UsingLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)March 28, 2010U.S. Government and agency securities
    
    $
    37,976
    
    
    $
    
    
    
    $
    
    
    
    $
    37,976Corporate debt obligations
    
    
    
    
    
    
    83,003
    
    
    
    
    
    
    
    83,003Asset and mortgage-backed securities
    
    
    
    
    
    
    19,115
    
    
    
    
    
    
    
    19,115Municipal bonds
    
    
    
    
    
    
    5,923
    
    
    
    
    
    
    
    5,923Certificates of deposit
    
    
    15,592
    
    
    
    
    
    
    
    
    
    
    
    15,592Total available-for-sale securities
    
    
    53,568
    
    
    
    108,041
    
    
    
    
    
    
    
    161,609Auction rate debt securities
    
    
    
    
    
    
    
    
    
    
    17,951
    
    
    
    17,951Auction rate preferred securities
    
    
    
    
    
    
    
    
    
    
    4,366
    
    
    
    4,366Put options related to auction rate securities
    
    
    
    
    
    
    
    
    
    
    1,439
    
    
    
    1,439Total trading securities
    
    
    
    
    
    
    
    
    
    
    23,756
    
    
    
    23,756Balance as of March 28, 2010
    
    $
    53,568
    
    
    $
    108,041
    
    
    $
    23,756
    
    
    $
    185,365
 Fair Value Measurements UsingLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)March 29, 2009U.S. Government and agency securities
    
    $
    52,640
    
    
    $
    
    
    
    $
    
    
    
    $
    52,640Corporate debt obligations
    
    
    36,586
    
    
    
    3,048
    
    
    
    
    
    
    
    39,634Asset and mortgage-backed securities
    
    
    3,621
    
    
    
    17,392
    
    
    
    
    
    
    
    21,013Municipal bonds
    
    
    2,591
    
    
    
    
    
    
    
    
    
    
    
    2,591Certificate of deposit
    
    
    20,054
    
    
    
    
    
    
    
    
    
    
    
    20,054Auction rate preferred securities
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    95Total available-for-sale securities
    
    
    115,492
    
    
    
    20,440
    
    
    
    95
    
    
    
    136,027Auction rate debt securities
    
    
    
    
    
    
    
    
    
    
    20,741
    
    
    
    20,741Auction rate preferred securities
    
    
    
    
    
    
    
    
    
    
    4,869
    
    
    
    4,869Put options related to auction rate securities
    
    
    
    
    
    
    
    
    
    
    9,281
    
    
    
    9,281Total trading securities
    
    
    
    
    
    
    
    
    
    
    34,891
    
    
    
    34,891Balance as of March 29, 2009
    
    $
    115,492
    
    
    $
    20,440
    
    
    $
    34,986
    
    
    $
    170,918
 51




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Balance
    
    
    Total Realized
    
    
    Change in Unrealized
    
    
    Sales and Other
    
    
    BalanceYear Ended March 28, 2010
    
    March 29, 2009
    
    
    Gains (Losses)
    
    
    Losses
    
    
    Settlements
    
    
    March 28, 2010(In thousands)Auction rate debt securities
    
    $
    20,741
    
    
    $
    2,434
    
    
    $
    
    
    
    $
    (5,224
    )
    
    $
    17,951Auction rate preferred securities
    
    
    4,964
    
    
    
    5,834
    
    
    
    5
    
    
    
    (6,437
    )
    
    
    4,366Put options related to auction rate securities
    
    
    9,281
    
    
    
    (7,842
    )
    
    
    
    
    
    
    
    
    
    
    1,439Total
    
    $
    34,986
    
    
    $
    426
    
    
    $
    5
    
    
    $
    (11,661
    )
    
    $
    23,756
 Balance
    
    
    Total Realized
    
    
    Change in Unrealized
    
    
    Sales and Other
    
    
    BalanceYear Ended March 29, 2009
    
    March 30, 2008
    
    
    Gains (Losses)
    
    
    Losses
    
    
    Settlements
    
    
    March 29, 2009(In thousands)Auction rate debt securities
    
    $
    24,058
    
    
    $
    (3,571
    )
    
    $
    1,582
    
    
    $
    (1,328
    )
    
    $
    20,741Auction rate preferred securities
    
    
    31,845
    
    
    
    (4,952
    )
    
    
    4,575
    
    
    
    (26,504
    )
    
    
    4,964Put options related to auction rate securities
    
    
    
    
    
    
    9,281
    
    
    
    
    
    
    
    
    
    
    
    9,281Total
    
    $
    55,903
    
    
    $
    758
    
    
    $
    6,157
    
    
    $
    (27,832
    )
    
    $
    34,986
 Note 4. Inventories
  2010
    
    
    2009(In thousands)Raw materials
    
    $
    6,693
    
    
    $
    15,780Finished goods
    
    
    12,710
    
    
    
    24,513$
    19,403
    
    
    $
    40,293
 Note 5. Property and Equipment
  2010
    
    
    2009(In thousands)Land
    
    $
    11,663
    
    
    $
    11,663Buildings and improvements
    
    
    40,705
    
    
    
    39,549Production and test equipment
    
    
    175,901
    
    
    
    160,978Furniture and fixtures
    
    
    8,033
    
    
    
    7,909236,302
    
    
    
    220,099Less accumulated depreciation and amortization
    
    
    152,806
    
    
    
    127,552$
    83,496
    
    
    $
    92,547
 52




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Note 6. Goodwill and Purchased Intangible Assets
 Goodwill
  2010
    
    
    2009(In thousands)Balance at beginning of year
    
    $
    118,859
    
    
    $
    127,409Adjustment to purchase price allocation
    
    
    
    
    
    
    (8,550
    )NetXen acquisition
    
    
    889
    
    
    
    Balance at end of year
    
    $
    119,748
    
    
    $
    118,859
  Purchased Intangible Assets
  March 28, 2010
    
    
    March 29, 2009Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingValue
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    Value(In thousands)Acquisition-related intangibles:Core/developed technology
    
    $
    45,700
    
    
    $
    30,059
    
    
    $
    15,641
    
    
    $
    43,700
    
    
    $
    27,277
    
    
    $
    16,423Customer relationships
    
    
    9,700
    
    
    
    9,700
    
    
    
    
    
    
    
    9,700
    
    
    
    7,814
    
    
    
    1,886Other
    
    
    1,010
    
    
    
    185
    
    
    
    825
    
    
    
    775
    
    
    
    697
    
    
    
    7856,410
    
    
    
    39,944
    
    
    
    16,466
    
    
    
    54,175
    
    
    
    35,788
    
    
    
    18,387Other purchased intangibles:Technology-related
    
    
    3,716
    
    
    
    2,788
    
    
    
    928
    
    
    
    2,911
    
    
    
    2,181
    
    
    
    730$
    60,126
    
    
    $
    42,732
    
    
    $
    17,394
    
    
    $
    57,086
    
    
    $
    37,969
    
    
    $
    19,117
   2010
    
    
    2009
    
    
    2008(In thousands)Cost of revenues
    
    $
    7,052
    
    
    $
    12,491
    
    
    $
    13,668Engineering and development
    
    
    
    
    
    
    125
    
    
    
    314Sales and marketing
    
    
    1,886
    
    
    
    3,234
    
    
    
    3,544$
    8,938
    
    
    $
    15,850
    
    
    $
    17,526
 53




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Fiscal
    
    (In thousands)2011
    
    $
    4,9072012
    
    
    4,9222013
    
    
    4,8322014
    
    
    1,1042015
    
    
    7932016 and thereafter
    
    
    836$
    17,394
 Note 7. Stockholders Equity
 Capital Stock
  Treasury Stock
   Note 8. Stock-Based Compensation
 Employee Stock Purchase Plan
  Stock Incentive Compensation Plans
  54




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term (Years)
    
    
    Value(In thousands)
    
    
    
    
    
    
    
    
    
    
    (In thousands)Outstanding at April 1, 2007
    
    
    26,127
    
    
    $
    21.01Granted
    
    
    4,027
    
    
    
    16.24Exercised
    
    
    (954
    )
    
    
    10.32Forfeited (cancelled pre-vesting)
    
    
    (2,054
    )
    
    
    16.91Expired (cancelled post-vesting)
    
    
    (1,067
    )
    
    
    22.36Outstanding at March 30, 2008
    
    
    26,079
    
    
    
    20.94Granted
    
    
    4,117
    
    
    
    15.07Exercised
    
    
    (1,485
    )
    
    
    13.09Forfeited (cancelled pre-vesting)
    
    
    (1,121
    )
    
    
    15.93Expired (cancelled post-vesting)
    
    
    (1,650
    )
    
    
    22.42Outstanding at March 29, 2009
    
    
    25,940
    
    
    
    20.58Granted
    
    
    3,853
    
    
    
    14.06Exercised
    
    
    (1,878
    )
    
    
    14.89Forfeited (cancelled pre-vesting)
    
    
    (499
    )
    
    
    15.54Expired (cancelled post-vesting)
    
    
    (3,160
    )
    
    
    25.06Outstanding at March 28, 2010
    
    
    24,256
    
    
    $
    19.50
    
    
    
    5.2
    
    
    $
    70,223Vested and expected to vest at March 28, 2010
    
    
    23,416
    
    
    $
    19.68
    
    
    
    5.0
    
    
    $
    65,394Exercisable at March 28, 2010
    
    
    17,509
    
    
    $
    21.34
    
    
    
    3.9
    
    
    $
    33,589
 55




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Weighted-AverageGrantNumber of
    
    
    DateShares
    
    
    Fair Value(In thousands)Outstanding and unvested at April 1, 2007
    
    
    939
    
    
    $
    18.84Granted
    
    
    842
    
    
    
    16.52Vested
    
    
    (214
    )
    
    
    18.79Forfeited
    
    
    (294
    )
    
    
    17.72Outstanding and unvested at March 30, 2008
    
    
    1,273
    
    
    
    17.57Granted
    
    
    944
    
    
    
    14.89Vested
    
    
    (364
    )
    
    
    17.72Forfeited
    
    
    (160
    )
    
    
    16.12Outstanding and unvested at March 29, 2009
    
    
    1,693
    
    
    
    16.18Granted
    
    
    1,488
    
    
    
    13.85Vested
    
    
    (533
    )
    
    
    16.65Forfeited
    
    
    (134
    )
    
    
    15.85Outstanding and unvested at March 28, 2010
    
    
    2,514
    
    
    $
    14.78
  Stock-Based Compensation Expense
  2010
    
    
    2009
    
    
    2008(In thousands)Cost of revenues
    
    $
    2,629
    
    
    $
    2,058
    
    
    $
    2,104Engineering and development
    
    
    18,237
    
    
    
    15,142
    
    
    
    15,729Sales and marketing
    
    
    6,918
    
    
    
    5,567
    
    
    
    6,290General and administrative
    
    
    7,910
    
    
    
    6,052
    
    
    
    8,850$
    35,694
    
    
    $
    28,819
    
    
    $
    32,973
   56




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  2010
    
    2009
    
    2008Employee Stock
    
    
    
    
    
    Employee Stock
    
    
    
    
    
    Employee StockStock Options
    
    Purchase Plan
    
    Stock Options
    
    Purchase Plan
    
    Stock Options
    
    Purchase PlanFair value
    
    $
    5.31
    
    
    $
    3.50
    
    
    $
    5.64
    
    
    $
    3.39
    
    
    $
    6.43
    
    
    $
    3.39Expected volatility
    
    
    38
    %
    
    
    42
    %
    
    
    37
    %
    
    
    45
    %
    
    
    38
    %
    
    
    35
    %Risk-free interest rate
    
    
    2.2
    %
    
    
    0.1
    %
    
    
    3.4
    %
    
    
    0.9
    %
    
    
    4.7
    %
    
    
    4.0
    %Expected life (years)
    
    
    5.0
    
    
    
    0.25
    
    
    
    5.2
    
    
    
    0.25
    
    
    
    5.1
    
    
    
    0.25Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
       Note 9. Employee Retirement Savings Plan
   Note 10. Special Charges
  57




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QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  WorkforceReductions
    
    
    Facility
    
    
    Total(In thousands)Charged to costs and expenses
    
    $
    1,542
    
    
    $
    3,076
    
    
    $
    4,618Cash payments
    
    
    (953
    )
    
    
    (324
    )
    
    
    (1,277
    )Non-cash adjustments
    
    
    
    
    
    
    92
    
    
    
    92Balance as of March 28, 2010
    
    $
    589
    
    
    $
    2,844
    
    
    $
    3,433
   WorkforceReductions
    
    
    Facility
    
    
    Total(In thousands)Charged to costs and expenses
    
    $
    3,641
    
    
    $
    285
    
    
    $
    3,926Cash payments
    
    
    (2,343
    )
    
    
    
    
    
    
    (2,343
    )Non-cash adjustments
    
    
    
    
    
    
    8
    
    
    
    8Balance as of March 29, 2009
    
    
    1,298
    
    
    
    293
    
    
    
    1,591Charged to costs and expenses
    
    
    
    
    
    
    370
    
    
    
    370Cash payments
    
    
    (1,298
    )
    
    
    (316
    )
    
    
    (1,614
    )Balance as of March 28, 2010
    
    $
    
    
    
    $
    347
    
    
    $
    347
   ContractWorkforce
    
    
    CancellationReductions
    
    
    and Other
    
    
    Total(In thousands)Charged to costs and expenses
    
    $
    3,761
    
    
    $
    1,235
    
    
    $
    4,996Cash payments
    
    
    (3,202
    )
    
    
    (742
    )
    
    
    (3,944
    )Non-cash adjustments
    
    
    
    
    
    
    60
    
    
    
    60Balance as of March 30, 2008
    
    
    559
    
    
    
    553
    
    
    
    1,112Charged to costs and expenses
    
    
    
    
    
    
    137
    
    
    
    137Cash payments
    
    
    (559
    )
    
    
    (225
    )
    
    
    (784
    )Non-cash adjustments
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Balance as of March 29, 2009
    
    
    
    
    
    
    455
    
    
    
    455Charged to costs and expenses
    
    
    
    
    
    
    175
    
    
    
    175Cash payments
    
    
    
    
    
    
    (235
    )
    
    
    (235
    )Non-cash adjustments
    
    
    
    
    
    
    (16
    )
    
    
    (16
    )Balance as of March 28, 2010
    
    $
    
    
    
    $
    379
    
    
    $
    379
   58




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Note 11. Interest and Other Income, net
  2010
    
    
    2009
    
    
    2008(In thousands)Interest income
    
    $
    5,399
    
    
    $
    11,295
    
    
    $
    20,590Gain on sales of available-for-sale securities
    
    
    4,521
    
    
    
    4,770
    
    
    
    804Loss on sales of available-for-sale securities
    
    
    (1,811
    )
    
    
    (1,131
    )
    
    
    (197
    )Net gains on trading securities
    
    
    426
    
    
    
    3,456
    
    
    
    Gain on distributions of other investment securities
    
    
    1,846
    
    
    
    
    
    
    
    Impairment of investment securities
    
    
    
    
    
    
    (16,407
    )
    
    
    (6,867
    )Other
    
    
    220
    
    
    
    151
    
    
    
    (306
    )$
    10,601
    
    
    $
    2,134
    
    
    $
    14,024
 Note 12. Income Taxes
  2010
    
    
    2009
    
    
    2008(In thousands)United States
    
    $
    58,604
    
    
    $
    130,573
    
    
    $
    96,450International
    
    
    51,103
    
    
    
    38,435
    
    
    
    51,270$
    109,707
    
    
    $
    169,008
    
    
    $
    147,720
  2010
    
    
    2009
    
    
    2008(In thousands)Current:Federal
    
    $
    42,350
    
    
    $
    32,147
    
    
    $
    53,371State
    
    
    4,158
    
    
    
    7,524
    
    
    
    8,784Foreign
    
    
    2,252
    
    
    
    3,888
    
    
    
    3,904Total current
    
    
    48,760
    
    
    
    43,559
    
    
    
    66,059Deferred:Federal
    
    
    5,578
    
    
    
    17,465
    
    
    
    (10,918
    )State
    
    
    109
    
    
    
    (511
    )
    
    
    (3,947
    )Foreign
    
    
    312
    
    
    
    (294
    )
    
    
    316Total deferred
    
    
    5,999
    
    
    
    16,660
    
    
    
    (14,549
    )Total income taxes
    
    $
    54,759
    
    
    $
    60,219
    
    
    $
    51,510
   2010
    
    
    2009
    
    
    2008(In thousands)Expected income tax provision at the statutory rate
    
    $
    38,397
    
    
    $
    59,153
    
    
    $
    51,702State income taxes, net of federal tax benefit
    
    
    2,282
    
    
    
    7,370
    
    
    
    4,954Tax rate differential on foreign earnings and other international related tax items
    
    
    17,864
    
    
    
    997
    
    
    
    (5,752
    )Benefit from research and other credits
    
    
    (4,732
    )
    
    
    (5,370
    )
    
    
    (4,800
    )Stock-based compensation
    
    
    3,294
    
    
    
    3,681
    
    
    
    4,239Resolution of prior period tax matters
    
    
    (696
    )
    
    
    (8,892
    )
    
    
    Valuation allowance
    
    
    (1,581
    )
    
    
    3,469
    
    
    
    Other, net
    
    
    (69
    )
    
    
    (189
    )
    
    
    1,167$
    54,759
    
    
    $
    60,219
    
    
    $
    51,510
 59




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2010
    
    
    2009(In thousands)Deferred tax assets:Reserves and accruals not currently deductible
    
    $
    22,642
    
    
    $
    21,502Stock-based compensation
    
    
    14,859
    
    
    
    12,322Net operating loss carryforwards
    
    
    13,924
    
    
    
    5,859Research credits
    
    
    4,132
    
    
    
    3,804Property and equipment
    
    
    2,887
    
    
    
    543Foreign tax credits
    
    
    2,571
    
    
    
    4,278Investment securities
    
    
    1,238
    
    
    
    3,095Capital loss carryovers
    
    
    1,061
    
    
    
    7,739State income taxes
    
    
    
    
    
    
    2,572Other
    
    
    1,434
    
    
    
    1,125Total gross deferred tax assets
    
    
    64,748
    
    
    
    62,839Valuation allowance
    
    
    (1,888
    )
    
    
    (3,469
    )Total deferred tax assets, net of valuation allowance
    
    
    62,860
    
    
    
    59,370Deferred tax liabilities:Research and development expenditures
    
    
    8,573
    
    
    
    8,223Purchased intangible assets
    
    
    3,421
    
    
    
    3,360State income taxes
    
    
    2,973
    
    
    
    Total deferred tax liabilities
    
    
    14,967
    
    
    
    11,583Net deferred tax assets
    
    $
    47,893
    
    
    $
    47,787
      60




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    2010
    
    
    2009(In thousands)Balance at beginning of year
    
    $
    41,526
    
    
    $
    40,162Additions based on tax positions related to the current year
    
    
    33,354
    
    
    
    14,957Additions for tax positions of prior years
    
    
    2,215
    
    
    
    5,357Reductions for tax positions of prior years
    
    
    (4,502
    )
    
    
    (15,521
    )Settlements with taxing authorities
    
    
    (5,603
    )
    
    
    (1,848
    )Lapses of statute of limitations
    
    
    (1,605
    )
    
    
    (1,581
    )Balance at end of year
    
    $
    65,385
    
    
    $
    41,526
   Note 13. Net Income per Share
  2010
    
    
    2009
    
    
    2008(In thousands, except per share amounts)Net income
    
    $
    54,948
    
    
    $
    108,789
    
    
    $
    96,210Shares:Weighted-average shares outstanding  basic
    
    
    116,037
    
    
    
    127,776
    
    
    
    142,167Dilutive potential common shares, using treasury stock method
    
    
    1,327
    
    
    
    794
    
    
    
    734Weighted-average shares outstanding  diluted
    
    
    117,364
    
    
    
    128,570
    
    
    
    142,901Net income per share:Basic
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.68Diluted
    
    $
    0.47
    
    
    $
    0.85
    
    
    $
    0.67
  61




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QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Note 14. Commitments and Contingencies
 Leases
  Fiscal Year
    
    (In thousands)2011
    
    $
    7,5832012
    
    
    5,2802013
    
    
    3,7282014
    
    
    3,6822015
    
    
    2,858Thereafter
    
    
    5,948Total future minimum lease payments
    
    $
    29,079
  Litigation
  Indemnifications
  Note 15. Revenue Components, Geographic Revenues and Significant Customers
  Revenue Components
  2010
    
    
    2009
    
    
    2008(In thousands)Host Products
    
    $
    396,519
    
    
    $
    440,862
    
    
    $
    437,882Network Products
    
    
    99,449
    
    
    
    117,551
    
    
    
    101,758Silicon Products
    
    
    42,368
    
    
    
    61,426
    
    
    
    44,323Royalty and Service
    
    
    10,734
    
    
    
    14,023
    
    
    
    13,903$
    549,070
    
    
    $
    633,862
    
    
    $
    597,866
 62




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Geographic Revenues
  2010
    
    
    2009
    
    
    2008(In thousands)United States
    
    $
    250,333
    
    
    $
    303,729
    
    
    $
    305,146Asia-Pacific and Japan
    
    
    138,775
    
    
    
    139,850
    
    
    
    113,063Europe, Middle East and Africa
    
    
    126,966
    
    
    
    154,463
    
    
    
    144,631Rest of world
    
    
    32,996
    
    
    
    35,820
    
    
    
    35,026$
    549,070
    
    
    $
    633,862
    
    
    $
    597,866
  Significant Customers
  2010
    
    
    2009
    
    
    2008Hewlett-Packard
    
    
    24
    %
    
    
    21
    %
    
    
    20
    %IBM
    
    
    20
    %
    
    
    18
    %
    
    
    16
    %Sun Microsystems (acquired by Oracle in fiscal 2010)
    
    
    *
    
    
    
    11
    %
    
    
    11
    %
 
 *
    
    Less than 10% of net revenues 63




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##### Table of Contents



QLOGIC CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Note 16. Condensed Quarterly Results (Unaudited)
  Three Months EndedJune
    
    
    September (1)
    
    
    December (2)
    
    
    March (3)(In thousands, except per share amounts)Fiscal 2010:Net revenues
    
    $
    122,775
    
    
    $
    131,457
    
    
    $
    149,122
    
    
    $
    145,716Gross profit
    
    
    78,306
    
    
    
    83,688
    
    
    
    96,102
    
    
    
    94,847Operating income
    
    
    16,449
    
    
    
    20,782
    
    
    
    34,532
    
    
    
    27,343Net income (loss)
    
    
    14,963
    
    
    
    16,163
    
    
    
    28,648
    
    
    
    (4,826
    )Net income (loss) per share:Basic
    
    
    0.13
    
    
    
    0.14
    
    
    
    0.25
    
    
    
    (0.04
    )Diluted
    
    
    0.13
    
    
    
    0.14
    
    
    
    0.25
    
    
    
    (0.04
    )Fiscal 2009:Net revenues
    
    $
    168,427
    
    
    $
    171,197
    
    
    $
    163,691
    
    
    $
    130,547Gross profit
    
    
    112,669
    
    
    
    116,183
    
    
    
    108,921
    
    
    
    86,014Operating income
    
    
    47,781
    
    
    
    49,926
    
    
    
    45,307
    
    
    
    23,860Net income
    
    
    31,647
    
    
    
    27,155
    
    
    
    30,790
    
    
    
    19,197Net income per share:Basic
    
    
    0.24
    
    
    
    0.21
    
    
    
    0.24
    
    
    
    0.16Diluted
    
    
    0.24
    
    
    
    0.20
    
    
    
    0.24
    
    
    
    0.16
 
 (1)
    
    During the three months ended September 28, 2008, the Company recorded impairment charges
related to investment securities of $5.0 million.(2)
    
    During the three months ended December 28, 2008, the Company recorded impairment charges of
$4.3 million related to investment securities, a $4.5 million loss upon the transfer of
auction rate securities from the available-for-sale classification to trading securities and
an $8.1 million gain for the initial recognition of the put options related to auction rate
securities owned by the Company.(3)
    
    During the three months ended March 28, 2010, the Company recorded an income tax charge of
$29.7 million related to its globalization initiative, primarily due to an amendment to an
intercompany technology license agreement with an international subsidiary which resulted in a
fully paid-up license, and special charges of $4.3 million related to certain exit costs.
During the three months ended March 29, 2009, the Company recorded impairment charges related
to investment securities of $4.4 million and recorded special charges of $2.7 million
associated with certain exit costs. 64




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal Control  Integrated Framework
  Changes in Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information
  65




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
   
 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, and Director Independence
  
 Item 14.
    
    Principal Accountant Fees and Services
  66




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 Consolidated Financial Statements
  FINANCIAL STATEMENT INDEX
 PageNumberReports of Independent Registered Public Accounting Firm
    
    
    36Consolidated Balance Sheets as of March 28, 2010 and March 29, 2009
    
    
    38Consolidated Statements of Income for the years ended March 28, 2010, March 29, 2009 and March 30, 2008
    
    
    39Consolidated Statements of Stockholders Equity and Comprehensive Income for the years ended
March 28, 2010, March 29, 2009 and March 30, 2008
    
    
    40Consolidated Statements of Cash Flows for the years ended March 28, 2010, March 29, 2009 and March 30, 2008
    
    
    41Notes to Consolidated Financial Statements
    
    
    42
 Financial Statement Schedule
    Exhibits
  67




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##### Table of Contents



SIGNATURES
   QLOGIC CORPORATIONBy:
    /s/   H.K. DesaiH.K. DesaiDate: May 20, 2010
    
    Chairman of the Board and
Chief Executive Officer POWER OF ATTORNEY
   Signature
    
    Title
    
    DatePrincipal Executive Officer:/s/ H.K. Desai
    
    Chairman of the Board and
    
    May 20, 2010H.K. Desai
    
    Chief Executive OfficerPrincipal Financial and Accounting Officer:/s/ Simon Biddiscombe
    
    Senior Vice President and
    
    May 20, 2010Simon Biddiscombe
    
    Chief Financial Officer/s/ Joel S. Birnbaum
    
    Director
    
    May 20, 2010Joel S. Birnbaum/s/ James R. Fiebiger
    
    Director
    
    May 20, 2010James R. Fiebiger/s/ Balakrishnan S. Iyer
    
    Director
    
    May 20, 2010Balakrishnan S. Iyer/s/ Kathryn B. Lewis
    
    Director
    
    May 20, 2010Kathryn B. Lewis/s/ George D. Wells
    
    Director
    
    May 20, 2010George D. Wells
 68




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##### Table of Contents



SCHEDULE II
 QLOGIC CORPORATION
 VALUATION AND QUALIFYING ACCOUNTS
 Additions:Charged to
    
    
    Deductions:Balance at
    
    
    Costs and
    
    
    Amounts
    
    
    Balance atBeginning of
    
    
    Expenses
    
    
    Written Off, Net
    
    
    End ofYear
    
    
    or Revenues
    
    
    of Recoveries
    
    
    Year(In thousands)Year ended March 28, 2010:Allowance for doubtful accounts
    
    $
    1,366
    
    
    $
    366
    
    
    $
    227
    
    
    $
    1,505Sales returns and allowances
    
    $
    8,848
    
    
    $
    29,311
    
    
    $
    29,883
    
    
    $
    8,276Year ended March 29, 2009:Allowance for doubtful accounts
    
    $
    1,176
    
    
    $
    278
    
    
    $
    88
    
    
    $
    1,366Sales returns and allowances
    
    $
    7,601
    
    
    $
    37,074
    
    
    $
    35,827
    
    
    $
    8,848Year ended March 30, 2008:Allowance for doubtful accounts
    
    $
    1,075
    
    
    $
    399
    
    
    $
    298
    
    
    $
    1,176Sales returns and allowances
    
    $
    5,219
    
    
    $
    29,820
    
    
    $
    27,438
    
    
    $
    7,601
 69




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description3.1
    
    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/A filed on February 15, 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/A filed on February 15,
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/A filed
on February 15, 1994)3.4
    
    Certificate of Amendment of Certificate of Incorporation,
dated February 24, 1994. (incorporated by reference to Exhibit
3.4 of the Registrants Annual Report on Form 10-K for the
year ended March 30, 2003)3.5
    
    Certificate of Designation of Rights, Preferences and
Privileges of Series A Junior Participating Preferred Stock,
dated June 4, 1996. (incorporated by reference to Exhibit 3.5
of the Registrants Annual Report on Form 10-K for the year
ended March 30, 2003)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. (incorporated by reference to
Exhibit 3.8 of the Registrants Annual Report on Form 10-K for
the year ended March 30, 2003)3.9
    
    By-Laws of QLogic Corporation, as amended. (incorporated by
reference to Exhibit 3.9 of the Registrants Current Report on
Form 8-K filed on November 12, 2008)10.1
    
    QLogic Corporation Non-Employee Director Stock Option Plan, as
amended.* (incorporated by reference to Exhibit 4.1 of the
Registrants Registration Statement on Form S-8 filed on
February 6, 2004 (File No. 333-112572))10.2
    
    QLogic Corporation Stock Awards Plan, as amended.*
(incorporated by reference to Exhibit 4.2 of the Registrants
Registration Statement on Form S-8 filed on February 6, 2004
(File No. 333-112572))10.3
    
    Form of Indemnification Agreement between QLogic Corporation
and Directors and Executive Officers.* (incorporated by
reference to Exhibit 10.1 of the Registrants Current Report
on Form 8-K filed on April 7, 2006)10.4
    
    QLogic Corporation 1998 Employee Stock Purchase Plan, Amended
and Restated Effective May 22, 2008.* (incorporated by
reference to Exhibit 10.3 of the Registrants Current Report
on Form 8-K filed on September 4, 2008)10.5
    
    QLogic Corporation 2005 Performance Incentive Plan, Amended
and Restated Effective July 16, 2009.* (incorporated by
reference to Exhibit 10.1 of the Registrants Current Report
on Form 8-K filed on August 21, 2009)
 70




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##### Table of Contents



ExhibitNo.
    
    Description10.6
    
    Terms and Conditions of Nonqualified Stock Option under the
QLogic Corporation 2005 Performance Incentive Plan.*
(incorporated by reference to Exhibit 10.1 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended July 2,
2006)10.7
    
    Terms and Conditions of Incentive Stock Option under the
QLogic Corporation 2005 Performance Incentive Plan.*
(incorporated by reference to Exhibit 10.2 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended July 2,
2006)10.8
    
    Terms and Conditions of Stock Unit Award under the QLogic
Corporation 2005 Performance Incentive Plan.* (incorporated by
reference to Exhibit 10.1 of the Registrants Quarterly Report
on Form 10-Q for the quarter ended December 28, 2008)10.9
    
    Change in Control Severance Agreement, dated December 18,
2008, between QLogic Corporation and H.K. Desai.*
(incorporated by reference to Exhibit 10.2 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended December
28, 2008)10.10
    
    Change in Control Severance Agreement, dated December 18,
2008, between QLogic Corporation and Simon Biddiscombe.*
(incorporated by reference to Exhibit 10.3 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended December
28, 2008)10.11
    
    Non-Employee Director Equity Award Program under the QLogic
Corporation 2005 Performance Incentive Plan.* (incorporated by
reference to Exhibit 10.2 of the Registrants Current Report
on Form 8-K filed on September 4, 2008)21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of Independent Registered Public Accounting Firm.24
    
    Power of Attorney (included on signature page).31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) of the Securities Exchange
Act of 1934, as amended, and 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. 71