10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 28, 2008

Or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number 0-23298

QLogic Corporation

(Exact name of registrant as specified in its charter)

Delaware	33-0537669
(State of incorporation)	(I.R.S. Employer Identification No.)

26650 Aliso Viejo Parkway
Aliso Viejo, California 92656
(Address of principal executive office and zip code)

(949) 389-6000
(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

     As of January 29, 2009, 121,238,405 shares of the Registrant’s common stock were outstanding.

QLOGIC CORPORATION

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at December 28, 2008 and March 30, 2008		1
Condensed Consolidated Statements of Income for the three and nine months ended December 28, 2008 and December 30, 2007		2
Condensed Consolidated Statements of Cash Flows for the nine months ended December 28, 2008 and December 30, 2007		3
Notes to Condensed Consolidated Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		21
Item 4. Controls and Procedures		21
PART II. OTHER INFORMATION
Item 1A. Risk Factors		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6. Exhibits		35
Signatures		36
EX-10.1
EX-10.2
EX-10.3
EX-31.1
EX-31.2
EX-32

i

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 28,			March 30,
	2008			2008
	(Unaudited; In thousands,
	except share and per
	share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	151,681		$	160,009
Short-term marketable securities		183,063			160,497
Accounts receivable, less allowance for doubtful accounts of $1,191 and $1,176 as of December 28, 2008 and March 30, 2008, respectively		87,531			81,642
Inventories		30,171			27,520
Deferred tax assets		22,563			32,227
Other current assets		9,450			8,925
Total current assets		484,459			470,820
Long-term marketable securities		36,908			55,903
Property and equipment, net		93,071			93,726
Goodwill		118,859			127,409
Purchased intangible assets, net		22,027			34,652
Deferred tax assets		26,484			25,870
Other assets		3,957			2,586
	$	785,765		$	810,966
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	35,915		$	35,643
Accrued compensation		24,824			31,120
Accrued taxes		3,905			5,262
Deferred revenue		6,998			8,693
Other current liabilities		6,893			5,952
Total current liabilities		78,535			86,670
Accrued taxes		56,245			48,163
Deferred revenue		8,603			5,087
Other liabilities		4,742			5,130
Total liabilities		148,125			145,050
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 1,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 201,795,000 and 199,652,000 shares issued at December 28, 2008 and March 30, 2008, respectively		202			200
Additional paid-in capital		703,689			657,893
Retained earnings		1,174,530			1,084,938
Accumulated other comprehensive income (loss)		291			(2,530	)
Treasury stock, at cost: 79,067,000 and 66,638,000 shares at December 28, 2008 and March 30, 2008, respectively		(1,241,072	)		(1,074,585	)
Total stockholders’ equity		637,640			665,916
	$	785,765		$	810,966

See accompanying notes to condensed consolidated financial statements.

1

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended				Nine Months Ended
	December 28,		December 30,		December 28,		December 30,
	2008		2007		2008		2007
	(Unaudited; In thousands, except per share amounts)
Net revenues	$	163,691	$	158,040	$	503,315	$	438,143
Cost of revenues		54,770		52,237		165,542		152,113
Gross profit		108,921		105,803		337,773		286,030
Operating expenses:
Engineering and development		33,117		33,174		100,565		100,916
Sales and marketing		20,918		20,292		67,895		62,104
General and administrative		8,172		8,260		24,892		25,250
Special charges		1,407		—		1,407		3,772
Total operating expenses		63,614		61,726		194,759		192,042
Operating income		45,307		44,077		143,014		93,988
Interest and other income, net		2,511		4,866		2,035		16,885
Income before income taxes		47,818		48,943		145,049		110,873
Income taxes		17,028		17,073		55,457		37,428
Net income	$	30,790	$	31,870	$	89,592	$	73,445
Net income per share:
Basic	$	0.24	$	0.23	$	0.69	$	0.51
Diluted	$	0.24	$	0.23	$	0.68	$	0.50
Number of shares used in per share calculations:
Basic		126,180		136,836		130,050		144,932
Diluted		126,497		137,421		130,932		145,614

See accompanying notes to condensed consolidated financial statements.

2

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	December 28,			December 30,
	2008			2007
	(Unaudited; In thousands)
Cash flows from operating activities:
Net income	$	89,592		$	73,445
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,579			22,842
Stock-based compensation		22,144			24,249
Acquisition-related:
Amortization of purchased intangible assets		12,319			13,107
Stock-based compensation		787			568
Deferred income taxes		15,632			(12,472	)
Impairment of available-for-sale securities		12,002			—
Net gains on trading securities		(3,605	)		—
Provision for losses on accounts receivable		111			190
Loss on disposal of property and equipment		137			1,121
Changes in operating assets and liabilities:
Accounts receivable		(6,000	)		(2,286	)
Inventories		(2,651	)		7,720
Other assets		(2,149	)		2,053
Accounts payable		(2,073	)		3,813
Accrued compensation		(5,376	)		(7,108	)
Accrued taxes		6,725			33,329
Deferred revenue		1,821			2,740
Other liabilities		(702	)		(756	)
Net cash provided by operating activities		163,293			162,555
Cash flows from investing activities:
Purchases of available-for-sale securities		(117,475	)		(120,923	)
Proceeds from sales and maturities of available-for-sale securities		107,874			348,387
Proceeds from disposition of trading securities		2,675			—
Additions to property and equipment		(21,410	)		(22,460	)
Acquisition of business		—			67
Net cash provided by (used in) investing activities		(28,336	)		205,071
Cash flows from financing activities:
Proceeds from issuance of stock under stock plans		21,624			11,262
Tax benefit from issuance of stock under stock plans		323			364
Purchase of treasury stock		(165,232	)		(315,276	)
Net cash used in financing activities		(143,285	)		(303,650	)
Net increase (decrease) in cash and cash equivalents		(8,328	)		63,976
Cash and cash equivalents at beginning of period		160,009			76,804
Cash and cash equivalents at end of period	$	151,681		$	140,780

See accompanying notes to condensed consolidated financial statements.

3

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

     In the opinion of management of QLogic Corporation (QLogic or the Company), the accompanying unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2008. The results of operations for the three and nine months ended December 28, 2008 are not necessarily indicative of the results that may be expected for the entire fiscal year.

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Among the significant estimates affecting the consolidated financial statements are those related to revenue recognition, stock-based compensation expense, income taxes, marketable securities, inventories, goodwill and long-lived assets.

     The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. The current volatility in the capital markets and the economy has increased the uncertainty in our estimates, including our estimates impacting marketable securities and long-lived assets. Significant judgment is required in determining the fair value of marketable securities in inactive markets as well as determining when declines in fair value constitute an other-than-temporary impairment. In addition, significant judgment is required in determining whether a potential indicator of impairment of our long-lived assets exists and in estimating future cash flows for any necessary impairment tests. As future events unfold and their effects cannot be determined with precision, actual results could differ significantly from management’s estimates.

Note 2. Acquisition of SilverStorm Technologies, Inc.

     In November 2006, the Company acquired SilverStorm Technologies, Inc. (SilverStorm) by merger. Cash consideration was $59.6 million, including $59.1 million for all outstanding SilverStorm common stock, vested stock options and stock warrants and $0.5 million for direct acquisition costs. Based on a preliminary purchase price allocation, the Company allocated the total purchase consideration to the tangible assets, liabilities and identifiable intangible assets acquired, as well as purchased in-process research and development. During the first quarter of fiscal 2009, the Company finalized its determination of the net operating loss carryforwards and other tax benefits available from the acquisition, resulting in an increase in deferred tax assets of $8.6 million and a corresponding decrease in goodwill.

Note 3. Marketable Securities and Fair Value Measurements

     Marketable Securities

     A summary of the components of marketable securities is as follows:

	December 28,		March 30,
	2008		2008
	(In thousands)
Available-for-sale securities	$	183,159	$	216,400
Trading securities		36,812		—
Total marketable securities		219,971		216,400
Less short-term marketable securities		183,063		160,497
Long-term marketable securities	$	36,908	$	55,903

4

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company’s portfolio of available-for-sale securities consists of the following:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
December 28, 2008
Corporate debt obligations	$	54,328	$	453	$	(1,089	)	$	53,692
U.S. Government and agency securities		44,832		1,467		—			46,299
Asset and mortgage-backed securities		25,630		334		(377	)		25,587
Municipal bonds		2,545		59		—			2,604
Total debt securities		127,335		2,313		(1,466	)		128,182
Money market and enhanced cash funds		49,000		—		—			49,000
Auction rate preferred securities		101		—		(5	)		96
Publicly-traded common stock		5,881		—		—			5,881
Total available-for-sale securities	$	182,317	$	2,313	$	(1,471	)	$	183,159
March 30, 2008
Corporate debt obligations	$	68,234	$	635	$	(168	)	$	68,701
U.S. Government and agency securities		40,242		964		—			41,206
Asset and mortgage-backed securities		35,373		490		(28	)		35,835
Auction rate debt securities		25,640		—		(1,582	)		24,058
Municipal bonds		4,548		67		—			4,615
Total debt securities		174,037		2,156		(1,778	)		174,415
Auction rate preferred securities		36,425		—		(4,580	)		31,845
Publicly-traded common stock		10,140		—		—			10,140
Total available-for-sale securities	$	220,602	$	2,156	$	(6,358	)	$	216,400

     As of December 28, 2008, the fair value of certain of the Company’s available-for-sale securities was less than their cost basis.  Management reviewed various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition and near term prospects of the issuer of the marketable security, the magnitude of the unrealized loss compared to the cost of the investment, the length of time the investment has been in a loss position and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.  Based on this analysis, the Company determined that a portion of the unrealized losses associated with the Company’s portfolio of marketable securities were other-than-temporary and recorded impairment charges for these securities of $4.3 million and $12.0 million during the three and nine months ended December 28, 2008, respectively, which are included in interest and other income, net, in the accompanying condensed consolidated statements of income. The Company determined that the remaining unrealized losses are temporary in nature and recorded them as a component of accumulated other comprehensive income.

     As of December 28, 2008, the Company had investments in a money market fund and enhanced cash fund sponsored by The Reserve (an asset management company) that have suspended trading and redemptions. These funds are in the process of being liquidated and the Company expects the liquidation to occur in stages with proceeds distributed as the underlying securities mature or are sold. As a result, during the three months ended September 28, 2008, the Company reclassified $55.5 million (net of $1.7 million of impairment charges) of such investments from cash equivalents to available-for-sale securities. This reclassification is included in purchases of available-for-sale securities in the accompanying condensed consolidated statement of cash flows for the nine months ended December 28, 2008. During the three months ended December 28, 2008, the Company received net proceeds totaling $6.5 million from the partial liquidation of these funds. Subsequent to December 28, 2008, the Company received an additional $33.7 million as part of the liquidation process.

     The Company’s marketable securities also include investments in auction rate debt and preferred securities (ARS), the majority of which are rated AA or higher.  During late fiscal 2008, the market auctions of many ARS began to fail, including auctions for the Company’s ARS.  The underlying assets for the auction rate debt securities in the Company’s portfolio are student loans, substantially all of which are backed by the federal government under the Federal Family Education Loan Program. The underlying assets of the Company’s auction rate preferred securities are the respective funds’ investment portfolios. 

     In November 2008, the Company entered into an agreement with the broker for substantially all of the ARS currently held by the Company, which provides the Company with certain rights (ARS Rights), in exchange for the release of potential claims and damages

5

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

against the broker. The ARS Rights entitle the Company to sell the related ARS back to the broker for a price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, if any, which price is referred to as “par.” The ARS Rights may be exercised by the Company at any time between June 30, 2010 and July 2, 2012, if the securities are not earlier redeemed or sold. Under the ARS Rights, the broker may, at its discretion, purchase the ARS at any time through July 2, 2012 without prior notice to the Company and must pay the Company par value for the ARS within one day of the sale transaction settlement.

     The ARS Rights agreement, a legally enforceable contract, results in put options and are recognized as free standing assets separate from the ARS, in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The Company elected to measure the put options at fair value in accordance with SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of Financial Accounting Standards Board (FASB) Statement No. 115” and recorded the initial fair value of $8.1 million in marketable securities with the related gains recognized in interest and other income, net, in the accompanying condensed consolidated statements of income for the three and nine months ended December 28, 2008. In connection with the election to measure the put options at fair value, the Company has classified these financial instruments as trading securities. The ARS associated with the ARS Rights, previously classified as available-for-sale securities, were reclassified to trading securities during the three months ended December 28, 2008. As a result, the Company recognized a loss of $3.4 million, which had previously been recorded in accumulated other comprehensive loss and $1.1 million related to changes in the fair market value of the trading securities subsequent to the reclassification. The loss related to the ARS is included in interest and other income, net, in the accompanying consolidated statements of income for the three and nine months ended December 28, 2008. Subsequent changes in fair value of the put options and the ARS will be recorded in earnings in the related period.

     The Company’s portfolio of trading securities consists of the following:

	December 28,
	2008
	(In thousands)
Auction rate debt securities	$	21,866
Auction rate preferred securities		6,799
Put options related to auction rate securities		8,147
Total trading securities	$	36,812

     The Company may be unable to liquidate some or all of its ARS in the near term and, accordingly, has classified its auction rate debt and preferred securities, as well as the related put options, as long-term as of December 28, 2008.

     Deferred Taxes related to Marketable Securities

     During the three and nine months ended December 28, 2008, the Company recorded $2.5 million and $7.7 million, respectively, for valuation allowances against deferred tax assets related to impairments on certain marketable securities. Due to the recent turmoil in the financial and credit markets, and limitations on the deductibility of capital losses, management is currently unable to assert that it is more likely than not that the Company will realize the benefit of the related deferred tax assets.

     Fair Value Measurements

     Effective March 31, 2008, the Company adopted certain provisions of SFAS No. 157, “Fair Value Measurements.” In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2, “Effective Date of FASB Statement No. 157,” which provides a one-year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company adopted the provisions of SFAS No. 157 with respect to only financial assets, which are comprised solely of marketable securities. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” that clarifies the application of SFAS No. 157 in valuing assets in inactive markets. FSP No. 157-3 was effective upon issuance and its adoption did not have a material impact on the Company’s consolidated results of operations or financial condition. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS No. 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value

6

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

• 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.

     Assets measured at fair value on a recurring basis as of December 28, 2008 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In thousands)
Corporate debt obligations	$	43,067	$	10,625	$	—	$	53,692
U.S. Government and agency securities		46,299		—		—		46,299
Asset and mortgage-backed securities		5,539		20,048		—		25,587
Auction rate debt securities		—		—		21,866		21,866
Municipal bonds		2,604		—		—		2,604
Total debt securities		97,509		30,673		21,866		150,048
Money market and enhanced cash funds		—		49,000		—		49,000
Auction rate preferred securities		—		—		6,895		6,895
Put options related to certain auction rate securities		—		—		8,147		8,147
Publicly-traded common stock		5,881		—		—		5,881
Balance as of December 28, 2008	$	103,390	$	79,673	$	36,908	$	219,971

     The Company’s investments in ARS and the related put options are classified within Level 3 because there are currently no active markets for these securities and the Company is unable to obtain independent valuations from market sources.  Therefore, the ARS and the related put options were primarily valued based on an income approach using an estimate of future cash flows. The assumptions used in preparing these discounted cash flow models included estimates for the amount and timing of future interest and principal payments, the collateralization of underlying security investments, the creditworthiness of the issuer and the rate of return required by investors to own these securities in the current environment, including call and liquidity premiums. The total amount of assets measured using Level 3 valuation methodologies represented less than 5% of total assets as of December 28, 2008.

     A summary of the changes in Level 3 assets measured at fair value on a recurring basis for the three and nine months ended December 28, 2008 is as follows:

						Change in
	Beginning		Total Realized			Unrealized		Sales and Other			Ending
Three Months Ended December 28, 2008	Balance		Gains (Losses)			Losses		Settlements			Balance
	(In thousands)
Auction rate debt securities	$	22,348	$	(2,401	)	$	3,104	$	(1,185	)	$	21,866
Auction rate preferred securities		9,664		(2,141	)		1,255		(1,883	)		6,895
Put options related to certain auction rate securities		—		8,147			—		—			8,147
Total	$	32,012	$	3,605		$	4,359	$	(3,068	)	$	36,908

7

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

						Change in
	Beginning		Total Realized			Unrealized		Sales and Other			Ending
Nine Months Ended December 28, 2008	Balance		Gains (Losses)			Losses		Settlements			Balance
	(In thousands)
Auction rate debt securities	$	24,058	$	(2,401	)	$	1,582	$	(1,373	)	$	21,866
Auction rate preferred securities		31,845		(4,839	)		4,575		(24,686	)		6,895
Put options related to certain auction rate securities		—		8,147			—		—			8,147
Total	$	55,903	$	907		$	6,157	$	(26,059	)	$	36,908

     Realized gains and losses are included in interest and other income, net, in the accompanying condensed consolidated statements of income for the three and nine months ended December 28, 2008. Realized gains and losses for the three and nine months ended December 28, 2008 included losses totaling $3.4 million that were transferred from accumulated other comprehensive loss as a result of the reclassification of the ARS from available-for-sale to trading securities and $1.1 million related to changes in the fair market value of the trading securities subsequent to the reclassification.

Note 4. Inventories

     Components of inventories are as follows:

	December 28,		March 30,
	2008		2008
	(In thousands)
Raw materials	$	9,639	$	7,403
Finished goods		20,532		20,117
	$	30,171	$	27,520

Note 5. Purchased Intangible Assets

     Purchased intangible assets consist of the following:

	December 28, 2008						March 30, 2008
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Value		Amortization		Value		Value		Amortization		Value
	(In thousands)
Acquisition-related intangibles:
Core/developed technology	$	43,700	$	25,437	$	18,263	$	43,700	$	15,737	$	27,963
Customer relationships		9,700		7,005		2,695		9,700		4,580		5,120
Other		775		633		142		775		439		336
		54,175		33,075		21,100		54,175		20,756		33,419
Other purchased intangibles:
Technology-related		2,911		1,984		927		2,596		1,363		1,233
	$	57,086	$	35,059	$	22,027	$	56,771	$	22,119	$	34,652

     A summary of the amortization expense, by classification, included in the accompanying condensed consolidated statements of income is as follows:

	Three Months Ended				Nine Months Ended
	December 28,		December 30,		December 28,		December 30,
	2008		2007		2008		2007
	(in thousands)
Cost of revenues	$	2,082	$	2,976	$	10,421	$	10,681
Engineering and development		32		32		94		283
Sales and marketing		808		808		2,425		2,736
	$	2,922	$	3,816	$	12,940	$	13,700

8

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The following table presents the estimated future amortization expense of purchased intangible assets as of December 28, 2008:

Fiscal	(In thousands)
2009 (remaining three months)	$	2,910
2010		9,865
2011		7,487
2012		1,765
	$	22,027

Note 6. Treasury Stock

     Since fiscal 2003, the Company has had various stock repurchase programs that authorized the purchase of up to $1.55 billion of the Company’s outstanding common stock, including a program approved in November 2008 authorizing the repurchase of up to $300 million of the Company’s outstanding common stock. During the nine months ended December 28, 2008, the Company purchased 12.4 million shares of its common stock for an aggregate purchase price of $166.5 million, of which $3.0 million was pending settlement at December 28, 2008 and is included in other current liabilities in the accompanying condensed consolidated balance sheet. As of December 28, 2008, the Company had purchased a total of 79.1 million shares of common stock under these repurchase programs for an aggregate purchase price of $1.2 billion.

     Repurchased shares have been recorded as treasury shares and will be held until the Company’s Board of Directors designates that these shares be retired or used for other purposes.

Note 7. Special Charges

     During the three months ended December 28, 2008, the Company implemented a workforce reduction initiative primarily in response to the macroeconomic environment and recorded special charges totaling $1.4 million associated with the cost of severance benefits for the affected employees, of which $0.8 million had been paid as of December 28, 2008. The unpaid severance benefits of $0.6 million are expected to be paid over the terms of the related agreements, principally during fiscal 2009.

     During the nine months ended December 30, 2007, the Company recorded special charges of $3.8 million associated with the consolidation and elimination of certain engineering activities. As of December 28, 2008, the payments related to these activities were substantially complete.

Note 8. Stock-Based Compensation

     During the nine months ended December 28, 2008, the Company granted options to purchase 3,969,000 shares of common stock and 921,000 restricted stock units with weighted average grant date fair values of $5.68 and $15.16 per share, respectively.

     A summary of stock-based compensation expense, excluding stock-based compensation related to acquisitions, recorded by functional line item in the accompanying condensed consolidated statements of income is as follows:

	Three Months Ended				Nine Months Ended
	December 28,		December 30,		December 28,		December 30,
	2008		2007		2008		2007
	(In thousands)
Cost of revenues	$	569	$	564	$	1,577	$	1,629
Engineering and development		3,748		3,851		11,600		11,131
Sales and marketing		1,288		1,479		4,303		4,753
General and administrative		1,400		2,168		4,664		6,736
	$	7,005	$	8,062	$	22,144	$	24,249

9

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9. Interest and Other Income, Net

     Components of interest and other income, net, are as follows:

	Three Months Ended						Nine Months Ended
	December 28,			December 30,			December 28,			December 30,
	2008			2007			2008			2007
	(In thousands)
Interest income	$	2,850		$	4,448		$	9,435		$	16,251
Gain on recognition of put options (see Note 3)		8,147			—			8,147			—
Loss on trading securities		(4,542	)		—			(4,542	)		—
Impairment of available-for-sale securities		(4,259	)		—			(12,002	)		—
Gain on sales of available-for-sale securities		559			402			993			571
Loss on sales of available-for-sale securities		(87	)		(16	)		(129	)		(194	)
Other		(157	)		32			133			257
	$	2,511		$	4,866		$	2,035		$	16,885

Note 10. Net Income Per Share

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

	Three Months Ended				Nine Months Ended
	December 28,		December 30,		December 28,		December 30,
	2008		2007		2008		2007
	(In thousands, except per share amounts)
Net income	$	30,790	$	31,870	$	89,592	$	73,445
Shares:
Weighted-average shares outstanding — basic		126,180		136,836		130,050		144,932
Dilutive potential common shares, using treasury stock method		317		585		882		682
Weighted-average shares outstanding — diluted		126,497		137,421		130,932		145,614
Net income per share:
Basic	$	0.24	$	0.23	$	0.69	$	0.51
Diluted	$	0.24	$	0.23	$	0.68	$	0.50

     Stock-based awards, including stock options and restricted stock units, representing 27,455,000 and 25,183,000 shares of common stock have been excluded from the diluted net income per share calculations for the three and nine months ended December 28, 2008, respectively, and 25,191,000 and 24,924,000 shares of common stock have been excluded from the diluted net income per share calculations for the three and nine months ended December 30, 2007, respectively. These stock-based awards have been excluded from the diluted net income per share calculations because their effect would have been antidilutive.

Note 11. Comprehensive Income

     Components of comprehensive income are as follows:

	Three Months Ended					Nine Months Ended
	December 28,		December 30,			December 28,		December 30,
	2008		2007			2008		2007
	(In thousands)
Net income	$	30,790	$	31,870		$	89,592	$	73,445
Other comprehensive income:
Unrealized losses on available-for-sale securities reclassified to trading securities, net of tax (see Note 3)		2,093		—			2,093		—
Other changes in unrealized gains/losses on available-for-sale securities, net of tax		2,080		(1,147	)		728		(1,186	)
	$	34,963	$	30,723		$	92,413	$	72,259

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     Item 2. 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 unaudited condensed 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. 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 II, 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. We undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

     We are a supplier of high performance network infrastructure solutions, which are sold primarily to original equipment manufacturers, or OEMs, and distributors. Our Host Products consist primarily of Fibre Channel and Internet Small Computer Systems Interface, or iSCSI, host bus adapters, or HBAs; and InfiniBand^® host channel adapters, or HCAs. Our Network Products consist primarily of Fibre Channel switches, including core, blade and stackable switches; InfiniBand switches, including edge fabric switches and multi-protocol fabric directors; and storage routers for bridging Fibre Channel and iSCSI networks. Our Silicon Products consist primarily of protocol chips. All of these solutions address the storage area network, or SAN, or server fabric connectivity infrastructure requirements of small, medium and large enterprises. Our products based on InfiniBand technology are designed for the emerging high performance computing, or HPC, environments.

     Our products are incorporated in solutions from a number of OEM customers, including Cisco Systems, Inc., Dell Inc., EMC Corporation, Hitachi Data Systems, Hewlett-Packard Company, International Business Machines Corporation, NetApp, Inc., Sun Microsystems, Inc. and many others.

  Third Quarter Financial Highlights and Other Information

     A summary of the key factors and significant events which impacted our financial performance during the third quarter of fiscal 2009 are as follows:

• Net revenues were $163.7 million for the third quarter of fiscal 2009 compared to $171.2 million in the second quarter of fiscal 2009.

• Gross profit as a percentage of net revenues was 66.5% for the third quarter of fiscal 2009 compared to 67.9% for the second quarter of fiscal 2009.

• Operating income as a percentage of net revenues was 27.7% for the third quarter of fiscal 2009 compared to 29.2% in the second quarter of fiscal 2009.

• Net income of $30.8 million, or $0.24 per diluted share, in the third quarter of fiscal 2009 increased from $27.2 million, or $0.20 per diluted share, in the second quarter of fiscal 2009.

• Cash, cash equivalents and marketable securities were $371.7 million at December 28, 2008 compared to $421.0 million at September 28, 2008.

• Accounts receivable was $87.5 million as of December 28, 2008, compared to $77.9 million as of September 28, 2008. Days sales outstanding (DSO) in receivables was 49 days as of December 28, 2008 compared to 41 days as of September 28, 2008.

• Inventories were $30.2 million as of December 28, 2008, compared to $33.3 million as of September 28, 2008. Our annualized inventory turns in the third quarter of fiscal 2009 increased to 7.3 from 6.6 turns in second quarter of fiscal 2009.

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     As a result of the worldwide economic slowdown, it is extremely difficult for us and our customers to forecast future sales levels based on historical information and trends. Portions of our expenses are fixed and other expenses are tied to expected levels of sales activities. To the extent that we do not achieve our anticipated level of sales, our gross profit and net income could be adversely affected until such expenses are reduced to an appropriate level.

Results of Operations

  Net Revenues

     A summary of the components of our net revenues is as follows:

	Three Months Ended						Nine Months Ended
	December 28,			December 30,			December 28,			December 30,
	2008			2007			2008			2007
	(Dollars in millions)
Net revenues:
Host Products	$	112.2		$	118.9		$	352.5		$	327.5
Network Products		32.8			27.8			92.5			74.2
Silicon Products		16.5			9.3			47.7			30.4
Royalty and Service		2.2			2.0			10.6			6.0
Total net revenues	$	163.7		$	158.0		$	503.3		$	438.1
Percentage of net revenues:
Host Products		69	%		75	%		70	%		75	%
Network Products		20			18			18			17
Silicon Products		10			6			10			7
Royalty and Service		1			1			2			1
Total net revenues		100	%		100	%		100	%		100	%

     Historically, the global marketplace for network infrastructure solutions has expanded in response to the information storage requirements of enterprise business environments, as well as the emerging market for solutions in HPC environments. These markets have been characterized by rapid advances in technology and related product performance, which has generally resulted in declining average selling prices over time. In general, our revenues have been favorably affected by increases in units sold as a result of market expansion and the release of new products. The favorable effect on our revenues as a result of increases in volume has been partially offset by the impact of declining average selling prices. However, as a result of the worldwide economic slowdown, we believe there may be potential for a broader slowdown in global IT spending rates in the next few quarters. Accordingly, it is extremely difficult for us to forecast future sales levels and historical information may not be indicative of future trends.

     Our net revenues are derived primarily from the sale of Host Products, Network Products and Silicon Products. Net revenues increased 4% to $163.7 million for the three months ended December 28, 2008 from $158.0 million for the three months ended December 30, 2007. The change in net revenue was primarily the result of a $6.7 million, or 6%, decrease in revenue from Host Products; a $5.0 million, or 18%, increase in revenue from Network Products; and a $7.2 million, or 78%, increase in revenue from Silicon Products. The decrease in revenue from Host Products was primarily due to a 9% decrease in the average selling prices of HBAs, partially offset by a 3% increase in the quantity of these products sold. The increase in revenue from Network Products was primarily due to a 27% increase in the number of InfiniBand switches sold and a 49% increase in the number of Fibre Channel switches sold, partially offset by a 27% decrease in the average selling prices of Fibre Channel switches. The increase in revenue from Silicon Products from the same period in the prior year was due primarily to an increase in the number of protocol chips sold, partially offset by a decrease in revenue from management controllers, as these products have reached end of life. Royalty and Service revenues are unpredictable and we do not expect them to be significant to our overall revenues.

     Net revenues increased 15% to $503.3 million for the nine months ended December 28, 2008 from $438.1 million for the nine months ended December 30, 2007. This increase was primarily the result of a $25.0 million, or 8%, increase in revenue from Host Products; an $18.3 million, or 25%, increase in revenue from Network Products; and a $17.3 million, or 57%, increase in revenue from Silicon Products. The increase in revenue from Host Products was primarily due to a 17% increase in the quantity of HBAs sold partially offset by an 8% decrease in average selling prices of these products. The increase in revenue from Network Products was primarily due to a 58% increase in the number of Fibre Channel switches sold, partially offset by a 23% decrease in the average selling prices of these products and a 46% increase in the number of InfiniBand switches sold. The increase in revenue from Silicon Products from the same period in the prior year was due primarily to an increase in the number of protocol chips sold. Royalty and Service revenues for the nine months ended December 28, 2008 increased to $10.6 million from $6.0 million for the nine months ended December 30, 2007, primarily due to a $3.5 million one-time royalty associated with the license of technology acquired from Troika Networks.

12

     A small number of our customers account for a substantial portion of our net revenues, and we expect that a limited number of customers will continue to represent a substantial portion of our net revenues for the foreseeable future. Our top ten customers accounted for 83% and 85% of net revenues during the nine months ended December 28, 2008 and the fiscal year ended March 30, 2008, respectively. Three of our customers each represented 10% or more of net revenues for fiscal 2008, and these same three customers continued to be the only customers representing 10% or more of net revenues for the nine months ended December 28, 2008.

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

     Net revenues by geographic area are as follows:

	Three Months Ended				Nine Months Ended
	December 28,		December 30,		December 28,		December 30,
	2008		2007		2008		2007
	(In millions)
United States	$	75.8	$	78.7	$	240.1	$	224.9
Europe, Middle East and Africa		40.4		40.2		123.4		105.4
Asia-Pacific and Japan		39.0		29.1		111.4		81.0
Rest of the world		8.5		10.0		28.4		26.8
Total net revenues	$	163.7	$	158.0	$	503.3	$	438.1

     Revenues by geographic area are presented based upon the country of destination, which is not necessarily indicative of the location of the ultimate end-user of our products.

  Gross Profit

     Gross profit represents net revenues less cost of revenues. Cost of revenues consists primarily of the cost of purchased products, assembly and test services; costs associated with product procurement, inventory management and product quality; and the amortization of purchased intangible assets. A summary of our gross profit and related percentage of net revenues is as follows:

	Three Months Ended						Nine Months Ended
	December 28,			December 30,			December 28,			December 30,
	2008			2007			2008			2007
	(Dollars in millions)
Gross profit	$	108.9		$	105.8		$	337.8		$	286.0
Percentage of net revenues		66.5	%		66.9	%		67.1	%		65.3	%

     Gross profit for the three months ended December 28, 2008 increased $3.1 million, or 3%, from gross profit for the three months ended December 30, 2007.  The gross profit percentage for the three months ended December 28, 2008 was 66.5% and compared to 66.9% for the corresponding period in the prior year.

     Gross profit for the nine months ended December 28, 2008 increased $51.8 million, or 18%, from gross profit for the nine months ended December 30, 2007.  The gross profit percentage for the nine months ended December 28, 2008 was 67.1% and increased from 65.3% for the corresponding period in the prior year.  The increase in gross profit percentage was primarily the result of manufacturing related efficiencies.

     Our ability to maintain our current gross profit percentage can be significantly affected by factors such as the results of our investment in engineering and development activities, supply costs, the worldwide semiconductor foundry capacity, the mix of products shipped, the transition to new products, competitive price pressures, the timeliness of volume shipments of new products, the level of royalties received, our ability to achieve manufacturing cost reductions, and amortization and impairments of purchased intangible assets. We anticipate that it will be increasingly difficult to reduce manufacturing costs. As a result of these and other factors, it may be difficult to maintain our gross profit percentage consistent with historical periods and it may decline in the future.

13

  Operating Expenses

     Our operating expenses are summarized in the following table:

	Three Months Ended						Nine Months Ended
	December 28,			December 30,			December 28,			December 30,
	2008			2007			2008			2007
	(Dollars in millions)
Operating expenses:
Engineering and development	$	33.1		$	33.2		$	100.6		$	100.9
Sales and marketing		20.9			20.3			67.9			62.1
General and administrative		8.2			8.2			24.9			25.2
Special charges		1.4			—			1.4			3.8
Total operating expenses	$	63.6		$	61.7		$	194.8		$	192.0
Percentage of net revenues:
Engineering and development		20.2	%		21.0	%		20.0	%		23.0	%
Sales and marketing		12.8			12.9			13.5			14.2
General and administrative		5.0			5.2			4.9			5.8
Special charges		0.9			—			0.3			0.8
Total operating expenses		38.9	%		39.1	%		38.7	%		43.8	%

     Engineering and Development. Engineering and development expenses consist primarily of compensation and related benefit costs, service and material costs, occupancy costs and related computer support costs. Engineering and development expenses decreased to $33.1 million for the three months ended December 28, 2008 from $33.2 million for the three months ended December 30, 2007. During the nine months ended December 28, 2008, engineering and development expenses decreased to $100.6 million from $100.9 million for the nine months ended December 30, 2007. The decrease was primarily due to a $1.7 million decrease in cash compensation and benefit costs resulting from a net reduction in headcount, including a reduction in headcount related to the consolidation and elimination of certain engineering activities during fiscal 2008. This decrease was partially offset by a $1.1 million increase in depreciation and equipment costs.

     We believe continued investments in engineering and development activities are critical to achieving future design wins, expansion of our customer base and revenue growth opportunities.

     Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related benefit costs, sales commissions, promotional activities and travel for sales and marketing personnel. Sales and marketing expenses increased to $20.9 million for the three months ended December 28, 2008 from $20.3 million for the three months ended December 30, 2007. The increase in sales and marketing expenses was due primarily to a $0.5 million increase in cash compensation and related benefit costs.

     Sales and marketing expenses increased to $67.9 million for the nine months ended December 28, 2008 from $62.1 million for the nine months ended December 30, 2007. The increase in sales and marketing expenses was due primarily to a $4.1 million increase in cash compensation and related benefit costs, principally related to a $1.9 million increase in salaries due to increased headcount and a $1.8 million increase in commissions. In addition, occupancy costs and related computer support costs increased by $1.4 million.

     We believe continued investments in our sales and marketing organizational infrastructure and related marketing programs are critical to the success of our strategy of expanding our customer base and enhancing relationships with our existing customers.

     General and Administrative. General and administrative expenses consist primarily of compensation and related benefit costs for executive, finance, accounting, human resources, legal and information technology personnel. Non-compensation components of general and administrative expenses include accounting, legal and other professional fees, facilities expenses and other corporate expenses. General and administrative expenses were consistent at $8.2 million for the three months ended December 28, 2008 and December 30, 2007, respectively.

     General and administrative expenses decreased to $24.9 million for the nine months ended December 28, 2008 from $25.2 million for the nine months ended December 30, 2007. The decrease in general and administrative expenses was due primarily to a $2.1 million decrease in stock-based compensation, partially offset by a $1.3 million increase in cash compensation and related benefit costs due to increased headcount.

14

     Special Charges. During the three months ended December 28, 2008, we implemented a workforce reduction initiative primarily in response to the macroeconomic environment and recorded special charges totaling $1.4 million associated with the cost of severance benefits for the affected employees, of which $0.8 million had been paid as of December 28, 2008. The unpaid severance benefits of $0.6 million are expected to be paid over the terms of the related agreements, principally during fiscal 2009.

     During the nine months ended December 30, 2007, we recorded special charges of $3.8 million associated with the consolidation and elimination of certain engineering activities. As of December 28, 2008, the payments related to these activities were substantially complete.

  Interest and Other Income, Net

     Components of our interest and other income, net, are as follows:

	Three Months Ended					Nine Months Ended
	December 28,			December 30,		December 28,			December 30,
	2008			2007		2008			2007
	(In millions)
Interest income	$	2.9		$	4.4	$	9.4		$	16.2
Gain on recognition of put options		8.1			—		8.1			—
Loss on trading securities		(4.5	)		—		(4.5	)		—
Impairment of available-for-sale securities		(4.3	)		—		(12.0	)		—
Gain on sales of available-for-sale securities		0.6			0.4		1.0			0.6
Loss on sales of available-for-sale securities		(0.1	)		—		(0.1	)		(0.2	)
Other		(0.2	)		0.1		0.1			0.3
	$	2.5		$	4.9	$	2.0		$	16.9

     Interest and other income, net, for the three months ended December 28, 2008 was comprised principally of an $8.1 million gain on the recognition of put options and $2.9 million of interest income related to our portfolio of marketable securities, partially offset by a $4.5 million loss on trading securities and a $4.3 million impairment charge on available-for-sale securities. The gain on recognition of put options resulted from an agreement that we entered into with the broker for substantially all of our auction rate securities (ARS) that entitles us to sell the related ARS back to the broker for a price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, if any, at any time between June 30, 2010 and July 2, 2012, if the securities are not earlier redeemed or sold. The loss on trading securities was due to the realization of $3.4 million of previously unrealized losses on certain ARS that were transferred from accumulated other comprehensive loss as a result of the reclassification of the ARS from available-for-sale to trading securities and $1.1 million related to changes in the fair market value of the trading securities subsequent to the reclassification. Interest income decreased primarily due to a decrease in the balance of our marketable securities and a decline in interest rates.

     Interest and other income, net, for the nine months ended December 28, 2008 was comprised principally of $9.4 million of interest income related to our portfolio of marketable securities, the $8.1 million gain on the recognition of the put options and $0.9 million of net gains on sales of available-for-sale securities, partially offset by a $12.0 million impairment charge on available-for-sale securities and the $4.5 million loss on trading securities. Interest income decreased primarily due to a decrease in the balance of our marketable securities and a decline in interest rates.

     We reviewed various factors in determining whether to recognize an impairment charge related to our unrealized losses in available-for-sale securities, including the current financial and credit market environment, the financial condition and near term prospects of the issuer of the marketable security, the magnitude of the unrealized loss compared to the cost of the investment, the length of time the investment has been in a loss position and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value. Based on this analysis, we determined that a portion of the unrealized losses were other-than-temporary and recorded impairment charges of $4.3 million and $12.0 million related to our portfolio of available-for-sale securities during the three and nine months ended December 28, 2008, respectively.

15

  Income Taxes

     Our effective income tax rate was 38% and 34% for the nine months ended December 28, 2008 and December 30, 2007, respectively. Our effective income tax rate for the nine months ended December 28, 2008 was adversely impacted by a valuation allowance against deferred tax assets related to impairment charges on certain available-for-sale securities. Due to the recent turmoil in the financial and credit markets, and limitations on the deductibility of capital losses, we are currently unable to assert that it is more likely than not that we will realize the benefit of the related deferred tax assets. The impact of the valuation allowance was partially offset by the retroactive benefit for the federal research tax credit which was reinstated in October 2008. We expect the annual effective tax rate for fiscal 2009 to approximate 37%. Our annual effective tax rate was 35% for fiscal 2008. Given the increased global scope of our operations, and the complexity of global tax and transfer pricing rules and regulations, it has become increasingly difficult to estimate earnings within each tax jurisdiction.  If actual earnings within each tax jurisdiction differ materially from our estimates, we may not achieve our expected effective tax rate. Additionally, our effective tax rate may be impacted by other items including the tax effects of acquisitions, newly enacted tax legislation, stock-based compensation and uncertain tax positions.

Liquidity and Capital Resources

     Our combined balances of cash, cash equivalents and marketable securities totaled $371.7 million at December 28, 2008 compared to $376.4 million at March 30, 2008. The decrease in cash, cash equivalents and marketable securities was due primarily to the purchase of our common stock pursuant to our stock repurchase program, partially offset by our cash generated from operations. We believe that existing cash, cash equivalents, marketable securities and expected cash flow from operations will provide sufficient funds to finance our operations for at least the next twelve months. However, it is possible that we may need to supplement our existing sources of liquidity to finance our activities beyond the next twelve months or for the future acquisition of businesses, products or technologies and there can be no assurance that sources of liquidity will be available to us at that time.

     Cash provided by operating activities was $163.3 million for the nine months ended December 28, 2008 and $162.6 million for the nine months ended December 30, 2007.  Operating cash flow for the nine months ended December 28, 2008 reflects our net income of $89.6 million, net non-cash charges of $84.1 million and a net increase in the non-cash components of working capital of $10.4 million.  The increase in the non-cash components of working capital was primarily due to a $6.0 million increase in accounts receivable, a $5.4 million decrease in accrued compensation, a $2.7 million increase in inventories and a $2.1 million increase in other assets, partially offset by a $6.7 million increase in accrued taxes. The increase in accounts receivable was primarily due to the timing of cash receipts which was impacted by holiday shutdowns of several of our customers. The changes in accrued compensation and accrued taxes were primarily due to the timing of payment obligations. The increase in inventories was primarily due to a planned increase in component inventory as a result of volume discounts.

     Cash used in investing activities was $28.3 million for the nine months ended December 28, 2008 and consisted of additions to property and equipment of $21.4 million and net purchases of marketable securities of $6.9 million. Included in purchases of available-for-sale securities was a $57.2 million reclassification of certain cash equivalents to available-for-sale securities related to our investments in a money market fund and enhanced cash fund sponsored by The Reserve (an asset management company) that have suspended trading and redemptions. During the three months ended December 28, 2008, we received net proceeds totaling $6.5 million from the partial liquidation of these funds. During the nine months ended December 30, 2007, cash provided by investing activities of $205.1 million consisted primarily of net sales and maturities of available-for-sale securities of $227.5 million, partially offset by additions to property and equipment of $22.4 million.

     As our business grows, we expect capital expenditures to increase in the future as we continue to invest in machinery and equipment, more costly engineering and production tools for new technologies, and enhancements to our corporate information technology infrastructure.

     Cash used in financing activities of $143.3 million for the nine months ended December 28, 2008 consisted primarily of our purchase of $165.2 million of common stock under our stock repurchase program, partially offset by $21.9 million of proceeds from the issuance of common stock under our stock plans and the related tax benefit. During the nine months ended December 30, 2007, cash used in financing activities of $303.7 million consisted primarily of our purchase of $315.3 million of common stock under our stock repurchase program, partially offset by $11.6 million of proceeds from the issuance of common stock under our stock plans and the related tax benefit.

     Our marketable securities include $28.8 million of investments in ARS, the majority of which are rated AA or higher.  During late fiscal 2008, the market auctions of many ARS began to fail, including auctions for our ARS. The underlying assets for auction rate debt securities in our portfolio are student loans, substantially all of which are backed by the federal government under the Federal Family Education Loan Program. The underlying assets of our auction rate preferred securities are the respective funds’ investment portfolios.

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     In November 2008, we entered into an agreement with the broker for substantially all of the ARS we currently hold, which provides us with certain rights (ARS Rights), in exchange for the release of potential claims and damages against the broker. The ARS Rights entitle us to sell the related ARS back to the broker for a price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, if any, which price is referred to as “par.” The ARS Rights may be exercised by us at any time between June 30, 2010 and July 2, 2012, if the securities are not earlier redeemed or sold. Under the ARS Rights, the broker may, at its discretion, purchase the ARS at any time through July 2, 2012 without prior notice to us and must pay us par value for the ARS within one day of the sale transaction settlement. While we expect to ultimately recover our investments in the ARS at par, we may be unable to liquidate some or all of our ARS should we need or desire to access the funds invested in those securities prior to redemption by the issuer or the exercise of the ARS Rights.

     In addition, our marketable securities as of December 28, 2008, include an aggregate of $49.0 million in a money market fund and enhanced cash fund sponsored by The Reserve that have suspended trading and redemptions. These funds are in the process of being liquidated and we expect the liquidation to occur in stages with proceeds distributed as the underlying securities mature or are sold. Subsequent to December 28, 2008, we received an additional $33.7 million as part of the liquidation process. Based on our existing cash, cash equivalents and other marketable securities, as well as our expected cash flows from operating activities, we do not anticipate that the potential lack of liquidity of these investments in the near term will affect our ability to execute our current business plan.

     Except for our ARS and the related put options, our marketable securities are valued based on quoted market prices or other observable market inputs. As of December 28, 2008, the entire $28.8 million portfolio of ARS and the related put options valued at $8.1 million (collectively approximating 17% of our marketable securities portfolio) were measured at fair value based on an income approach using an estimate of future cash flows. The assumptions used in preparing the discounted cash flow model included estimates for the amount and timing of future interest and principal payments, the collateralization of underlying security investments, the creditworthiness of the issuer and the rate of return required by investors to own these securities in the current environment, including call and liquidity premiums.

     Since fiscal 2003, we have had stock repurchase programs that authorized us to purchase up to an aggregate of $1.55 billion of our outstanding common stock, including a program approved in November 2008 authorizing the repurchase of up to $300 million of our outstanding common stock. As of December 28, 2008, we had repurchased a total of 79.1 million shares of common stock under our stock repurchase programs for an aggregate purchase price of $1.2 billion. During the nine months ended December 28, 2008, we repurchased 12.4 million shares for an aggregate purchase price of $166.5 million, of which $3.0 million was pending settlement as of December 28, 2008. Pursuant to the existing stock repurchase programs, we are authorized to repurchase shares with an aggregate cost of up to $308.9 million as of December 28, 2008.

     We have certain contractual obligations and commitments to make future payments in the form of non-cancelable purchase orders to our suppliers and commitments under operating lease arrangements. A summary of our contractual obligations as of December 28, 2008, and their impact on our cash flows in future fiscal years, is as follows:

	2009
	(Remaining
	three months)		2010		2011		2012		2013		Thereafter		Total
	(In millions)
Operating leases	$	1.8	$	6.2	$	4.4	$	3.4	$	2.7	$	10.5	$	29.0
Non-cancelable purchase obligations		36.7		1.4		—		—		—		—		38.1
Total	$	38.5	$	7.6	$	4.4	$	3.4	$	2.7	$	10.5	$	67.1

     The amount of unrecognized tax benefits under Financial Accounting Standards Board Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” at December 28, 2008 was $56.2 million. The Company has not provided a detailed estimate of the timing due to the uncertainty of when the related tax settlements are due.

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Critical Accounting Policies and Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. We base our estimates on historical experience and on various other factors, including the current economic environment, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We believe the accounting policies described below to be our most critical accounting policies. These accounting policies are affected significantly by judgments, assumptions and estimates used in the preparation of the financial statements and actual results could differ materially from the amounts reported based on these policies.

  Revenue Recognition

     We recognize revenue from product sales when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured.

     For all sales, we use a binding purchase order or a signed agreement as evidence of an arrangement. Delivery occurs when goods are shipped and title and risk of loss transfer to the customer, in accordance with the terms specified in the arrangement with the customer. The customer’s obligation to pay and the payment terms are set at the time of delivery and are not dependent on the subsequent resale of our product. However, certain of our sales are made to distributors under agreements which contain a limited right to return unsold product and price protection provisions. We recognize revenue from these distributors based on the sell-through method using inventory information provided by the distributor. At times, we provide standard incentive programs to our customers and account for such programs in accordance with Emerging Issues Task Force (EITF) Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” Accordingly, we account for our competitive pricing incentives, which generally reflect front-end price adjustments, as a reduction of revenue at the time of sale, and rebates as a reduction of revenue in the period the related revenue is recorded based on the specific program criteria and historical experience. In addition, we record provisions against revenue and cost of revenue for estimated product returns in the same period that revenue is recognized. These provisions are based on historical experience as well as specifically identified product returns. Royalty and service revenue is recognized when earned and receipt is reasonably assured.

     For those sales that include multiple deliverables, we allocate revenue based on the relative fair values of the individual components as determined in accordance with EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” When more than one element, such as hardware and services, are contained in a single arrangement, we allocate revenue between the elements based on each element’s relative fair value, provided that each element meets the criteria for treatment as a separate unit of accounting. An item is considered a separate unit of accounting if it has value to the customer on a standalone basis and there is objective and reliable evidence of the fair value of the undelivered items. Fair value is generally determined based upon the price charged when the element is sold separately. In the absence of fair value for a delivered element, we allocate revenue first to the fair value of the undelivered elements and allocate the residual revenue to the delivered elements. In the absence of fair value for an undelivered element, the arrangement is accounted for as a single unit of accounting, resulting in a deferral of revenue recognition for the delivered elements. Such deferred revenue is recognized over the service period or when all elements have been delivered.

     We sell certain software products and related post-contract customer support (PCS), and account for these transactions in accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2, “Software Revenue Recognition,” as amended. We recognize revenue from software products when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is probable. Revenue is allocated to undelivered elements based upon vendor-specific objective evidence (VSOE) of the fair value of the element. VSOE of the fair value is based upon the price charged when the element is sold separately. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. If we are unable to determine VSOE of fair value for an undelivered element, the entire amount of revenue from the arrangement is deferred and recognized over the service period or when all elements have been delivered.

     An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of our customers to make required payments. This reserve is determined by analyzing specific customer accounts, applying historical loss rates to the aging of remaining accounts receivable balances, and considering the impact of the current economic environment where appropriate. If the financial condition of our customers were to deteriorate, resulting in their inability to pay their accounts when due, additional reserves might be required.

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  Stock-Based Compensation

     We account for stock-based awards in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (revised), “Shared-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors including stock options, restricted stock units and stock purchases under our Employee Stock Purchase Plan (the ESPP) based on estimated fair values on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in our consolidated financial statements. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is the vesting period for stock options and restricted stock units, and the offering period for the ESPP. The determination of fair value of stock-based awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. In estimating expected stock price volatility, we use a combination of both historical volatility, calculated based on the daily closing prices of our common stock over a period equal to the expected term of the option, and implied volatility, utilizing market data of actively traded options on our common stock. We believe that the historical volatility of the price of our common stock over the expected term of the option is a strong indicator of the expected future volatility. We also believe that implied volatility takes into consideration market expectations of how future volatility will differ from historical volatility. Accordingly, we believe a combination of both historical and implied volatility provides the best estimate of the future volatility of the market price of our common stock. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. However, our employee stock options have certain characteristics that are significantly different from traded options. Changes in the subjective assumptions can materially affect the estimate of their fair value.

  Income Taxes

     We utilize the asset and liability method of accounting for income taxes. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Under FIN 48, income tax positions should be recognized in the first reporting period that the tax position meets the recognition threshold. Previously recognized income tax positions that fail to meet the recognition threshold in a subsequent period should be derecognized in that period. As a multinational corporation, we are subject to complex tax laws and regulations in various jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional liabilities or potentially to reverse previously recorded tax liabilities. Differences between actual results and our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

     At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items are individually computed and recognized in the interim period in which the item occurs. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs.

     The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes.

     Deferred income taxes are recognized for the future tax consequences of temporary differences using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Temporary differences include the difference between the financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carryforwards. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

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     We assess the likelihood that our deferred tax assets will be recovered from future taxable income. To the extent management believes that recovery is more likely than not, we do not establish a valuation allowance against our deferred tax assets. An adjustment to income would occur if we determine that we are able to realize a different amount of our deferred tax assets than currently expected.

  Marketable Securities and Investments

     We invest primarily in marketable debt securities. We also hold shares of common stock in a publicly-traded company, which were received in connection with the sale of our hard disk drive controller and tape drive controller business in November 2005. All of our marketable securities are recorded at fair value, primarily based on quoted market prices or other observable inputs. Due to the recent failures in the auction rate securities market, quoted market prices were not available for these assets as of December 28, 2008 and March 30, 2008. Accordingly, such securities were valued based on an income approach using an estimate of future cash flows.

     Our marketable securities are classified in our consolidated balance sheets based on the nature of the security and the availability for use in current operations. Realized gains and losses are included in interest and other income, net, in our consolidated statements of income. Unrealized gains and losses, net of related income taxes, on our portfolio of available-for-sale securities, are excluded from earnings and reported as a separate component of other comprehensive income until realized.

     We recognize an impairment charge when the decline in the fair value of an investment below its cost basis is judged to be other-than-temporary. Significant judgment is required in determining the fair value of marketable securities in inactive markets as well as determining when declines in fair value constitute an other-than-temporary impairment. Various factors are considered in determining whether to recognize an impairment charge, including the current financial and credit market environment, the financial condition and near term prospects of the issuer of the security, the magnitude of the loss compared to the cost of the investment, the length of time the investment has been in a loss position and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.

     Realized gains or losses and other-than-temporary declines in the fair value of marketable securities are determined on a specific identification basis and reported in interest and other income, net, as incurred.

  Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or market. We write down the carrying value of our inventory to estimated net realizable value for estimated excess and obsolete inventory based upon assumptions about future demand and market conditions. These assumptions are based on economic conditions and trends (both current and projected), anticipated customer demand and acceptance of our current products, expected future products and other assumptions. If actual market conditions are less favorable than those projected by management, additional write-downs may be required. Once we write down the carrying value of inventory, a new cost basis is established. Subsequent changes in facts and circumstances do not result in an increase in the newly established cost basis.

  Goodwill and Other Intangible Assets

     We account for goodwill and other intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. The amounts and useful lives assigned to intangible assets acquired, other than goodwill, impact the amount and timing of future amortization, and the amount assigned to in-process research and development is expensed immediately.

     SFAS No. 142 requires that goodwill not be amortized but instead be tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that the assets might be impaired, by comparing the carrying value to the fair value of the reporting unit to which the goodwill is assigned. A two-step test is used to identify the potential impairment and to measure the amount of impairment, if any. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit with the carrying amount of goodwill. We perform the annual test for impairment as of the first day of our fiscal fourth quarter and utilize the two-step process.

     The initial recording and subsequent evaluation for impairment of goodwill and purchased intangible assets requires the use of significant management judgment regarding the forecasts of future operating results. It is possible that our business plans may change and our estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than original estimates used, we could incur impairment charges.

  Long-Lived Assets

     Long-lived assets, including property and equipment and purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Significant judgment is required in determining whether a potential indicator of impairment of our long-lived assets exists and in estimating future cash flows for any necessary impairment tests. Recoverability of assets to be held and used is measured by the comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Estimating future net cash flows and determining proper asset groupings for the purpose of this impairment test requires the use of significant management judgment. If our actual results, or estimates used in future impairment analyses, are lower than our current estimates, we could incur impairment charges.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 28, 2008, the carrying value of our cash and cash equivalents approximates fair value.

     We maintain a portfolio of marketable securities consisting primarily of money market and enhanced cash funds and marketable debt securities, including corporate debt obligations, government and agency securities, asset and mortgage-backed securities, and municipal bonds, which principally have remaining terms of three years or less. We are exposed to fluctuations in interest rates as movements in interest rates can result in changes in the market value of our investments in debt securities.  However, due to the short-term nature of our investment portfolio we do not believe that we are subject to material interest rate risk.

     In accordance with our investment guidelines, we only invest in instruments with high credit quality standards and we limit our exposure to any one issuer or type of investment. We also hold shares of common stock of Marvell Technology Group Ltd. (Marvell) that were received in connection with the sale of our hard disk drive controller and tape drive controller business. The shares of Marvell common stock are equity securities and, as such, inherently have higher risk than the marketable securities in which we usually invest. In addition, our portfolio of marketable securities as of December 28, 2008 includes $28.8 million of investments in auction rate debt and preferred securities (ARS), the majority of which are rated AA or higher, and related put options valued at $8.1 million.

     There is currently significant turmoil in the credit market, including the impact to the value and liquidity of ARS. As of December 28, 2008, our investment portfolio includes $21.9 million of auction rate debt securities and $6.9 million of auction rate preferred securities. During late fiscal 2008, the market auctions of many ARS began to fail, including auctions for our ARS. The underlying assets for auction rate debt securities in our portfolio are student loans, substantially all of which are backed by the federal government under the Federal Family Education Loan Program. The underlying assets of our auction rate preferred securities are the respective funds’ investment portfolios.

     In November 2008, we entered into an agreement with the broker for substantially all of the ARS we currently hold, which provides us with rights (ARS Rights), in exchange for the release of potential claims and damages against the broker. The ARS Rights entitle us to sell the related ARS back to the broker for a price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, if any, which price is referred to as “par.” The ARS Rights may be exercised by us at any time between June 30, 2010 and July 2, 2012, if the securities are not earlier redeemed or sold. Under the ARS Rights, the broker may, at its discretion, purchase the ARS at any time through July 2, 2012 without prior notice to us and must pay us par value for the ARS within one day of the sale transaction settlement.

     While we expect to ultimately recover our investments in the ARS at par, we may be unable to liquidate some or all of our ARS should we need or desire to access the funds invested in those securities prior to redemption by the issuer or the exercise of the ARS Rights. In addition, our marketable securities as of December 28, 2008, include an aggregate of $49.0 million in a money market fund and enhanced cash fund sponsored by The Reserve (an asset management company) that have suspended trading and redemptions. These funds are in the process of being liquidated and we expect the liquidation to occur in stages with proceeds distributed as the underlying securities mature or are sold. During the three months ended December 28, 2008, we received net proceeds totaling $6.5 million from the partial liquidation of these funds. Subsequent to December 28, 2008, we received an additional $33.7 million as part of the liquidation process. Based on our existing cash, cash equivalents and other marketable securities, as well as our expected cash flows from operating activities, we do not anticipate that the potential lack of liquidity of these investments in the near term will affect our ability to execute our current business plan.

     Our asset and mortgage-backed securities totaled $25.6 million as of December 28, 2008 and consisted primarily of high quality investments insured by the federal government under various programs.

     Our portfolio includes $183.2 million of marketable securities that are classified as available for sale. As of December 28, 2008, we had gross unrealized losses associated with our available-for-sale marketable securities of $1.5 million that were determined by management to be temporary in nature. If the credit market continues to deteriorate, we may conclude that the decline in value is other than temporary and incur realized losses, which could adversely affect our financial condition or results of operations.

     We do not use derivative financial instruments.

Item 4. Controls and Procedures

     We maintain disclosure controls and procedures to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of December 28, 2008. There was no change in our internal control over financial reporting during our quarter ended December 28, 2008 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

OTHER INFORMATION

Item 1A. Risk Factors

     We have updated the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the year ended March 30, 2008, as set forth below. Except for the expanded discussion of the current economic environment, we do not believe any of the updates constitute material changes from the risk factors previously discussed in our Annual Report on Form 10-K for the year ended March 30, 2008.

Our operating results may fluctuate in future periods, which could cause our stock price to decline.

     We have experienced, and expect to experience in future periods, fluctuations in sales and operating results from quarter to quarter. In addition, there can be no assurance that we will maintain our current gross margins or profitability in the future. A significant portion of our net revenues in each fiscal quarter results from orders booked in that quarter. Orders placed by major customers are typically based on their forecasted sales and inventory levels for our products.

     As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Governments have taken unprecedented actions intended to address extreme market conditions that include severely restricted credit and declines in real estate values. While we do not currently require access to credit markets to finance our operations, these economic developments affect businesses in a number of ways. The current tightening of credit in financial markets adversely affects the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in or cancellation of orders for our products or reduced ability to finance operations to supply products to us. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries. As a result of the worldwide economic slowdown, it is extremely difficult for us and our customers to forecast future sales levels based on historical information and trends. Portions of our expenses are fixed and other expenses are tied to expected levels of sales activities. To the extent that we do not achieve our anticipated level of sales, our gross profit and net income could be adversely affected until such expenses are reduced to an appropriate level.

     Fluctuations in our quarterly operating results may also be the result of:

• 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;

• negotiated rebates and extended payment terms;

• changes in our ability to anticipate in advance the mix of customer orders;

• levels of inventory our customers require us to maintain in our inventory hub locations;

• the availability and sale of new products;

• shifts or changes in technology;

• changes in the mix or average selling prices of our products;

• variations in manufacturing capacities, efficiencies and costs;

• the availability and cost of components, including silicon chips;

• variations in product development costs, especially related to advanced technologies;

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• 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 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 marketable securities;

• changes in accounting rules;

• changes in 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 information technology, or IT, spending.

     In addition, our quarterly results of operations are influenced by competitive factors, including the pricing and availability of our products and our competitors’ products. Furthermore, communications regarding new products and technologies could cause our customers to defer or cancel purchases of our products. Order deferrals by our customers, delays in our introduction of new products, and longer than anticipated design-in cycles for our products have in the past adversely affected our quarterly results of operations. Due to these factors, as well as other unanticipated factors, it is likely that in some future quarter or quarters our operating results will be below the expectations of public market analysts or investors, and as a result, the price of our common stock could significantly decrease.

Our revenues may be affected by changes in IT spending levels.

     In the past, unfavorable or uncertain economic conditions and reduced global IT spending rates have adversely affected the markets in which we operate. Certain of our large customers are reporting weaknesses in particular markets and geographies, which may adversely affect our revenues. While we are unable to predict changes in general economic conditions and how the current global financial and market conditions will impact global IT spending rates, we are aware of a slowdown in capital expenditures by some end-users and believe there may be potential for a broader slowdown in global IT spending rates in the next few quarters. Furthermore, even if IT spending rates increase, we cannot be certain that the market for Storage Area Network (SAN) and server fabric infrastructure solutions will be positively impacted. If there are future reductions in either domestic or international IT spending rates, or if IT spending rates do not increase, our revenues, operating results and financial condition may be adversely affected.

We expect gross margin to vary over time, and our recent level of gross margin may not be sustainable.

     Our recent level of gross margin may not be sustainable and may be adversely affected by numerous factors, including:

• changes in product mix;

• 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;

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• sales discounts;

• increases in material, labor or overhead costs;

• excess inventory and inventory holding charges;

• changes in distribution channels;

• increased warranty costs; and

• how well we execute our business strategy and operating plans.

Our stock price may be volatile.

     The market price of our common stock has fluctuated substantially, and there can be no assurance that such volatility will not continue. Several factors could impact our stock price including, but not limited to:

• differences between our actual operating results and the published expectations of analysts;

• quarterly fluctuations in our 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 by industry analysts;

• operating results or forecasts of our major customers or competitors;

• overall market conditions for high technology equities;

• rumors or dissemination of false information; and

• general economic and geopolitical conditions.

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

Our business is dependent, in large part, on the continued growth of the SAN market and if this market does not continue to develop and expand as we anticipate, our business will suffer.

     A significant number of our products are used in SANs and, therefore, our business is dependent on the SAN market. Accordingly, the widespread adoption of SANs for use in organizations’ computing systems is critical to our future success. SANs are often implemented in connection with the deployment of new storage systems and servers. Therefore, our future success is also substantially dependent on the market for new storage systems and servers.

     Our success in generating revenue in the SAN market will depend on, among other things, our ability to:

• educate potential OEM customers, distributors, resellers, system integrators, storage system providers and end-user organizations about the benefits of SANs;

• maintain and enhance our relationships with OEM customers, distributors, resellers, system integrators and storage system providers;

• predict and base our products on standards which ultimately become industry standards; and

• achieve interoperability between our products and other SAN components from diverse vendors.

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Our business could be adversely affected by the broad adoption of server virtualization technology.

     Server virtualization technologies, which allow a single server to take on the function of what was previously performed by many individual servers, are gaining momentum in the industry. The broad implementation of server virtualization could result in a decrease in the demand for servers, which could result in a lower demand for our products. This could have a material adverse effect on our business or results of operations.

Our business could be adversely affected by a significant increase in the market acceptance of blade servers.

     Blade server products have gained acceptance in the market over the past few years.  Blade servers use custom SAN infrastructure products, including blade switches and mezzanine cards which have lower average selling prices than the SAN infrastructure products used in a non-blade server environment.  If blade servers gain an increased percentage of the overall server market, our business could be adversely affected by the transition to blade server products.  This could have a material adverse effect on our business or results of operations.

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

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

• enhance our current products and develop and introduce in a timely manner new products that keep pace with technological developments and industry standards;

• compete effectively on the basis of price and performance; and

• adequately address OEM and end-user customer requirements and achieve market acceptance.

     We believe that to remain competitive, we will need to continue to develop new products, which will require a significant investment in new product development. Our competitors may be developing alternative technologies, which may adversely affect the market acceptance of our products. Although we continue to explore and develop products based on new technologies, a substantial portion of our revenues is generated today from Fibre Channel technology. If alternative technologies are adopted by the industry, we may not be able to develop products for new technologies in a timely manner. Further, even if alternative technologies do augment Fibre Channel revenues, our products may not be fully developed in time to be accepted by our customers. Even if our new products are developed on time, we may not be able to manufacture them at competitive prices or in sufficient volumes.

We depend on a limited 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.

     A small number of customers account for a substantial portion of our net revenues, and we expect that a limited number of customers will continue to represent a substantial portion of our net revenues in the foreseeable future. Our top ten customers accounted for 83% and 85% of net revenues for the nine months ended December 28, 2008 and the fiscal year ended March 30, 2008, respectively. We are also subject to credit risk associated with the concentration of our accounts receivable. In addition, the worldwide economic slowdown and tightening of credit in financial markets may impact the businesses of our customers, which could have a material adverse effect on our business, financial condition or results of operations.

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

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Our business may be subject to seasonal fluctuations and uneven sales patterns in the future.

     A large percentage of our products are sold to customers who experience seasonality and uneven sales patterns in their businesses. As a result, we may experience similar seasonality and uneven sales patterns. We believe this uneven sales pattern is a result of many factors including:

• 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

• differences between our quarterly fiscal periods and the fiscal periods of our customers.

     In addition, as our customers increasingly require us to maintain products at hub locations near their facilities, it becomes increasingly difficult for us to predict sales trends. Our uneven sales pattern also makes it extremely difficult to predict the demand of our customers and adjust manufacturing capacity accordingly. If we predict demand that is substantially greater than actual customer orders, we will have excess inventory. Alternatively, if customer orders substantially exceed predicted demand, the ability to assemble, test and ship orders received in the last weeks and days of each quarter may be limited, or at an increased cost, which could have a material adverse effect on quarterly revenues and earnings.

Competition within the markets for our products is intense and includes various established competitors.

     The markets for our products are highly competitive and are characterized by short product life cycles, price erosion, rapidly changing technology, frequent product improvements and evolving industry standards. In the Fibre Channel HBA market, we compete primarily with Emulex Corporation. In the iSCSI HBA market, we compete primarily with Broadcom Corporation and we also compete with companies offering software initiator solutions. In the Fibre Channel switch and storage router markets, we compete primarily with Brocade Communications Systems, Inc. and Cisco Systems, Inc. Our competition in the Fibre Channel switch market includes well-established participants who have significantly more sales and marketing resources to develop and penetrate this market. In the InfiniBand HCA and switch markets, we compete primarily with Voltaire Ltd., Cisco Systems, Inc. and Mellanox Technologies, Ltd. We may also compete with some of our server and storage systems customers, some of which have the capability to develop products comparable to those we offer.

     We need to continue to develop products appropriate to our markets to remain competitive as our competitors continue to introduce products with improved features. While we continue to devote significant resources to engineering and development, these efforts may not be successful or competitive products may not be developed and introduced in a timely manner. In addition, while relatively few competitors offer a full range of SAN and server fabric infrastructure products, additional domestic and foreign manufacturers may increase their presence in these markets. We may not be able to compete successfully against these or other competitors. If we are unable to design, develop or introduce competitive new products on a timely basis, our future operating results will be materially and adversely affected.

We expect the pricing of our products to continue to decline, which could reduce our revenues, gross margins and profitability.

     We expect the average unit prices of our products (on a product-to-product comparison basis) to decline in the future as a result of competitive pricing pressures, increased sales discounts, new product introductions by us or our competitors, or other factors. If we are unable to offset these factors by increasing sales volumes, or reducing product manufacturing costs, our total revenues and gross margins may decline. In addition, we must develop and introduce new products and product enhancements. Moreover, most of our expenses are fixed in the short-term or incurred in advance of receipt of corresponding revenues. As a result, we may not be able to decrease our spending to offset any unexpected shortfall in revenues. If this occurs, our operating results and gross margins may be below our expectations and the expectations of investors and public market analysts, and our stock price could be negatively affected.

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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.

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

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

We are dependent on sole source and limited source suppliers for certain key components.

     We purchase certain key components used in the manufacture of our products from single or limited sources. We purchase application specific integrated circuits, or ASICs, from single sources and we purchase microprocessors, certain connectors, logic chips, power supplies and programmable logic devices from limited sources. If one of these suppliers experiences an interruption in its ability to supply our needs, or chooses to sever their relationship with us, we may be unable to produce certain of our products, which could result in the loss of customers and have a material adverse effect on our results of operations. The worldwide economic slowdown and tightening of credit in financial markets may adversely impact our suppliers by limiting their ability to finance their business operations and as a result limit their ability to supply products to us.

We are dependent on worldwide third-party subcontractors and contract manufacturers.

     Third-party subcontractors located outside the United States assemble and test certain products for us. To the extent that we rely upon third-party subcontractors to perform these functions, we will not be able to directly control product delivery schedules and quality assurance. This lack of control may result in product shortages or quality assurance problems that could delay shipments of products or increase manufacturing, assembly, testing or other costs. If any of these subcontractors experience capacity constraints or financial difficulties, suffer damage to their facilities, experience power outages or any other disruption of assembly or testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner.

     In addition, the loss of any of our major third-party contract manufacturers could significantly impact our ability to produce products for an indefinite period of time. Qualifying a new contract manufacturer and commencing volume production is a lengthy and expensive process. Some customers will not purchase any products, other than a limited number of evaluation units, until they qualify the manufacturing line for the product, and we may not always be able to satisfy the qualification requirements of these customers. If we are required to change a contract manufacturer or if a contract manufacturer experiences delays, disruptions, capacity constraints, component parts shortages or quality control problems in its manufacturing operations, shipment of our products to our customers could be delayed resulting in loss or postponement of revenues and our competitive position and relationship with customers could be harmed.

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

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

     Historically, there have been periods when there has been a worldwide shortage of advanced process technology foundry capacity. The manufacture of semiconductor devices is subject to a wide variety of factors, including the availability of raw materials, the level of contaminants in the manufacturing environment, impurities in the materials used and the performance of personnel and equipment.

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We are continuously evaluating potential new sources of supply. However, the qualification process and the production ramp-up for additional foundries have in the past taken, and could in the future take, longer than anticipated. New supply sources may not be able or willing to satisfy our silicon chip requirements on a timely basis or at acceptable quality or unit prices.

     We have not developed alternate sources of supply for some of our products. A customer’s inability to obtain a sufficient supply of products from us may cause that customer to satisfy its product requirements from our competitors. Constraints or delays in the supply of our products, due to capacity constraints, unexpected disruptions at foundries or with our subcontractors, delays in obtaining additional production at the existing foundries or in obtaining production from new foundries, shortages of raw materials or other reasons, could result in the loss of customers and have a material adverse effect on our results of operations.

     The number of suppliers we use may decrease as a result of business combinations involving these suppliers.

Our marketable securities portfolio could experience a decline in market value which could materially and adversely affect our financial results.

     As of December 28, 2008, we held short-term and long-term marketable securities aggregating $220.0 million. We invest primarily in marketable debt securities, the majority of which are high investment grade, and we limit the amount of credit exposure through diversification and investment in highly rated securities. However, investing in highly rated securities does not entirely mitigate the risk of potential declines in market value. During the nine months ended December 28, 2008, we recorded impairment charges related to marketable securities issued by companies in the financial services sector that had previously been rated AA or higher. A further deterioration in the economy, including further tightening of credit markets or significant volatility in interest rates, could cause our marketable securities to decline in value or could impact the liquidity of the portfolio. If market conditions deteriorate significantly, our results of operations or financial condition could be materially and adversely affected.

     Our marketable securities include $28.8 million of investments in auction rate debt and preferred securities (ARS), the majority of which are rated AA or higher.  During late fiscal 2008, the market auctions of many ARS began to fail, including auctions for our ARS. The underlying assets for auction rate debt securities in our portfolio are student loans, substantially all of which are backed by the federal government under the Federal Family Education Loan Program. The underlying assets of our auction rate preferred securities are the respective funds’ investment portfolios. 

     In November 2008, we entered into an agreement with the broker for substantially all of the ARS we currently hold, which provides us with certain rights (ARS Rights), in exchange for the release of potential claims and damages against the broker. The ARS Rights entitle us to sell the related ARS back to the broker for a price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, if any, which price is referred to as “par.” The ARS Rights may be exercised by us at any time between June 30, 2010 and July 2, 2012, if the securities are not earlier redeemed or sold. Under the ARS Rights, the broker may, at its discretion, purchase the ARS at any time through July 2, 2012 without prior notice to us and must pay us par value for the ARS within one day of the sale transaction settlement. While we expect to ultimately recover our investments in the ARS at par, we may be unable to liquidate some or all of our ARS should we need or desire to access the funds invested in those securities prior to redemption by the issuer or the exercise of the ARS Rights.

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

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

The migration of our customers toward new products could adversely affect our results of operations.

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

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     Historically, the electronics industry has developed higher performance ASICs, which create chip level solutions that replace selected board level or box level solutions at a significantly lower average selling price. We have previously offered ASICs to customers for certain applications that have effectively resulted in a lower-priced solution when compared to an HBA solution. This transition to ASICs may also occur with respect to other current and future products. The result of this transition may have an adverse effect on our business, financial condition or results of operations. In the future, a similar adverse effect to our business could occur if there were rapid shifts in customer purchases from our midrange server and storage solutions to products for the small and medium-sized business market or if our customers shifted to lower cost products that could replace our HBA or HCA solutions.

Environmental compliance costs could adversely affect our results of operations.

     We are subject to various federal, state, local and foreign laws concerning environmental protection, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites, the content of our products and the recycling, treatment and disposal of our products. In particular, we face increasing complexity in our product design and procurement operations as we adjust to new and future requirements relating to the chemical and material composition of our products, their safe use, the energy consumption associated with those products and product take-back legislation (i.e., legislation that makes producers of electrical goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products). We could incur substantial costs, our products could be restricted from entering certain jurisdictions, and we could face other sanctions, if we were to violate or become liable under environmental laws or if our products become non-compliant with environmental laws. Our potential exposure includes fines and civil or criminal sanctions, third-party property damage or personal injury claims, and clean up costs. Further, liability under some environmental laws relating to contaminated sites can be imposed retroactively, on a joint and several basis, and without any finding of noncompliance or fault. The amount and timing of costs under environmental laws are difficult to predict.

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.

     International revenues accounted for 52% and 49% of our net revenues for the nine months ended December 28, 2008 and the fiscal year ended March 30, 2008, respectively. We expect that international revenues will continue to account for a significant percentage of our net revenues for the foreseeable future. In addition, we maintain operations in foreign countries and a significant portion of our inventory purchases are from suppliers that are located outside the United States. As a result, we are subject to several risks, which include:

• 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;

• potentially longer accounts receivable cycles;

• currency fluctuations;

• overlapping or differing tax structures;

• political and economic instability, including terrorism and war; and

• general trade restrictions.

     Our international sales are invoiced in U.S. dollars and, accordingly, if the relative value of the U.S. dollar in comparison to the currency of our foreign customers should increase, the resulting effective price increase of our products to such foreign customers could result in decreased sales. Any of the foregoing factors could have a material adverse effect on our business, financial condition or results of operations.

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     In addition, we and our customers are subject to various import and export regulations of the United States government and other countries. Certain government export regulations apply to the encryption or other features contained in some of our products. Changes in or violations of any such import or export regulations could materially and adversely affect our business, financial condition or results of operations.

     Moreover, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we implement policies and procedures designed to ensure compliance with these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business, financial condition or results of operations.

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

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

• 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.

     Further, we may never realize the perceived benefits of a business combination. Acquisitions by us could negatively impact gross margins or dilute stockholders’ investment and cause us to incur debt, contingent liabilities and amortization/impairment charges related to intangible assets, all of which could materially and adversely affect our financial position or results of operations. In addition, our effective tax rate for future periods could be negatively impacted by mergers and acquisitions.

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

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     We have completed acquisitions that expanded our portfolio of products to include InfiniBand solutions. While the usage of InfiniBand technology has increased since its first specifications were completed in October 2000, continued adoption of InfiniBand is dependent on continued collaboration and cooperation among IT vendors. In addition, the end users that purchase IT products and services from vendors must find InfiniBand to be a compelling solution to their IT system requirements. We cannot control third-party participation in the development of InfiniBand as an industry standard technology. InfiniBand may fail to effectively compete with other technologies, which may be adopted by vendors and their customers in place of InfiniBand. The adoption of InfiniBand is also impacted by the general replacement cycle of IT equipment by end users, which is dependent on factors unrelated to InfiniBand. These factors may reduce the rate at which InfiniBand is incorporated by the industry and impede its adoption in the storage, communications infrastructure and embedded systems markets, which in turn would harm our ability to sell our InfiniBand products.

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

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

     We have historically used stock options and other forms of stock-based compensation as key components of our total employee compensation program in order to align employees’ interests with the interests of our stockholders, encourage retention of key personnel, and provide competitive compensation packages. In recent periods, many of our employee stock options were granted with exercise prices which exceed our current stock price, which reduces their value to employees and could affect our ability to retain employees. As a result of the accounting requirements under Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” the use of stock options and other stock-based awards to attract and retain key personnel may be limited. Moreover, applicable stock exchange listing standards relating to obtaining stockholder approval of equity compensation plans could make it more difficult or expensive for us to grant stock-based awards to employees in the future, which may result in changes in our stock-based compensation strategy. These and other developments relating to the provision of stock-based compensation to employees could make it more difficult to attract, retain and motivate key personnel.

We may experience difficulties in transitioning to smaller geometry process technologies.

     We expect to continue to transition our semiconductor products to increasingly smaller line width geometries. This transition requires us to modify the manufacturing processes for our products and to redesign some products as well as standard cells and other integrated circuit designs that we may use in multiple products. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies. Currently, most of our products include ASICs which are manufactured in 0.18, 0.13 and 0.09 micron geometry processes. In addition, we have begun to develop certain new ASIC products with 65 nanometer (0.065 micron) geometry process technology. In the past, we have experienced some difficulties in shifting to smaller geometry process technologies or new manufacturing processes, which resulted in reduced manufacturing yields, delays in product deliveries and increased expenses. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes.

Our proprietary rights may be inadequately protected and difficult to enforce.

     In some jurisdictions, we have patent protection on certain aspects of our technology. However, we rely primarily on trade secrets, trademarks, copyrights and contractual provisions to protect our proprietary rights. There can be no assurance that these protections will be adequate to protect our proprietary rights, that others will not independently develop or otherwise acquire equivalent or superior technology, or that we can maintain such technology as trade secrets. There also can be no assurance that any patents we possess will not be invalidated, circumvented or challenged. We have taken steps in several jurisdictions to enforce our trademarks against third parties. No assurances can be given that we will ultimately be successful in protecting our trademarks. The laws of certain countries in which our products are or may be developed, manufactured or sold, including various countries in Asia, may not protect our products and intellectual property rights to the same extent as the laws of the United States or at all. If we fail to protect our intellectual property rights, our business could be negatively impacted.

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Disputes relating to claimed infringement of intellectual property rights may adversely affect our business.

     We have received notices of claimed infringement of intellectual property rights in the past and have been involved in intellectual property litigation in the past. There can be no assurance that third parties will not assert future claims of infringement of intellectual property rights against us, or against customers who we are contractually obligated to indemnify, with respect to existing and future products. In addition, individuals and groups are purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours. Although patent and intellectual property disputes may be settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and the necessary licenses or similar arrangements may not be available to us on satisfactory terms or at all. As a result, we could be prevented from manufacturing and selling some of our products. In addition, if we litigate these kinds of claims, the litigation could be expensive, time consuming and could divert management’s attention from other matters and there is no guarantee we would prevail. Our business could suffer regardless of the outcome of the litigation. Our supply of silicon chips and other components can also be interrupted by intellectual property infringement claims against our suppliers.

Dependence on third-party technology could adversely affect our business.

     Some of our products are designed to include software or other intellectual property licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that necessary licenses will be available on acceptable terms, if at all. In addition, we may have little or no ability to correct errors in the technology provided by such third parties, or to continue to develop new generations of such technology. Accordingly, we may be dependent on their ability and willingness to do so. In the event of a problem with such technology, or in the event that our rights to use such technology become impaired, we may be unable to ship our products containing such technology, and may be unable to replace the technology with a suitable alternative within the time frame needed by our customers. The inability to find suitable alternatives to third-party technology, obtain certain licenses or obtain such licenses on favorable terms, or the need to engage in litigation regarding these matters, could have a material adverse impact on our business, results of operations and financial condition.

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 source code.

     Certain of our software may be derived from “open source” software that is generally made available to the public by its authors and/or other third parties. Such open source software is often made available to us under licenses, such as the GNU General Public License (GPL) which impose certain obligations on us in the event we were to distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the forms of licenses customarily used to protect our intellectual property. In the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work.

Unanticipated changes in our tax provisions or adverse outcomes resulting from examination of our income tax returns could adversely affect our results of operations.

     We are subject to income taxes in the United States and various foreign jurisdictions. Our effective income tax rates have recently been and could in the future be adversely affected by changes in tax laws or interpretations of those tax laws, by changes in the mix of earnings in countries with differing statutory tax rates, by discovery of new information in the course of our tax return preparation process, or by changes in the valuation of our deferred tax assets and liabilities. Our effective income tax rates are also affected by intercompany transactions for licenses, services, funding and other items. Given the increased global scope of our operations, and the complexity of global tax and transfer pricing rules and regulations, it has become increasingly difficult to estimate earnings within each tax jurisdiction.  If actual earnings within a tax jurisdiction differ materially from our estimates, we may not achieve our expected effective tax rate. Additionally, our effective tax rate may be impacted by the tax effects of acquisitions, newly enacted tax legislation, stock-based compensation and uncertain tax positions.  Finally, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities which may result in the assessment of additional income taxes. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. However, unanticipated outcomes from these continuous examinations could have a material adverse effect on our financial condition or results of operations.

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Computer viruses and other forms of tampering with our computer systems or servers may disrupt our operations and adversely affect our results of operations.

     Despite our implementation of network security measures and anti-virus defenses, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business, results of operations or financial condition.

Our facilities and the facilities of our suppliers and customers are located in regions that are subject to natural disasters.

     Our California facilities, including our principal executive offices, our principal design facilities and our critical business operations, are located near major earthquake faults. We are not specifically insured for earthquakes or other natural disasters. Any personal injury or damage to the facilities as a result of such occurrences could have a material adverse effect on our business, results of operations or financial condition. Additionally, we have operations, suppliers and customers in regions which have historically experienced natural disasters. Any earthquake or other natural disaster, including a hurricane, tsunami or fire, affecting any of these regions could adversely affect our business, results of operations and financial condition.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     In November 2007, our Board of Directors approved a program to repurchase up to $200 million of our common stock over a two-year period. In November 2008, our Board of Directors approved a new program to repurchase up to an additional $300 million of our common stock over a two-year period. Set forth below is information regarding our stock repurchases made during the third quarter of fiscal 2009 under these programs.

					Total Number of		Approximate Dollar
					Shares Purchased		Value of Shares that
	Total Number of		Average Price		as Part of Publicly		May Yet be Purchased
Period	Shares Purchased		Paid per Share		Announced Plans		Under the Plans
September 29, 2008 – October 26, 2008		2,901,357	$	12.92		2,901,357	$	69,893,000
October 27, 2008 – November 23, 2008		3,504,581	$	11.12		3,504,581	$	330,914,000
November 24, 2008 – December 28, 2008		1,905,166	$	11.54		1,905,166	$	308,928,000
Total		8,311,104	$	11.84		8,311,104	$	308,928,000

     We previously purchased 5,761,012 shares under the November 2007 program for an aggregate purchase price of $92.6 million.

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Item 6. Exhibits

     Exhibits

Exhibit No.
3.1	Bylaws of Registrant, 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	Terms and Conditions of Stock Unit Award under the QLogic Corporation 2005 Performance Incentive Plan.*
10.2	Change in Control Severance Agreement between QLogic Corporation and H.K. Desai.*
10.3	Change in Control Severance Agreement between QLogic Corporation and Simon Biddiscombe.*
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.

35

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QLOGIC CORPORATION
By:	/s/ H.K. DESAI
	H.K. Desai
	Chairman of the Board and Chief Executive Officer
By:	/s/ Simon Biddiscombe
	Simon Biddiscombe
	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Date: February 3, 2009

36

EXHIBIT INDEX

Exhibit No.
3.1	Bylaws of Registrant, 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	Terms and Conditions of Stock Unit Award under the QLogic Corporation 2005 Performance Incentive Plan.*
10.2	Change in Control Severance Agreement between QLogic Corporation and H.K. Desai.*
10.3	Change in Control Severance Agreement between QLogic Corporation and Simon Biddiscombe.*
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.

37

EX-10.1

Exhibit 10.1

QLOGIC CORPORATION
2005 PERFORMANCE INCENTIVE PLAN
TERMS AND CONDITIONS OF STOCK UNIT AWARD

1. General.

     Subject to these Terms and Conditions of Stock Unit Award (these “Terms”) and the QLogic Corporation 2005 Performance Incentive Plan (the “Plan”), QLogic Corporation (the “Corporation”) has granted to the Grantee (as defined below) a credit of stock units under the Plan (the “Stock Unit Award” or “Award”) with respect to the number of stock units provided in the Notice of Grant Agreement (“Grant Notice”) corresponding to that particular Award grant (subject to adjustment as provided in Section 7.1 of the Plan) (the “Stock Units”). As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan) solely for purposes of the Plan and these Terms. The recipient of the Award identified in the Grant Notice is referred to as the “Grantee.” The effective date of grant of the Award as set forth on the Grants tab on the CEFS website (www.ubs.com/cefs/qlgc) is referred to as the “Award Date.” Capitalized terms are defined in the Plan if not defined herein. The Award has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee. The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Stock Units vest pursuant to Section 2. The Stock Units shall not be treated as property or as a trust fund of any kind.

     The Grant Notice and these Terms are collectively referred to as the “Stock Unit Award Agreement” applicable to the Stock Units, or this “Stock Unit Award Agreement.”

2. Vesting.

     Subject to adjustment under Section 7.1 of the Plan and further subject to early termination under Section 6 of these Terms, the Award shall vest and become non-forfeitable with respect to twenty-five (25%) of the total number of Stock Units on each of the first, second, third and fourth anniversaries of the Award Date.

3. Continuance of Employment/Service Required; No Employment/Service Commitment.

     The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Stock Unit Award Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 6 below or under the Plan.

     Nothing contained in this Stock Unit Award Agreement or the Plan constitutes a continued employment or service commitment by the Corporation or any of its Subsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or service, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation.

4. Dividend and Voting Rights.

     The Grantee shall have no rights as a stockholder of the Corporation, no dividend rights and no voting rights with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Grantee. No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate.

5. Crediting of Vested Stock Unit Awards; Tax Withholding.

     5.1 Crediting of Vested Stock Unit Awards.

     On or as soon as administratively practical following each vesting of the applicable portion of the total Award pursuant to Section 2 (and in all events not later than two and one-half months after the vesting date), the Corporation shall deliver to the Grantee a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units subject to this Award that vest on the applicable vesting date, unless such Stock Units terminate prior to the given vesting date pursuant to Section 6. The Corporation’s obligation to deliver or credit shares of Common Stock with respect to vested Stock Units is subject to the condition precedent that the Grantee or other person entitled under the Plan to receive any shares with respect to the vested Stock Units (a) deliver to the Corporation any representations or other documents or assurances required pursuant to Section 8.1 of the Plan and (b) make arrangements satisfactory to the Corporation to pay or otherwise satisfy the tax withholding requirements with respect to the vested Stock Units. The Grantee shall have no further rights with respect to any Stock Units that are paid or that terminate pursuant to Section 6.

     The Corporation has established a web – based system for managing Stock Unit Awards. Currently, UBS Financial Services, Inc. manages Stock Unit Awards. In the event that the Grantee wishes to sell shares of Common Stock granted pursuant to a vested Stock Unit Award, the Grantee must contact UBS either by logging on to the UBS OneSource website (http://www.ubs.com/onesource/qlgc) or by calling the UBS Call Center at 1-866-756-4421. UBS will request from the Grantee information regarding the Common Stock to be sold and the order type. In addition, the Grantee may elect to have income taxes withheld at higher than the statutory rate.

     5.2 Responsibility for Taxes. The ultimate liability for any and all tax, social insurance and payroll tax withholding legally payable by an employee under applicable law (including without limitation laws of foreign jurisdictions)(“Tax-Related Items”) is and remains Grantee’s responsibility and liability and the Corporation (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant or vesting of the Award and the subsequent sale of the shares of Common Stock subject to the Award; and (b) does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate Grantee’s liability for Tax-Related Items.

     Upon the granting of a Stock Unit Awards or the vesting of shares of the Common Stock in respect of the Stock Unit Awards, the Corporation (or the Subsidiary last employing the Grantee) shall have the right at its option to (a) require the Grantee to pay or provide for payment in cash of the amount of any taxes that the Corporation or the Subsidiary may be required to withhold with respect to such payment and/or distribution, or (b) deduct from any amount payable to the Grantee the amount of any taxes which the Corporation or the Subsidiary may be required to withhold with respect to such payment and/or distribution. In any case where a tax is required to be withheld in connection with Stock Unit Awards or the delivery of shares of Common Stock under this Stock Unit Award Agreement, the Administrator may, in its sole discretion, direct the Corporation or the Subsidiary to reduce the number of Stock Unit Awards or shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy such withholding obligation at the minimum applicable withholding rates. Alternatively, or in addition, if permissible under local law, the Corporation may sell or arrange for the sale of shares of Common Stock that Grantee is due to acquire to meet the minimum withholding obligations for Tax-Related Items. Finally, Grantee shall pay to the Corporation any amount of any Tax-Related Items that the Corporation may be required to withhold as a result of Grantee’s participation in the Plan or Grantee’s purchase of shares of Common Stock that cannot be satisfied by the means previously described.

6. Early Termination of Award.

     The Grantee’s Stock Units shall terminate to the extent such units have not become vested prior to the first date the Grantee is no longer employed by the Corporation or one of its Subsidiaries, regardless of the reason for the termination of the Grantee’s employment with the Corporation or a Subsidiary, whether with or without cause, voluntarily or involuntarily. If the Grantee is employed by a Subsidiary and that entity ceases to be a Subsidiary, such event shall be deemed to be a termination of employment of the Grantee for purposes of this Agreement, unless the Grantee otherwise continues to be employed by the Corporation or another of its Subsidiaries following such event. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Grantee, or the Grantee’s beneficiary or personal representative, as the case may be. The Administrator shall be the sole judge of whether the Grantee continues to render employment or services for purposes of this Stock Unit Award Agreement.

7. Restrictions on Transfer.

     Neither the Stock Unit Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

8. Adjustment.

     Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan, the Administrator shall make adjustments if appropriate in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Stock Unit Award.

9. Data Privacy Consent.

     Grantee explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Grantee’s personal data as described in this document by and among, as applicable, the Corporation, its Subsidiaries, or affiliates for the exclusive purpose of implementing, administering and managing Grantee’s participation in the Plan.

     Grantee further understands that the Corporation, its Subsidiaries or affiliates hold certain personal information about Grantee, including, but not limited to, Grantee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock held in the Corporation and details of all Awards or other entitlements to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in Grantee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Grantee’s country. Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom Grantee may elect to deposit any shares of Common Stock acquired upon vesting of the Award. Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee’s participation in the Plan. Grantee understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or withdraw the consents herein by contacting the Corporation’s human resources department. Grantee understands that withdrawal of consent may affect Grantee’s ability to exercise or realize benefits from the Award.

10. Nature of Grant.

     In accepting the grant of the Award, Grantee acknowledges that: (i) the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, suspended or terminated by the Corporation at any time, as provided in the Plan and these

Terms; (ii) the grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of stock units, or benefits in lieu of stock units even if stock units have been granted repeatedly in the past; (iii) all decisions with respect to future grants will be at the sole discretion of the Corporation; (iv) Grantee’s participation in the Plan shall not create a right to further employment and shall not interfere with the ability of the Corporation or its subsidiaries to terminate Grantee’s employment relationship at any time with or without cause; (v) Grantee’s participation in the Plan is voluntary; (vi) in the event that Grantee is not an employee of the Corporation, the Award grant will not be interpreted to form an employment contract or relationship with the Corporation, and furthermore, the Award grant will not be interpreted to form an employment contract with the Corporation and any of its Subsidiaries or affiliates; (vii) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (viii) if Grantee vests in his or her Award and shares of Common Stock are no longer restricted, the value of those shares of Common Stock acquired upon vesting may increase or decrease in value, even below the price at which such Award was originally granted; and (ix) no claim or entitlement to compensation or damages arises from termination of the Award or diminution in value of the Award or shares of Common Stock acquired pursuant to the Award and Grantee irrevocably releases the Corporation and its Subsidiaries and affiliates from any such claim that may arise.

11. Notices.

     Any notice to be given under the terms of this Stock Unit Award Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Grantee is no longer employed by the Corporation or a Subsidiary, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12. Plan.

     The Award and all rights of the Grantee under this Stock Unit Award Agreement are subject to the terms and conditions of the Plan, incorporated herein by this reference. The Grantee agrees to be bound by the terms of the Plan and this Stock Unit Award Agreement. The Grantee acknowledges having read and understanding the Plan and this Stock Unit Award Agreement. Unless otherwise expressly provided in other sections of this Stock Unit Award Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Grantee unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13. Entire Agreement.

     This Stock Unit Award Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Stock Unit Award Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

14. Governing Law.

     This Stock Unit Award Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of law principles thereunder.

15. Effect of this Agreement.

     Subject to the Corporation’s right to terminate the Award pursuant to Section 7.4 of the Plan, this Stock Unit Award Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Corporation.

16. Limitation on Participant’s Rights.

     Participation in the Plan confers no rights or interests other than as herein provided. This Stock Unit Award Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Grantee shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.

17. Section Headings.

     The section headings of this Stock Unit Award Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

18. Construction.

     It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. The Stock Unit Award Agreement shall be construed and interpreted consistent with that intent.

19. Acceptance.

     In accepting the grant of the Award, Grantee acknowledges receipt of a copy of the Plan, the Grant Notice and these Terms. Grantee has read and understands the terms and provisions thereof, and has accepted the Award subject to all terms and conditions of the Plan, the Grant Notice and these Terms. Grantee acknowledges that there may be adverse tax consequences upon vesting of the Award or disposition of the shares of Common Stock acquired upon vesting of the Award and that Grantee should consult a tax adviser prior to such exercise or disposition.

EX-10.2

Exhibit 10.2

QLOGIC CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT

     THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of December 19, 2008 by and between QLogic Corporation, a Delaware corporation (the “Company”), and H.K. Desai (the “Executive”) and amends and restates that certain Change in Control Agreement by and between the Company and the Executive dated as of November 10, 2006 (the “Prior Change in Control Agreement”), the purpose of such amendment and restatement being to incorporate certain provisions into this Agreement intended to comply with Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

RECITALS

     A. The Board of Directors of the Company has approved the Company entering into a severance agreement with the Executive.

     B. The Executive is a key executive of the Company.

     C. Should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive’s advice, if requested, as to the best interests of the Company and its stockholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control.

     D. Should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be appropriate.

     E. This Agreement provides the benefits the Executive will be entitled to receive upon certain terminations of employment in connection with a Change in Control from and after the Effective Date and supersedes and negates all previous agreements with respect to such benefits, including, without limitation, the Prior Change in Control Agreement.

     NOW THEREFORE, to help assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company in the face of these circumstances and for other good and valuable consideration, the Company and the Executive agree as follows:

Article 1. Term

     This Agreement shall be effective as of November 10, 2006 (the “Effective Date”). This Agreement will continue in effect through the second anniversary of the Effective Date. However, upon the first anniversary of the Effective Date and upon each subsequent anniversary of the Effective Date, the term of this Agreement shall be extended automatically for one (1) additional year (such that upon the first anniversary of the Effective Date the term of this Agreement shall be extended through the third anniversary of the Effective Date and so on), unless the Committee delivers written notice prior to such anniversary of the Effective Date to the Executive that this Agreement will not be extended or further extended, as the case may be, and if such notice is given this Agreement will terminate at the end of the term then in progress.

     Notwithstanding the foregoing, in the event a Change in Control occurs during the original or any extended term of this Agreement, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. For purposes of clarity, subject to Section 3.1, benefits shall be payable to the Executive under this Agreement only with respect to a single Change in Control of the Company. Accordingly, no Change in Control after the first Change in Control shall be considered for purposes of this Agreement.

Article 2. Definitions

     Whenever used in this Agreement, the following terms shall have the meanings set forth below:

(a) “Accrued Obligations” means:

(i)	any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) prior to the Severance Date; and
(ii)	any Annual Bonus earned as of the Severance Date with respect to the fiscal year preceding the year in which the Severance Date occurs (if the Executive was employed by the Company on the last day of that fiscal year) that had not previously been paid.

(b)	“Agreement” means this Change in Control Severance Agreement.
(c)	“Annual Bonus” means the Executive’s annual incentive cash bonus opportunity.
(d)	“Base Salary” means the salary of record paid to the Executive by the Company as annual salary (whether or not deferred), but excludes amounts received under incentive or other bonus plans.
(e)	“Beneficiary” means the persons or entities designated or deemed designated by the Executive pursuant to Section 8.2.
(f)	“Board” means the Board of Directors of the Company.

(g) “Cause” means the occurrence of any of the following:

(i)	the Executive is convicted of, or has pled guilty or nolo contendere to, a felony (other than traffic related offenses or as a result of vicarious liability); or
(ii)	the Executive has engaged in acts of fraud, material dishonesty or other acts of willful misconduct in the course of his duties to the Company; or
(iii)	the Executive willfully and repeatedly fails to perform or uphold his duties to the Company; or
(iv)	the Executive willfully fails to comply with reasonable directives of the Board which are communicated to him in writing;

	provided, however, that no act or omission by the Executive shall be deemed to be “willful” if the Executive reasonably believed in good faith that such acts or omissions were in the best interests of the Company.
(h)	“Change in Control” means any of the following:

(i)

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control; (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate of the Company or a successor, (D) any acquisition by any entity pursuant to a transaction that complies with clauses (iii)(1), (2) and (3) below, and (E) any acquisition by a Person who owned more than 30% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities as of the Effective Date or an Affiliate of any such Person;

(ii)

A change in the Board or its members such that individuals who, as of the later of the Effective Date or the date that is two years prior to such change (the later of such two dates is referred to as the “Measurement Date”), constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Measurement Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors

then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member and his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii)

Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 30% existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a Parent were members of the Incumbent Board (determined pursuant to clause (ii) above using the date that is the later of the Effective Date or the date that is two years prior to the Business Combination as the Measurement Date) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a Change in Control under clause (iii) above.

	Notwithstanding the foregoing, in no event shall a transaction or other event that occurred prior to the Effective Date constitute a Change in Control.
(i)	“Code” means the United States Internal Revenue Code of 1986, as amended.
(j)	“Committee” means the Compensation Committee of the Board.
(k)	“Company” means QLogic Corporation, a Delaware corporation, or any successor thereto as provided in Article 7.
(l)	“Disability” means disability as defined in the Company’s long-term disability plan in which the Executive participates at the relevant time or, if the Executive does not participate in a Company long-term disability plan at the relevant time, such term shall mean a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code.
(m)	“Effective Date” has the meaning given to such term in Article 1 hereof.
(n)	“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
(o)	“Executive” means the individual identified in the first sentence, and on the signature page, of this Agreement.
(p)	“Good Reason” means, without the Executive’s express written consent, the occurrence of any one or more of the following:

(i)

A material reduction in the nature or status of the Executive’s authorities, duties, and/or responsibilities, (when such authorities, duties, and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive. The change in status of the Company from a publicly-traded company to a company the securities of which are not publicly-traded (including any related termination of the Company’s reporting obligations under the Exchange Act) shall not, in and of itself, constitute Good Reason or a material reduction in the nature or status of the Executive’s authorities, duties, and/or responsibilities.

(ii)

A reduction by the Company in either the Executive’s Base Salary or the Executive’s Annual Bonus opportunity as in effect immediately prior to the start of the Protected Period or as the same shall be increased from time to time.

(iii)	A material reduction in the Executive’s relative level of coverage and accruals under the Company’s employee benefit and/or retirement plans, policies, practices, or arrangements in which the Executive participates immediately prior to the start of the Protected Period, both in terms of the amount of benefits provided, and amounts accrued. For this purpose, the Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Executive’s level of coverage under all such programs must be at least as great as is provided to other senior executives of the Company.
(iv)	The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 7.
(v)	The Executive is informed by the Company that his principal place of employment for the Company will be relocated to a location that is more than fifty (50) miles from his principal place of employment for the Company at the start of the corresponding Protected Period.
(vi)	A repudiation or breach by the Company or any successor company of any of the provisions of this Agreement.

	The Executive’s right to terminate employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason herein; provided, however, that if the Executive does not terminate employment and claim Good Reason for such termination within ninety (90) days after the Executive has knowledge of an event or circumstance that would constitute Good Reason, then the Executive shall be deemed to have waived his right to claim Good Reason as to that specific fact or circumstance (except that the event or circumstance may be considered for purposes of determining whether any subsequent, separate, event or circumstance constitutes Good Reason; for example, and without limitation, a reduction in the Executive’s authorities that is deemed waived by operation of this clause may be considered for purposes of determining whether any subsequent reduction in the Executive’s authorities (when taken into consideration with the first reduction) constitutes a “material reduction” in the nature or status of the Executive’s authorities from their level in effect on the day immediately prior to the start of the Protected Period).
(q)	“Protected Period” with respect to a Change in Control of the Company shall mean the period commencing on the date that is six (6) months prior to the date of such Change in Control and ending on the date of such Change in Control.
(r)	“Qualifying Termination” has the meaning given to such term in Section 3.2(a).

(s)	As used herein, a “Separation from Service” occurs when the Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.
(t)	“Severance Benefits” means the payments and/or benefits provided in Section 3.3.
(u)	“Severance Date” means the date on which the Executive’s employment with the Company and its subsidiaries terminates for any reason (whether or not as a result of a Qualifying Termination).
(v)	“Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

Article 3. Severance Benefits

     3.1. Right to Severance Benefits. The Executive shall be entitled to receive from the Company the Severance Benefits described in Section 3.3 if the Executive has incurred a Qualifying Termination and satisfies the release requirements set forth in Section 3.7.

     The Executive shall not be entitled to receive Severance Benefits if his employment terminates (regardless of the reason) before the Protected Period corresponding to a Change in Control of the Company or more than twenty-four (24) months after the date of a Change in Control of the Company.

     3.2. Qualifying Termination.

(a) Subject to Sections 3.2(c), 3.4, and 3.5, the occurrence of any one or more of the following events within the Protected Period corresponding to a Change in Control of the Company, or within twenty-four (24) calendar months following the date of a Change in Control of the Company shall constitute a “Qualifying Termination”:

(i)	An involuntary termination of the Executive’s employment by the Company for reasons other than Cause; or
(ii)	A voluntary termination of employment by the Executive for Good Reason.

(b) Notwithstanding anything else contained herein to the contrary, the Executive’s termination of employment on account of reaching mandatory retirement age, as such age may be defined from time to time in policies adopted by the Company prior to the commencement of the Protected Period, and consistent with applicable law, shall not be a Qualifying Termination.

(c) Notwithstanding anything else contained herein to the contrary, the Executive’s Severance Benefits under this Agreement shall be reduced by the severance benefits (including, without limitation, any other change-in-control severance benefits and any other severance benefits generally) that the Executive may be entitled to under any other plan, program, agreement or other arrangement with the Company (including, without limitation, any such benefits provided for by an employment agreement). For purposes of the foregoing, any cash severance benefits payable to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. For purposes of the foregoing, non-cash severance benefits to be provided to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset any corresponding benefits otherwise to be provided to the Executive under this Agreement or, if there are no corresponding benefits otherwise to be provided to the Executive under this Agreement, the value of such benefits shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. If the amount of other benefits to be offset against the cash severance benefits otherwise payable to the Executive under this Agreement in accordance with the preceding two sentences exceeds the amount of cash severance benefits otherwise payable to the Executive under this Agreement, then the excess may be used to offset other non-cash severance benefits otherwise to be provided to the Executive under this Agreement on a dollar-for-dollar basis. For purposes of this paragraph, the Committee shall reasonably determine the value of any non-cash benefits.

     3.3. Description of Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1, 3.2 and 3.8, the Company shall pay and provide to the Executive (in addition to the Accrued Obligations) the following:

(a) The Company will pay to the Executive an amount equal to two (2) times the sum of (i) the Executive’s Base Salary, and (ii) the Executive’s Annual Bonus. For purposes of this Section 3.3(a), the Executive’s “Base Salary” shall be deemed to be the Executive’s highest annualized rate of Base Salary in effect at any time after the commencement of the Protected Period and on or before the Executive’s Severance Date, and the Executive’s “Annual Bonus” shall be the greater of (x) the Executive’s maximum Annual Bonus opportunity for the fiscal year in which the Executive’s Severance Date occurs, and (y) the highest aggregate bonus(es) paid by the Company to the Executive for any one of the three (3) full fiscal years of the Company immediately preceding the Executive’s Severance Date. Notwithstanding the foregoing provisions, if the Executive would be entitled to a greater cash severance payment in the circumstances under the terms of any employment agreement then in effect than the amount determined under the first sentence of this Section 3.3(a), the Executive shall be entitled to such greater cash severance payment only and no additional payment shall be made under this Section 3.3(a).

(b)

The Company will pay or reimburse the Executive for his premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the Severance Date, to the extent that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this clause (ii) shall cease upon the first to occur of (a) the second anniversary of the Severance Date; (b) the Executive’s death; (c) the date the Executive becomes eligible for coverage under the health plan of a future employer; or (d) the date the Company or its affiliates ceases to offer any group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive. To the extent that the payment of any COBRA premiums pursuant to this Section 3.3(b) is taxable to the Executive, such payment shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. The Executive’s right to payment of such premiums is not subject to liquidation or exchange for another benefit and the amount of such benefits that the Executive receives in one taxable year shall not affect the amount of such benefits that the Executive receives in any other taxable year.

(c)

Notwithstanding any other provision herein or in any other document, any stock option or other equity-based award granted by the Company to the Executive, to the extent such award is outstanding and has not vested as of the Executive’s Severance Date, shall automatically become fully vested as of the Severance Date. In the event that the Executive has a Qualifying Termination during the Protected Period related to a Change in Control, any stock option or other equity-based award granted by the Company to the Executive, to the extent such award had not vested and was cancelled or otherwise terminated upon or prior to the date of the related Change in Control solely as a result of such Qualifying Termination, shall be reinstated and shall automatically become fully vested, and, in the case of stock options or similar awards, the Executive shall be given a reasonable opportunity to exercise such accelerated portion of the option or other award before it terminates.

     3.4. Termination Due to Disability or Death. Termination of the Executive’s employment due to the Executive’s death or Disability is not a Qualifying Termination, and upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations.

     3.5. Termination for Cause or by the Executive Other Than for Good Reason Termination of the Executive’s employment by the Company for Cause or by the Executive other than for Good Reason does not constitute a Qualifying Termination. Upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations.

     3.6. Notice of Termination. Any termination of the Executive’s employment by the Company for Cause or by the Executive for Good Reason shall be communicated by a Notice of

Termination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

     3.7. Release. This Section 3.7 shall apply notwithstanding anything else contained in this Agreement to the contrary. As a condition precedent to any Company obligation to the Executive pursuant to Section 3.3, the Executive (or, in the event of the Executive’s death following a Qualifying Termination, the Executive’s estate) shall, upon or promptly following (and in all events within forty-five (45) days following) the Executive’s Severance Date (or, if later, the date of the relevant Change in Control of the Company), provide the Company with a valid, executed, written release of claims (in the form attached hereto as Exhibit A or such similar form as the Company may reasonably require in the circumstances) (the “Release”), and such Release shall have not been revoked by the Executive (or the Executive’s estate, as applicable) pursuant to any revocation rights afforded by applicable law. The Company shall have no obligation to make any payment or provide any benefit to the Executive pursuant to Section 3.3 unless and until the Release contemplated by this Section 3.7 becomes irrevocable by the Executive (or the Executive’s estate, as applicable) in accordance with all applicable laws, rules and regulations.

     3.8. Exclusive Remedy. The Executive agrees that the payments and benefits contemplated by Section 3.3 shall, if the Release contemplated by Section 3.7 is signed and the amounts paid, constitute the exclusive and sole remedy for any termination of his employment and in such case the Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and the Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement, and there shall be no offset against any amounts due to the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain.

Article 4. Form and Timing of Severance Benefits; Tax Withholding

     4.1. Form and Timing of Severance Benefits. Subject to Section 3.7, the Severance Benefits described in Section 3.3(a) shall be paid in cash to the Executive in a single lump sum as soon as practicable following (and in all events within sixty (60) days following) the later of (i) the Executive’s Separation from Service or (ii) in the case of a Separation from Service during the Protected Period, the date of the corresponding Change in Control; provided, however, that such payment shall be subject to the provisions of Section 8.14(a).

     4.2. Withholding of Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

Article 5. Section 280G. Notwithstanding any other provision herein, the Executive shall be covered by the provisions set forth in Exhibit B hereto, incorporated herein by this reference.

Article 6. The Company’s Payment Obligation

     6.1. Payment of Obligations Absolute. Except as provided in Sections 3.7, 4.2 and in Article 5, the Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Article 5; provided that the Executive does not revoke the Release or otherwise take action to render the Release unenforceable.

     6.2. Contractual Right to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. The Company expressly waives any ability, if possible, to deny liability for any breach of its contractual commitment hereunder upon the grounds of lack of consideration, accord and satisfaction or any other defense. In any dispute arising after a Change in Control as to whether the Executive is entitled to benefits under this Agreement, there shall be a presumption that the Executive is entitled to such benefits and the burden of proving otherwise shall be on the Company. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

     6.3. Pension Plans; Duplicate Benefits. All payments, benefits and amounts provided under this Agreement shall be in addition to and not in substitution for any pension rights under the Company’s tax-qualified pension plans, supplemental retirement plans, nonqualified deferred compensation plans, bonus plans, and any disability, workers’ compensation or other Company benefit plan distribution that the Executive is entitled to as of his Severance Date. Notwithstanding the foregoing, this Agreement shall not create an inference that any duplicate payments shall be required. No payments made pursuant to this Agreement shall be considered compensation for purposes of any such benefit plan.

Article 7. Successors and Assignment

     7.1. Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company) to expressly assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

     7.2. Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

Article 8. Miscellaneous

     8.1. Employment Status. Except as may be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will,” and, prior to the effective date of a Change in Control, may be terminated by either the Executive or the Company at any time, subject to applicable law.

     8.2. Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Executive’s Beneficiary in accordance with the terms of this Agreement. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive’s devisee, legatee, or other designee, or if there is no such designee, to the Executive’s estate. The Executive may make or change such designation at any time, provided that any designation or change thereto must be in the form of a signed writing acceptable to and received by the Committee.

     8.3. Gender and Number. Where the context requires herein, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

     8.4. Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

     8.5. Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

     8.6. Entire Agreement. This Agreement, together with any employment agreement and any written agreement evidencing any stock option or other equity-based incentive award previously granted by the Company, embodies the entire agreement of the parties hereto respecting the matters within its scope. As of the date hereof, this Agreement shall supersede all other agreements of the parties hereto that are prior to or contemporaneous with such date and that directly or indirectly bear upon the subject matter hereof (including, without limitation, the Prior Change in Control Agreement), other than any prior agreement relating to any right to indemnification the Executive may have from the Company or the Executive’s right to be covered under any applicable insurance policy, with respect to any liability the Executive incurred or may incur as an employee, officer or director of the Company or its affiliates. Any negotiations, correspondence, agreements, proposals or understandings prior to the date of this

Agreement relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein. This Agreement is an integrated agreement.

     8.7. Modification. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

     8.8. Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

     8.9. Arbitration. Any controversy arising out of or relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy arising out of the Executive’s employment, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Orange County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc., Orange, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The parties hereto acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or the Executive’s employment. The parties agree hereto that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the Arbitrator’s fee. The Executive and the Company further agree that in any proceeding to enforce the terms of this Agreement, the prevailing party shall be entitled to its or his reasonable attorneys’ fees and costs (other than forum costs associated with the arbitration) incurred by it or him in connection with resolution of the dispute in addition to any other relief granted. Notwithstanding this provision, the parties hereto may mutually agree to mediate any dispute prior to or following submission to arbitration.

     8.10. Notices.

(a) All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, or (iii) sent by registered or certified mail, postage prepaid, return receipt requested. Any notice shall be duly addressed to the parties hereto as follows:

     (i) if to the Company:

QLogic Corporation
26650 Aliso Viejo Parkway
Aliso Viejo, California 92656

Attn: General Counsel

with a copy to:

O’Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660

Attn: Gary Singer, Esq.

     (ii) if to the Executive, at the last address of the Executive on the books of the Company.

(b) Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 8.10 for the giving of notice. Any communication shall be effective when delivered by hand, when otherwise delivered against receipt therefor, or five (5) business days after being mailed in accordance with the foregoing.

     8.11. Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read and understands this Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

     8.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties hereto reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

     8.13. Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.

     8.14. Section 409A.

(a)

Notwithstanding any provision of this Agreement to the contrary, if the Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s Separation from Service, the Executive shall not be entitled to any payment pursuant to Section 3.3 until the earlier of (i) the date which is six (6) months after the Executive’s Separation from Service for any reason other than death, or (ii) the date of the Executive’s death. Any amounts otherwise payable to the Executive upon or in the six (6) month period following the Executive’s Separation from Service that are not so paid by reason of this Section 8.14(a) shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Executive’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Executive’s death). The provisions of this Section 8.14(a) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code.

(b)

It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) so as not to subject the Executive to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive.

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     IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the Effective Date.

“COMPANY”
QLogic Corporation,
a Delaware corporation
By:	/s/ Michael L. Hawkins
Print Name: Michael L. Hawkins
Title: Vice President and General Counsel
“EXECUTIVE”
/s/ H.K. Desai
H.K. Desai

EXHIBIT A
GENERAL RELEASE AGREEMENT

          1. Release. H.K. Desai (“Executive”), on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue QLogic Corporation (the “Company”), its divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as its and their assignees, successors, directors, officers, shareholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “Releasees”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in the Company or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, equity-based awards and/or dividend equivalents thereon, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this Agreement, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the California Fair Employment and Housing Act, or the California Family Rights Act, or any other federal, state or local law, regulation or ordinance (collectively, the “Claims”); provided, however, that the foregoing release does not apply to any obligation of the Company to Executive pursuant to any of the following: (1) Section 3 of the Change in Control Severance Agreement dated as of December 19, 2008 by and between the Company and Executive (the “Change in Control Agreement”), or (2) any equity-based awards previously granted by the Company to Executive (as amended by the Change in Control Agreement). In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

          2. Acknowledgement of Payment of Wages. Executive acknowledges that he has received all amounts owed for his regular and usual salary (including, but not limited to, any bonus or other wages), and usual benefits through the date of this Agreement.

          3. Waiver of Civil Code Section 1542. This Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Executive hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code as to the Claims. Section 1542 of the California Civil Code provides:

“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Executive acknowledges that he later may discover claims, demands, causes of action or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

          4. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into this Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), which have arisen on or before the date of execution of this Agreement. Executive further expressly acknowledges and agrees that:

          (a) In return for this Agreement, he will receive consideration beyond that which he was already entitled to receive before entering into this Agreement;

          (b) He is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement;

          (c) He was given a copy of this Agreement on [                    ] and informed that he had twenty-one (21) days within which to consider the Agreement and that if he wished to executive this Agreement prior to expiration of such 21-day period, he should execute the Acknowledgement and Waiver attached hereto as Exhibit A-1;

          (d) Nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law; and

          (e) He was informed that he has seven (7) days following the date of execution of this Agreement in which to revoke this Agreement, and this Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Company during the seven-day revocation period. In the event that Executive exercises his right of revocation, neither the Company nor Executive will have any obligations under this Agreement.

          5. No Transferred Claims. Executive represents and warrants to the Company that he has not heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof.

          6. Miscellaneous. The following provisions shall apply for purposes of this Agreement:

          (a) Number and Gender. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

          (b) Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

          (c) Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.

          (d) Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

          (e) Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

          (f) Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

          (g) Arbitration. Any controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provisions of the Change in Control Agreement.

          (h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

[Remainder of page intentionally left blank]

          The undersigned have read and understand the consequences of this Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

     EXECUTED this                      day of                      20     , at                      County,                     .

“Executive”
H.K. DESAI
QLOGIC CORPORATION
By:
	[NAME]
	[TITLE]

EXHIBIT A-1

ACKNOWLEDGMENT AND WAIVER

     I, H.K. Desai, hereby acknowledge that I was given 21 days to consider the foregoing Agreement and voluntarily chose to sign the Agreement prior to the expiration of the 21-day period.

     I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

     EXECUTED this       day of                      20   , at                      County,                     .

H.K. Desai

EXHIBIT B

SECTION 280G PROVISIONS

1.1

Gross-Up Payment. In the event it is determined (pursuant to Section 1.2) or finally determined (as defined in Section 1.3(c)) that any payment, distribution, transfer, or benefit by the Company, or a direct or indirect subsidiary or affiliate of the Company, to or for the benefit of the Executive or the Executive’s dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, the Executive’s employment with the Company or a change in ownership or effective control of the Company or a substantial portion of its assets, but determined without regard to any additional payments required under this Exhibit B) (each a “Payment” and collectively the “Payments”) is subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, “Section 4999”), or any interest, penalty or addition to tax is incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest, penalty, and addition to tax, hereinafter collectively referred to as the “Excise Tax”), then, within 10 days after such determination or final determination, as the case may be (and in all events not later than the end of the Executive’s taxable year following the Executive’s taxable year in which the tax was remitted), the Company shall pay to the Executive (or to the applicable taxing authority on the Executive’s behalf) an additional cash payment (hereinafter referred to as the “Gross-Up Payment”) equal to an amount such that after payment by the Executive of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments. This provision is intended to put the Executive in the same position as the Executive would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.

1.2

Determination of Gross-Up.

(a)

Except as provided in Section 1.3, the determination that a Payment is subject to an Excise Tax shall be made in writing by a nationally recognized accounting firm or executive compensation consulting firm selected by the Company (the “Accounting Firm”). Such determination shall include the amount of the Gross-Up Payment and detailed computations thereof, including any assumptions used in such computations. Any determination by the Accounting Firm will be binding on the Company and the Executive.

(b)

For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal individual income taxation in the calendar year in which the Gross-Up Payment is to be made. Such highest marginal rate shall take into account the loss of itemized deductions by the Executive and shall also include the Executive’s share of the hospital insurance portion of FICA and state and local income taxes at the highest marginal rate of individual income taxation in the state and locality of the Executive’s residence on the date that the Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from the deduction of such state and local taxes.

1.3 Notification.

(a) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the “Taxing Authority”) that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Executive receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that failure by the Executive to give such notice within such 30-day period shall not result in a waiver or forfeiture of any of the Executive’s rights under this Exhibit B except to the extent of actual damages suffered by the Company as a result of such failure. The Executive shall not pay such claim prior to the expiration of the 15-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim, the Executive shall:

(1)	give the Company any information reasonably requested by the Company relating to such claim;
(2)	take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company;
(3)	cooperate with the Company in good faith in order effectively to contest such claim; and
(4)	permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.

(b)	Without limitation on the foregoing provisions of this Section 1.3, and to the extent its actions do not unreasonably interfere with or prejudice the Executive’s disputes with the Taxing Authority as to other issues, the Company shall control all proceedings taken in connection with such contest and, in its reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its or in their sole option, either direct the Executive to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance an amount equal to such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably acceptable to the Executive, and the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue.
(c)	If, after receipt by the Executive of an amount advanced by the Company pursuant to Section 1.3(a), the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company’s compliance with the requirements of this Exhibit B) promptly pay to the Company an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Executive in connection with such advance, after giving effect to such repayment. If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 1.3(a), it is finally determined that the Executive is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.
(d)	For purposes of this Exhibit B, whether the Excise Tax is applicable to a Payment shall be deemed to be “finally determined” upon the earliest of: (1) the expiration of the 15-day period referred to in Section 1.3(a) if the Company or the

Executive’s Employer has not notified the Executive that it intends to contest the underlying claim, (2) the expiration of any period following which no right of appeal exists, (3) the date upon which a closing agreement or similar agreement with respect to the claim is executed by the Executive and the Taxing Authority (which agreement may be executed only in compliance with this section), or (4) the receipt by the Executive of notice from the Company that it no longer seeks to pursue a contest (which shall be deemed received if the Company does not, within 15 days following receipt of a written inquiry from the Executive, affirmatively indicate in writing to the Executive that the Company intends to continue to pursue such contest).

1.4

Underpayment and Overpayment. It is possible that no Gross-Up Payment will initially be made but that a Gross-Up Payment should have been made, or that a Gross-Up Payment will initially be made in an amount that is less than what should have been made (either of such events is referred to as an “Underpayment”). It is also possible that a Gross-Up Payment will initially be made in an amount that is greater than what should have been made (an “Overpayment”). The determination of any Underpayment or Overpayment shall be made by the Accounting Firm in accordance with Section 1.2. In the event of an Underpayment, the amount of any such Underpayment shall be paid to the Executive as an additional Gross-Up Payment. In the event of an Overpayment, the Executive shall promptly pay to the Company the amount of such Overpayment together with interest on such amount at the applicable Federal rate provided for in Section 1274(d) of the Code for the period commencing on the date of the Overpayment to the date of such payment by the Executive to the Company. The Executive shall make such payment to the Company as soon as administratively practicable after the Company notifies the Executive of (a) the Accounting Firm’s determination that an Overpayment was made and (b) the amount to be repaid.

1.5

Compliance with Law. Nothing in this Exhibit B is intended to violate the Sarbanes-Oxley Act of 2002, and to the extent that any advance or repayment obligation hereunder would constitute such a violation, such obligation shall be modified so as to make the advance a nonrefundable payment to the Executive and the repayment obligation null and void to the extent required by such Act.

EX-10.3

Exhibit 10.3

QLOGIC CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT

     THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of December 19, 2008 by and between QLogic Corporation, a Delaware corporation (the “Company”), and Simon Biddiscombe (the “Executive”) and amends and restates that certain Change in Control Agreement by and between the Company and the Executive dated as of April 22, 2008 (the “Prior Change in Control Agreement”), the purpose of such amendment and restatement being to incorporate certain provisions into this Agreement intended to comply with Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

RECITALS

     A. The Board of Directors of the Company has approved the Company entering into a severance agreement with the Executive.

     B. The Executive is a key executive of the Company.

     C. Should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive’s advice, if requested, as to the best interests of the Company and its stockholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control.

     D. Should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be appropriate.

     E. This Agreement provides the benefits the Executive will be entitled to receive upon certain terminations of employment in connection with a Change in Control from and after the Effective Date and supersedes and negates all previous agreements with respect to such benefits, including, without limitation, the Prior Change in Control Agreement.

     NOW THEREFORE, to help assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company in the face of these circumstances and for other good and valuable consideration, the Company and the Executive agree as follows:

Article 1. Term

     This Agreement shall be effective as of April 22, 2008 (the “Effective Date”). This Agreement will continue in effect through the second anniversary of the Effective Date. However, upon the first anniversary of the Effective Date and upon each subsequent anniversary of the Effective Date, the term of this Agreement shall be extended automatically for one (1) additional year (such that upon the first anniversary of the Effective Date the term of this Agreement shall be extended through the third anniversary of the Effective Date and so on), unless the Committee delivers written notice prior to such anniversary of the Effective Date to the Executive that this Agreement will not be extended or further extended, as the case may be, and if such notice is given this Agreement will terminate at the end of the term then in progress.

     Notwithstanding the foregoing, in the event a Change in Control occurs during the original or any extended term of this Agreement, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. For purposes of clarity, subject to Section 3.1, benefits shall be payable to the Executive under this Agreement only with respect to a single Change in Control of the Company. Accordingly, no Change in Control after the first Change in Control shall be considered for purposes of this Agreement.

Article 2. Definitions

     Whenever used in this Agreement, the following terms shall have the meanings set forth below:

(a) “Accrued Obligations” means:

(i)	any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) prior to the Severance Date; and
(ii)	any Annual Bonus earned as of the Severance Date with respect to the fiscal year preceding the year in which the Severance Date occurs (if the Executive was employed by the Company on the last day of that fiscal year) that had not previously been paid.

(b)	“Agreement” means this Change in Control Severance Agreement.
(c)	“Annual Bonus” means the Executive’s annual incentive cash bonus opportunity.
(d)	“Base Salary” means the salary of record paid to the Executive by the Company as annual salary (whether or not deferred), but excludes amounts received under incentive or other bonus plans.
(e)	“Beneficiary” means the persons or entities designated or deemed designated by the Executive pursuant to Section 8.2.
(f)	“Board” means the Board of Directors of the Company.

(g) “Cause” means the occurrence of any of the following:

(i)	the Executive is convicted of, or has pled guilty or nolo contendere to, a felony (other than traffic related offenses or as a result of vicarious liability); or
(ii)	the Executive has engaged in acts of fraud, material dishonesty or other acts of willful misconduct in the course of his duties to the Company; or
(iii)	the Executive willfully and repeatedly fails to perform or uphold his duties to the Company; or
(iv)	the Executive willfully fails to comply with reasonable directives of the Board which are communicated to him in writing;

	provided, however, that no act or omission by the Executive shall be deemed to be “willful” if the Executive reasonably believed in good faith that such acts or omissions were in the best interests of the Company.
(h)	“Change in Control” means any of the following:

(i)

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control; (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate of the Company or a successor, (D) any acquisition by any entity pursuant to a transaction that complies with clauses (iii)(1), (2) and (3) below, and (E) any acquisition by a Person who owned more than 30% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities as of the Effective Date or an Affiliate of any such Person;

(ii)

A change in the Board or its members such that individuals who, as of the later of the Effective Date or the date that is two years prior to such change (the later of such two dates is referred to as the “Measurement Date”), constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Measurement Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors

then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member and his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii)

Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 30% existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a Parent were members of the Incumbent Board (determined pursuant to clause (ii) above using the date that is the later of the Effective Date or the date that is two years prior to the Business Combination as the Measurement Date) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a Change in Control under clause (iii) above.

	Notwithstanding the foregoing, in no event shall a transaction or other event that occurred prior to the Effective Date constitute a Change in Control.
(i)	“Code” means the United States Internal Revenue Code of 1986, as amended.
(j)	“Committee” means the Compensation Committee of the Board.
(k)	“Company” means QLogic Corporation, a Delaware corporation, or any successor thereto as provided in Article 7.
(l)	“Disability” means disability as defined in the Company’s long-term disability plan in which the Executive participates at the relevant time or, if the Executive does not participate in a Company long-term disability plan at the relevant time, such term shall mean a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code.
(m)	“Effective Date” has the meaning given to such term in Article 1 hereof.
(n)	“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
(o)	“Executive” means the individual identified in the first sentence, and on the signature page, of this Agreement.
(p)	“Good Reason” means, without the Executive’s express written consent, the occurrence of any one or more of the following:

(i)

A material reduction in the nature or status of the Executive’s authorities, duties, and/or responsibilities, (when such authorities, duties, and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive. The change in status of the Company from a publicly-traded company to a company the securities of which are not publicly-traded (including any related termination of the Company’s reporting obligations under the Exchange Act) shall not, in and of itself, constitute Good Reason or a material reduction in the nature or status of the Executive’s authorities, duties, and/or responsibilities.

(ii)

A reduction by the Company in either the Executive’s Base Salary or the Executive’s Annual Bonus opportunity as in effect immediately prior to the start of the Protected Period or as the same shall be increased from time to time.

(iii)	A material reduction in the Executive’s relative level of coverage and accruals under the Company’s employee benefit and/or retirement plans, policies, practices, or arrangements in which the Executive participates immediately prior to the start of the Protected Period, both in terms of the amount of benefits provided, and amounts accrued. For this purpose, the Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Executive’s level of coverage under all such programs must be at least as great as is provided to other senior executives of the Company.
(iv)	The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 7.
(v)	The Executive is informed by the Company that his principal place of employment for the Company will be relocated to a location that is more than fifty (50) miles from his principal place of employment for the Company at the start of the corresponding Protected Period.
(vi)	A repudiation or breach by the Company or any successor company of any of the provisions of this Agreement.

	The Executive’s right to terminate employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason herein; provided, however, that if the Executive does not terminate employment and claim Good Reason for such termination within ninety (90) days after the Executive has knowledge of an event or circumstance that would constitute Good Reason, then the Executive shall be deemed to have waived his right to claim Good Reason as to that specific fact or circumstance (except that the event or circumstance may be considered for purposes of determining whether any subsequent, separate, event or circumstance constitutes Good Reason; for example, and without limitation, a reduction in the Executive’s authorities that is deemed waived by operation of this clause may be considered for purposes of determining whether any subsequent reduction in the Executive’s authorities (when taken into consideration with the first reduction) constitutes a “material reduction” in the nature or status of the Executive’s authorities from their level in effect on the day immediately prior to the start of the Protected Period).
(q)	“Protected Period” with respect to a Change in Control of the Company shall mean the period commencing on the date that is six (6) months prior to the date of such Change in Control and ending on the date of such Change in Control.
(r)	“Qualifying Termination” has the meaning given to such term in Section 3.2(a).

(s)	As used herein, a “Separation from Service” occurs when the Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.
(t)	“Severance Benefits” means the payments and/or benefits provided in Section 3.3.
(u)	“Severance Date” means the date on which the Executive’s employment with the Company and its subsidiaries terminates for any reason (whether or not as a result of a Qualifying Termination).
(v)	“Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

Article 3. Severance Benefits

     3.1. Right to Severance Benefits. The Executive shall be entitled to receive from the Company the Severance Benefits described in Section 3.3 if the Executive has incurred a Qualifying Termination and satisfies the release requirements set forth in Section 3.7.

     The Executive shall not be entitled to receive Severance Benefits if his employment terminates (regardless of the reason) before the Protected Period corresponding to a Change in Control of the Company or more than twenty-four (24) months after the date of a Change in Control of the Company.

     3.2. Qualifying Termination.

(a) Subject to Sections 3.2(c), 3.4, and 3.5, the occurrence of any one or more of the following events within the Protected Period corresponding to a Change in Control of the Company, or within twenty-four (24) calendar months following the date of a Change in Control of the Company shall constitute a “Qualifying Termination”:

(i)	An involuntary termination of the Executive’s employment by the Company for reasons other than Cause; or
(ii)	A voluntary termination of employment by the Executive for Good Reason.

(b) Notwithstanding anything else contained herein to the contrary, the Executive’s termination of employment on account of reaching mandatory retirement age, as such age may be defined from time to time in policies adopted by the Company prior to the commencement of the Protected Period, and consistent with applicable law, shall not be a Qualifying Termination.

(c) Notwithstanding anything else contained herein to the contrary, the Executive’s Severance Benefits under this Agreement shall be reduced by the severance benefits (including, without limitation, any other change-in-control severance benefits and any other severance benefits generally) that the Executive may be entitled to under any other plan, program, agreement or other arrangement with the Company (including, without limitation, any such benefits provided for by an employment agreement). For purposes of the foregoing, any cash severance benefits payable to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. For purposes of the foregoing, non-cash severance benefits to be provided to the Executive under any other plan, program, agreement or other arrangement with the Company shall offset any corresponding benefits otherwise to be provided to the Executive under this Agreement or, if there are no corresponding benefits otherwise to be provided to the Executive under this Agreement, the value of such benefits shall offset the cash severance benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar basis. If the amount of other benefits to be offset against the cash severance benefits otherwise payable to the Executive under this Agreement in accordance with the preceding two sentences exceeds the amount of cash severance benefits otherwise payable to the Executive under this Agreement, then the excess may be used to offset other non-cash severance benefits otherwise to be provided to the Executive under this Agreement on a dollar-for-dollar basis. For purposes of this paragraph, the Committee shall reasonably determine the value of any non-cash benefits.

     3.3. Description of Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1, 3.2 and 3.8, the Company shall pay and provide to the Executive (in addition to the Accrued Obligations) the following:

(a) The Company will pay to the Executive an amount equal to one and one-half (1.5) times the sum of (i) the Executive’s Base Salary, and (ii) the Executive’s Annual Bonus. For purposes of this Section 3.3(a), the Executive’s “Base Salary” shall be deemed to be the Executive’s highest annualized rate of Base Salary in effect at any time after the commencement of the Protected Period and on or before the Executive’s Severance Date, and the Executive’s “Annual Bonus” shall be the greater of (x) the Executive’s maximum Annual Bonus opportunity for the fiscal year in which the Executive’s Severance Date occurs, and (y) the highest aggregate bonus(es) paid by the Company to the Executive for any one of the three (3) full fiscal years of the Company immediately preceding the Executive’s Severance Date. Notwithstanding the foregoing provisions, if the Executive would be entitled to a greater cash severance payment in the circumstances under the terms of any employment agreement then in effect than the amount determined under the first sentence of this Section 3.3(a), the Executive shall be entitled to such greater cash severance payment only and no additional payment shall be made under this Section 3.3(a).

(b)

The Company will pay or reimburse the Executive for his premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the Severance Date, to the extent that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this clause (ii) shall cease upon the first to occur of (a) the second anniversary of the Severance Date; (b) the Executive’s death; (c) the date the Executive becomes eligible for coverage under the health plan of a future employer; or (d) the date the Company or its affiliates ceases to offer any group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive. To the extent that the payment of any COBRA premiums pursuant to this Section 3.3(b) is taxable to the Executive, such payment shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. The Executive’s right to payment of such premiums is not subject to liquidation or exchange for another benefit and the amount of such benefits that the Executive receives in one taxable year shall not affect the amount of such benefits that the Executive receives in any other taxable year.

(c)

Notwithstanding any other provision herein or in any other document, any stock option or other equity-based award granted by the Company to the Executive, to the extent such award is outstanding and has not vested as of the Executive’s Severance Date, shall automatically become fully vested as of the Severance Date. In the event that the Executive has a Qualifying Termination during the Protected Period related to a Change in Control, any stock option or other equity-based award granted by the Company to the Executive, to the extent such award had not vested and was cancelled or otherwise terminated upon or prior to the date of the related Change in Control solely as a result of such Qualifying Termination, shall be reinstated and shall automatically become fully vested, and, in the case of stock options or similar awards, the Executive shall be given a reasonable opportunity to exercise such accelerated portion of the option or other award before it terminates.

     3.4. Termination Due to Disability or Death. Termination of the Executive’s employment due to the Executive’s death or Disability is not a Qualifying Termination, and upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations.

     3.5. Termination for Cause or by the Executive Other Than for Good Reason Termination of the Executive’s employment by the Company for Cause or by the Executive other than for Good Reason does not constitute a Qualifying Termination. Upon any such termination, the Executive shall be entitled to payment only of the Accrued Obligations.

     3.6. Notice of Termination. Any termination of the Executive’s employment by the Company for Cause or by the Executive for Good Reason shall be communicated by a Notice of Termination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

     3.7. Release. This Section 3.7 shall apply notwithstanding anything else contained in this Agreement to the contrary. As a condition precedent to any Company obligation to the Executive pursuant to Section 3.3, the Executive (or, in the event of the Executive’s death following a Qualifying Termination, the Executive’s estate) shall, upon or promptly following (and in all events within forty-five (45) days following) the Executive’s Severance Date (or, if later, the date of the relevant Change in Control of the Company), provide the Company with a valid, executed, written release of claims (in the form attached hereto as Exhibit A or such similar form as the Company may reasonably require in the circumstances) (the “Release”), and such Release shall have not been revoked by the Executive (or the Executive’s estate, as applicable) pursuant to any revocation rights afforded by applicable law. The Company shall have no obligation to make any payment or provide any benefit to the Executive pursuant to Section 3.3 unless and until the Release contemplated by this Section 3.7 becomes irrevocable by the Executive (or the Executive’s estate, as applicable) in accordance with all applicable laws, rules and regulations.

     3.8. Exclusive Remedy. The Executive agrees that the payments and benefits contemplated by Section 3.3 shall, if the Release contemplated by Section 3.7 is signed and the amounts paid, constitute the exclusive and sole remedy for any termination of his employment and in such case the Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and the Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement, and there shall be no offset against any amounts due to the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain.

Article 4. Form and Timing of Severance Benefits; Tax Withholding

     4.1. Form and Timing of Severance Benefits. Subject to Section 3.7, the Severance Benefits described in Section 3.3(a) shall be paid in cash to the Executive in a single lump sum as soon as practicable following (and in all events within sixty (60) days following) the later of (i) the Executive’s Separation from Service or (ii) in the case of a Separation from Service during the Protected Period, the date of the corresponding Change in Control; provided, however, that such payment shall be subject to the provisions of Section 8.14(a).

     4.2. Withholding of Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

Article 5. Section 280G. Notwithstanding any other provision herein, the Executive shall be covered by the provisions set forth in Exhibit B hereto, incorporated herein by this reference.

Article 6. The Company’s Payment Obligation

     6.1. Payment of Obligations Absolute. Except as provided in Sections 3.7, 4.2 and in Article 5, the Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Article 5; provided that the Executive does not revoke the Release or otherwise take action to render the Release unenforceable.

     6.2. Contractual Right to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. The Company expressly waives any ability, if possible, to deny liability for any breach of its contractual commitment hereunder upon the grounds of lack of consideration, accord and satisfaction or any other defense. In any dispute arising after a Change in Control as to whether the Executive is entitled to benefits under this Agreement, there shall be a presumption that the Executive is entitled to such benefits and the burden of proving otherwise shall be on the Company. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

     6.3. Pension Plans; Duplicate Benefits. All payments, benefits and amounts provided under this Agreement shall be in addition to and not in substitution for any pension rights under the Company’s tax-qualified pension plans, supplemental retirement plans, nonqualified deferred compensation plans, bonus plans, and any disability, workers’ compensation or other Company benefit plan distribution that the Executive is entitled to as of his Severance Date. Notwithstanding the foregoing, this Agreement shall not create an inference that any duplicate payments shall be required. No payments made pursuant to this Agreement shall be considered compensation for purposes of any such benefit plan.

Article 7. Successors and Assignment

     7.1. Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company) to expressly assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

     7.2. Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

Article 8. Miscellaneous

     8.1. Employment Status. Except as may be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will,” and, prior to the effective date of a Change in Control, may be terminated by either the Executive or the Company at any time, subject to applicable law.

     8.2. Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Executive’s Beneficiary in accordance with the terms of this Agreement. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive’s devisee, legatee, or other designee, or if there is no such designee, to the Executive’s estate. The Executive may make or change such designation at any time, provided that any designation or change thereto must be in the form of a signed writing acceptable to and received by the Committee.

     8.3. Gender and Number. Where the context requires herein, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

     8.4. Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

     8.5. Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

     8.6. Entire Agreement. This Agreement, together with any employment agreement and any written agreement evidencing any stock option or other equity-based incentive award previously granted by the Company, embodies the entire agreement of the parties hereto respecting the matters within its scope. As of the date hereof, this Agreement shall supersede all other agreements of the parties hereto that are prior to or contemporaneous with such date and that directly or indirectly bear upon the subject matter hereof (including, without limitation, the Prior Change in Control Agreement), other than any prior agreement relating to any right to indemnification the Executive may have from the Company or the Executive’s right to be covered under any applicable insurance policy, with respect to any liability the Executive incurred or may incur as an employee, officer or director of the Company or its affiliates. Any negotiations, correspondence, agreements, proposals or understandings prior to the date of this

Agreement relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein. This Agreement is an integrated agreement.

     8.7. Modification. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

     8.8. Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

     8.9. Arbitration. Any controversy arising out of or relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy arising out of the Executive’s employment, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Orange County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc., Orange, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The parties hereto acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or the Executive’s employment. The parties agree hereto that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the Arbitrator’s fee. The Executive and the Company further agree that in any proceeding to enforce the terms of this Agreement, the prevailing party shall be entitled to its or his reasonable attorneys’ fees and costs (other than forum costs associated with the arbitration) incurred by it or him in connection with resolution of the dispute in addition to any other relief granted. Notwithstanding this provision, the parties hereto may mutually agree to mediate any dispute prior to or following submission to arbitration.

     8.10. Notices.

(a) All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, or (iii) sent by registered or certified mail, postage prepaid, return receipt requested. Any notice shall be duly addressed to the parties hereto as follows:

     (i) if to the Company:

QLogic Corporation
26650 Aliso Viejo Parkway
Aliso Viejo, California 92656
Attn: General Counsel

with a copy to:

O’Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660
Attn: Gary Singer, Esq.

     (ii) if to the Executive, at the last address of the Executive on the books of the Company.

(b) Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 8.10 for the giving of notice. Any communication shall be effective when delivered by hand, when otherwise delivered against receipt therefor, or five (5) business days after being mailed in accordance with the foregoing.

     8.11. Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read and understands this Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

     8.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties hereto reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

     8.13. Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.

     8.14. Section 409A.

(a)

Notwithstanding any provision of this Agreement to the contrary, if the Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s Separation from Service, the Executive shall not be entitled to any payment pursuant to Section 3.3 until the earlier of (i) the date which is six (6) months after the Executive’s Separation from Service for any reason other than death, or (ii) the date of the Executive’s death. Any amounts otherwise payable to the Executive upon or in the six (6) month period following the Executive’s Separation from Service that are not so paid by reason of this Section 8.14(a) shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Executive’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Executive’s death). The provisions of this Section 8.14(a) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code.

(b)

It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) so as not to subject the Executive to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive.

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     IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the Effective Date.

“COMPANY”
QLogic Corporation,
a Delaware corporation
By:	/s/ Michael L. Hawkins
Print Name: Michael L. Hawkins
Title: Vice President and General Counsel
“EXECUTIVE”
/s/ Simon Biddiscombe
Simon Biddiscombe

EXHIBIT A
GENERAL RELEASE AGREEMENT

          1. Release. Simon Biddiscombe (“Executive”), on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue QLogic Corporation (the “Company”), its divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as its and their assignees, successors, directors, officers, shareholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “Releasees”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in the Company or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, equity-based awards and/or dividend equivalents thereon, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this Agreement, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the California Fair Employment and Housing Act, or the California Family Rights Act, or any other federal, state or local law, regulation or ordinance (collectively, the “Claims”); provided, however, that the foregoing release does not apply to any obligation of the Company to Executive pursuant to any of the following: (1) Section 3 of the Change in Control Severance Agreement dated as of December 19, 2008 by and between the Company and Executive (the “Change in Control Agreement”), or (2) any equity-based awards previously granted by the Company to Executive (as amended by the Change in Control Agreement). In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

          2. Acknowledgement of Payment of Wages. Executive acknowledges that he has received all amounts owed for his regular and usual salary (including, but not limited to, any bonus or other wages), and usual benefits through the date of this Agreement.

          3. Waiver of Civil Code Section 1542. This Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Executive hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code as to the Claims. Section 1542 of the California Civil Code provides:

“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Executive acknowledges that he later may discover claims, demands, causes of action or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

          4. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into this Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), which have arisen on or before the date of execution of this Agreement. Executive further expressly acknowledges and agrees that:

          (a) In return for this Agreement, he will receive consideration beyond that which he was already entitled to receive before entering into this Agreement;

          (b) He is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement;

          (c) He was given a copy of this Agreement on [___] and informed that he had twenty-one (21) days within which to consider the Agreement and that if he wished to executive this Agreement prior to expiration of such 21-day period, he should execute the Acknowledgement and Waiver attached hereto as Exhibit A-1;

          (d) Nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law; and

          (e) He was informed that he has seven (7) days following the date of execution of this Agreement in which to revoke this Agreement, and this Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Company during the seven-day revocation period. In the event that Executive exercises his right of revocation, neither the Company nor Executive will have any obligations under this Agreement.

          5. No Transferred Claims. Executive represents and warrants to the Company that he has not heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof.

          6. Miscellaneous. The following provisions shall apply for purposes of this Agreement:

          (a) Number and Gender. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

          (b) Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

          (c) Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.

          (d) Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

          (e) Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

          (f) Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

          (g) Arbitration. Any controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provisions of the Change in Control Agreement.

          (h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

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          The undersigned have read and understand the consequences of this Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

     EXECUTED this                      day of                      20     , at                      County,                     .

“Executive”
Simon Biddiscombe
QLOGIC CORPORATION
By:
	[NAME]
	[TITLE]

EXHIBIT A-1

ACKNOWLEDGMENT AND WAIVER

     I, Simon Biddiscombe, hereby acknowledge that I was given 21 days to consider the foregoing Agreement and voluntarily chose to sign the Agreement prior to the expiration of the 21-day period.

     I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

     EXECUTED this       day of                      20   , at                      County,                     .

Simon Biddiscombe

EXHIBIT B

SECTION 280G PROVISIONS

1.1

Gross-Up Payment. In the event it is determined (pursuant to Section 1.2) or finally determined (as defined in Section 1.3(c)) that any payment, distribution, transfer, or benefit by the Company, or a direct or indirect subsidiary or affiliate of the Company, to or for the benefit of the Executive or the Executive’s dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, the Executive’s employment with the Company or a change in ownership or effective control of the Company or a substantial portion of its assets, but determined without regard to any additional payments required under this Exhibit B) (each a “Payment” and collectively the “Payments”) is subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, “Section 4999”), or any interest, penalty or addition to tax is incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest, penalty, and addition to tax, hereinafter collectively referred to as the “Excise Tax”), then, within 10 days after such determination or final determination, as the case may be (and in all events not later than the end of the Executive’s taxable year following the Executive’s taxable year in which the tax was remitted), the Company shall pay to the Executive (or to the applicable taxing authority on the Executive’s behalf) an additional cash payment (hereinafter referred to as the “Gross-Up Payment”) equal to an amount such that after payment by the Executive of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments. This provision is intended to put the Executive in the same position as the Executive would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.

1.2

Determination of Gross-Up.

(a)

Except as provided in Section 1.3, the determination that a Payment is subject to an Excise Tax shall be made in writing by a nationally recognized accounting firm or executive compensation consulting firm selected by the Company (the “Accounting Firm”). Such determination shall include the amount of the Gross-Up Payment and detailed computations thereof, including any assumptions used in such computations. Any determination by the Accounting Firm will be binding on the Company and the Executive.

(b)

For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal individual income taxation in the calendar year in which the Gross-Up Payment is to be made. Such highest marginal rate shall take into account the loss of itemized deductions by the Executive and shall also include the Executive’s

share of the hospital insurance portion of FICA and state and local income taxes at the highest marginal rate of individual income taxation in the state and locality of the Executive’s residence on the date that the Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from the deduction of such state and local taxes.

1.3 Notification.

(a) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the “Taxing Authority”) that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Executive receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that failure by the Executive to give such notice within such 30-day period shall not result in a waiver or forfeiture of any of the Executive’s rights under this Exhibit B except to the extent of actual damages suffered by the Company as a result of such failure. The Executive shall not pay such claim prior to the expiration of the 15-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim, the Executive shall:

(1)	give the Company any information reasonably requested by the Company relating to such claim;
(2)	take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company;
(3)	cooperate with the Company in good faith in order effectively to contest such claim; and
(4)	permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.

(b)	Without limitation on the foregoing provisions of this Section 1.3, and to the extent its actions do not unreasonably interfere with or prejudice the Executive’s disputes with the Taxing Authority as to other issues, the Company shall control all proceedings taken in connection with such contest and, in its reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its or in their sole option, either direct the Executive to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance an amount equal to such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably acceptable to the Executive, and the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue.
(c)	If, after receipt by the Executive of an amount advanced by the Company pursuant to Section 1.3(a), the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company’s compliance with the requirements of this Exhibit B) promptly pay to the Company an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Executive in connection with such advance, after giving effect to such repayment. If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 1.3(a), it is finally determined that the Executive is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.
(d)	For purposes of this Exhibit B, whether the Excise Tax is applicable to a Payment shall be deemed to be “finally determined” upon the earliest of: (1) the expiration of the 15-day period referred to in Section 1.3(a) if the Company or the

Executive’s Employer has not notified the Executive that it intends to contest the underlying claim, (2) the expiration of any period following which no right of appeal exists, (3) the date upon which a closing agreement or similar agreement with respect to the claim is executed by the Executive and the Taxing Authority (which agreement may be executed only in compliance with this section), or (4) the receipt by the Executive of notice from the Company that it no longer seeks to pursue a contest (which shall be deemed received if the Company does not, within 15 days following receipt of a written inquiry from the Executive, affirmatively indicate in writing to the Executive that the Company intends to continue to pursue such contest).

1.4

Underpayment and Overpayment. It is possible that no Gross-Up Payment will initially be made but that a Gross-Up Payment should have been made, or that a Gross-Up Payment will initially be made in an amount that is less than what should have been made (either of such events is referred to as an “Underpayment”). It is also possible that a Gross-Up Payment will initially be made in an amount that is greater than what should have been made (an “Overpayment”). The determination of any Underpayment or Overpayment shall be made by the Accounting Firm in accordance with Section 1.2. In the event of an Underpayment, the amount of any such Underpayment shall be paid to the Executive as an additional Gross-Up Payment. In the event of an Overpayment, the Executive shall promptly pay to the Company the amount of such Overpayment together with interest on such amount at the applicable Federal rate provided for in Section 1274(d) of the Code for the period commencing on the date of the Overpayment to the date of such payment by the Executive to the Company. The Executive shall make such payment to the Company as soon as administratively practicable after the Company notifies the Executive of (a) the Accounting Firm’s determination that an Overpayment was made and (b) the amount to be repaid.

1.5

Compliance with Law. Nothing in this Exhibit B is intended to violate the Sarbanes-Oxley Act of 2002, and to the extent that any advance or repayment obligation hereunder would constitute such a violation, such obligation shall be modified so as to make the advance a nonrefundable payment to the Executive and the repayment obligation null and void to the extent required by such Act.

EX-31.1

EXHIBIT 31.1

Certification 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

I, H.K. Desai, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of QLogic Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ H.K. DESAI
	H.K. Desai
	Chief Executive Officer

Date: February 3, 2009

EX-31.2

EXHIBIT 31.2

Certification 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

I, Simon Biddiscombe, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of QLogic Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Simon Biddiscombe
	Simon Biddiscombe
	Chief Financial Officer

Date: February 3, 2009

EX-32

EXHIBIT 32

Certification 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

     Each of the undersigned, the Chief Executive Officer and Chief Financial Officer of QLogic Corporation (the “Company”), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) the Quarterly Report on Form 10-Q of the Company for the quarter ended December 28, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ H.K. DESAI  

H.K. Desai 

Chief Executive Officer 

/s/ Simon Biddiscombe  

Simon Biddiscombe 

Chief Financial Officer 

Dated: February 3, 2009

     The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, except to the extent that the Company specifically incorporates it by reference and regardless of any general incorporation language in such filing.