10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2010

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). 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 October 25, 2010, 105,624,000 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 September 26, 2010 and March 28, 2010		1
Condensed Consolidated Statements of Income for the three and six months ended September 26, 2010 and September 27, 2009		2
Condensed Consolidated Statements of Cash Flows for the six months ended September 26, 2010 and September 27, 2009		3
Notes to Condensed Consolidated Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures About Market Risk		20
Item 4. Controls and Procedures		20
PART II. OTHER INFORMATION
Item 1A. Risk Factors		21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 6. Exhibits		33
Signatures		34
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

i 

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 26,			March 28,
	2010			2010
	(Unaudited; In thousands,
	except share and per
	share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	200,151		$	190,308
Short-term investment securities		103,861			185,365
Accounts receivable, less allowance for doubtful accounts of $1,613 and $1,505 as of September 26, 2010 and March 28, 2010, respectively		86,350			73,301
Inventories		24,947			19,403
Deferred tax assets		10,890			10,976
Other current assets		15,567			9,845
Total current assets		441,766			489,198
Property and equipment, net		80,846			83,496
Goodwill		119,748			119,748
Purchased intangible assets, net		15,530			17,394
Deferred tax assets		31,762			36,917
Other assets		3,285			3,984
	$	692,937		$	750,737
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	33,832		$	36,766
Accrued compensation		21,435			22,727
Accrued taxes		3,323			2,633
Deferred revenue		9,797			9,240
Other current liabilities		7,839			11,069
Total current liabilities		76,226			82,435
Accrued taxes		66,761			70,577
Deferred revenue		6,111			7,401
Other liabilities		6,381			6,985
Total liabilities		155,479			167,398
Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 500,000,000 shares authorized; 205,953,000 and 204,893,000 shares issued at September 26, 2010 and March 28, 2010, respectively		206			205
Additional paid-in capital		800,859			778,853
Retained earnings		1,304,110			1,248,675
Accumulated other comprehensive income		1,283			1,206
Treasury stock, at cost: 99,746,000 and 92,586,000 shares at September 26, 2010 and March 28, 2010, respectively		(1,569,000	)		(1,445,600	)
Total stockholders’ equity		537,458			583,339
	$	692,937		$	750,737

See accompanying notes to condensed consolidated financial statements.

1 

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended				Six Months Ended
	September 26,		September 27,		September 26,		September 27,
	2010		2009		2010		2009
	(Unaudited; In thousands, except per share amounts)
Net revenues	$	146,529	$	131,457	$	289,138	$	254,232
Cost of revenues		50,411		47,769		100,112		92,238
Gross profit		96,118		83,688		189,026		161,994
Operating expenses:
Engineering and development		32,792		34,238		67,501		68,316
Sales and marketing		20,420		19,991		40,850		39,456
General and administrative		8,031		7,829		16,499		16,143
Special charges		—		848		931		848
Total operating expenses		61,243		62,906		125,781		124,763
Operating income		34,875		20,782		63,245		37,231
Interest and other income, net		1,809		2,336		3,485		5,260
Income before income taxes		36,684		23,118		66,730		42,491
Income taxes		6,698		6,955		11,295		11,365
Net income	$	29,986	$	16,163	$	55,435	$	31,126
Net income per share:
Basic	$	0.28	$	0.14	$	0.50	$	0.26
Diluted	$	0.28	$	0.14	$	0.50	$	0.26
Number of shares used in per share calculations:
Basic		108,220		117,248		109,823		118,054
Diluted		109,039		117,941		111,385		118,708

See accompanying notes to condensed consolidated financial statements.

2 

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	September 26,			September 27,
	2010			2009
	(Unaudited; In thousands)
Cash flows from operating activities:
Net income	$	55,435		$	31,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,342			15,963
Stock-based compensation		18,592			18,683
Amortization of acquisition-related intangible assets		2,311			4,826
Deferred income taxes		5,147			3,398
Net gains on investment securities		(1,728	)		(2,082	)
Other non-cash items		92			108
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(13,155	)		(6,046	)
Inventories		(5,544	)		18,049
Other assets		543			(792	)
Accounts payable		(6,376	)		(5,351	)
Accrued compensation		(718	)		(8,997	)
Accrued taxes		(8,692	)		(20,608	)
Deferred revenue		(733	)		1,066
Other liabilities		(3,234	)		(747	)
Net cash provided by operating activities		57,282			48,596
Cash flows from investing activities:
Purchases of available-for-sale securities		(47,920	)		(166,192	)
Proceeds from sales and maturities of available-for-sale securities		107,165			149,441
Proceeds from disposition of trading securities		23,800			8,750
Distributions from other investment securities		329			—
Purchases of property and equipment		(9,692	)		(12,585	)
Acquisition of business, net of cash acquired		—			(14,815	)
Net cash provided by (used in) investing activities		73,682			(35,401	)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards		7,757			7,509
Excess tax benefits from stock-based awards		1,059			(286	)
Minimum tax withholding paid on behalf of employees for restricted stock units		(5,937	)		(2,442	)
Purchases of treasury stock		(124,000	)		(67,424	)
Payoff of line of credit assumed in acquisition		—			(934	)
Net cash used in financing activities		(121,121	)		(63,577	)
Net increase (decrease) in cash and cash equivalents		9,843			(50,382	)
Cash and cash equivalents at beginning of period		190,308			203,722
Cash and cash equivalents at end of period	$	200,151		$	153,340

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 28, 2010. The results of operations for the three and six months ended September 26, 2010 are not necessarily indicative of the results that may be expected for the entire fiscal year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Among the significant estimates affecting the consolidated financial statements are those related to revenue recognition, stock-based compensation, income taxes, investment securities, inventories, goodwill and long-lived assets. The actual results experienced by the Company could differ materially from management’s estimates.

Note 2. Investment Securities

     Components of investment securities are as follows:

	September 26,		March 28,
	2010		2010
	(In thousands)
Available-for-sale securities	$	103,861	$	161,609
Trading securities		—		23,756
	$	103,861	$	185,365

     Available-For-Sale Securities

     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)
September 26, 2010
U.S. Government and agency securities	$	23,112	$	357	$	—		$	23,469
Corporate debt obligations		60,761		1,635		—			62,396
Asset and mortgage-backed securities		14,153		416		(15	)		14,554
Municipal bonds		2,860		20		—			2,880
Total debt securities		100,886		2,428		(15	)		103,299
Certificate of deposit		562		—		—			562
Total available-for-sale securities	$	101,448	$	2,428	$	(15	)	$	103,861
March 28, 2010
U.S. Government and agency securities	$	37,677	$	326	$	(27	)	$	37,976
Corporate debt obligations		81,424		1,600		(21	)		83,003
Asset and mortgage-backed securities		18,721		410		(16	)		19,115
Municipal bonds		5,923		3		(3	)		5,923
Total debt securities		143,745		2,339		(67	)		146,017
Certificates of deposit		15,592		—		—			15,592
Total available-for-sale securities	$	159,337	$	2,339	$	(67	)	$	161,609

4 

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The amortized cost and estimated fair value of debt securities as of September 26, 2010, by contractual maturity, are presented below. Expected maturities will differ from contractual maturities because the issuers of securities may have the right to repay obligations without prepayment penalties. Certain debt instruments, although possessing a contractual maturity greater than one year, are classified as short-term investment securities based on their ability to be traded on active markets and availability for current operations.

	Amortized		Estimated
	Cost		Fair Value
	(In thousands)
Due in one year or less	$	6,749	$	6,978
Due after one year through three years		74,517		76,098
Due after three years through five years		4,393		4,597
Due after five years		15,227		15,626
	$	100,886	$	103,299

     The following table presents the Company’s investments with unrealized losses by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 26, 2010 and March 28, 2010.

	Less Than 12 Months					12 Months or Greater				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses			Value		Losses		Value		Losses
						(In thousands)
September 26, 2010
Asset and mortgage-backed securities	$	4,312	$	(15	)	$	—	$	—	$	4,312	$	(15	)
Total	$	4,312	$	(15	)	$	—	$	—	$	4,312	$	(15	)
March 28, 2010
U.S. Government and agency securities	$	6,661	$	(27	)	$	—	$	—	$	6,661	$	(27	)
Corporate debt obligations		11,337		(21	)		—		—		11,337		(21	)
Asset and mortgage-backed securities		3,557		(16	)		—		—		3,557		(16	)
Municipal bonds		317		(3	)		—		—		317		(3	)
Total	$	21,872	$	(67	)	$	—	$	—	$	21,872	$	(67	)

     Trading Securities

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

	September 26,		March 28,
	2010		2010
	(In thousands)
Auction rate debt securities	$	—	$	17,951
Auction rate preferred securities		—		4,366
Put options related to auction rate securities		—		1,439
Total trading securities	$	—	$	23,756

     The Company’s trading securities included investments in auction rate securities (ARS). During late fiscal 2008, the market auctions of many ARS began to fail, including auctions for the ARS held by the Company. In November 2008, the Company entered into an agreement with the broker for all of the ARS held by the Company, which provided the Company with certain rights (ARS Rights), in exchange for the release of potential claims and damages against the broker. The ARS Rights entitled 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 agreement resulted in put options that were recognized as free standing assets separate from the ARS. The Company elected to measure the put options at fair value. In connection with the election to measure the put options at fair value, the Company classified these financial instruments as trading securities.

     During the three months ended June 27, 2010, the Company received $9.3 million of proceeds in connection with the redemption of certain ARS by the respective issuers. On June 30, 2010, the Company exercised the ARS Rights and sold all of its remaining ARS investments to the broker at par for cash totaling $14.5 million.

5 

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Other Investment Securities

     The Company’s other investment securities are comprised of a money market fund and an enhanced cash fund sponsored by The Reserve (an asset management company), which suspended trading and redemptions in September 2008 and are currently in the process of being liquidated. These funds do not have readily determinable fair values and thus have been accounted for under the cost method. As of September 26, 2010 and March 28, 2010, the carrying value of the Company’s other investment securities was zero.

     During the six months ended September 26, 2010, the Company received distributions totaling $0.3 million upon the partial liquidation of these funds. Distributions received by the Company in fiscal 2011 were in excess of the carrying value of these investment securities and, accordingly, the Company recorded a gain of $0.3 million which is included in interest and other income, net.

     Fair Value Measurements

     Fair value is 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 must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is 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. A description of the three levels of inputs is as follows:

• 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 September 26, 2010 and March 28, 2010 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
			(In thousands)
September 26, 2010
U.S. Government and agency securities	$	23,469	$	—	$	—	$	23,469
Corporate debt obligations		—		62,396		—		62,396
Asset and mortgage-backed securities		—		14,554		—		14,554
Municipal bonds		—		2,880		—		2,880
Certificate of deposit		562		—		—		562
Balance as of September 26, 2010	$	24,031	$	79,830	$	—	$	103,861
March 28, 2010
U.S. Government and agency securities	$	37,976	$	—	$	—	$	37,976
Corporate debt obligations		—		83,003		—		83,003
Asset and mortgage-backed securities		—		19,115		—		19,115
Municipal bonds		—		5,923		—		5,923
Certificates of deposit		15,592		—		—		15,592
Total available-for-sale securities		53,568		108,041		—		161,609
Auction rate debt securities		—		—		17,951		17,951
Auction rate preferred securities		—		—		4,366		4,366
Put options related to auction rate securities		—		—		1,439		1,439
Total trading securities		—		—		23,756		23,756
Balance as of March 28, 2010	$	53,568	$	108,041	$	23,756	$	185,365

6 

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company’s investments classified within Level 2 were primarily valued based on valuations obtained from a third-party pricing service. The pricing service utilizes industry standard valuation models, including both income and market based approaches for which all significant inputs are observable either directly or indirectly, to estimate fair value. These inputs include reported trades and broker/dealer quotes of the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

     The Company’s investments in auction rate securities and the related put options were classified within Level 3 because there were no active markets for these securities and the Company was unable to obtain independent valuations from market sources. Therefore, the auction rate securities and the related put options were primarily valued based on an income approach using estimates 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.

     A summary of the changes in Level 3 assets measured at fair value on a recurring basis for the three and six months ended September 26, 2010 is as follows:

	Balance		Total Realized			Sales and Other			Balance
Three Months Ended September 26, 2010	June 27, 2010		Gains (Losses)			Settlements			September 26, 2010
			(In thousands)
Auction rate debt securities	$	9,219	$	681		$	(9,900	)	$	—
Auction rate preferred securities		4,366		184			(4,550	)		—
Put options related to auction rate securities		840		(840	)		—			—
Total	$	14,425	$	25		$	(14,450	)	$	—

	Balance		Total Realized			Sales and Other			Balance
Six Months Ended September 26, 2010	March 28, 2010		Gains (Losses)			Settlements			September 26, 2010
			(In thousands)
Auction rate debt securities	$	17,951	$	1,299		$	(19,250	)	$	—
Auction rate preferred securities		4,366		184			(4,550	)		—
Put options related to auction rate securities		1,439		(1,439	)		—			—
Total	$	23,756	$	44		$	(23,800	)	$	—

Note 3. Inventories

     Components of inventories are as follows:

	September 26,		March 28,
	2010		2010
	(In thousands)
Raw materials	$	6,542	$	6,693
Finished goods		18,405		12,710
	$	24,947	$	19,403

Note 4. Treasury Stock

     Since fiscal 2003, the Company has had various stock repurchase programs that authorized the purchase of up to $1.75 billion of the Company’s outstanding common stock, including a program approved in August 2010 authorizing the repurchase of up to $200 million of the Company’s outstanding common stock. During the six months ended September 26, 2010, the Company purchased 7.2 million shares of its common stock for an aggregate purchase price of $123.4 million. As of September 26, 2010, the Company had purchased a total of 99.7 million shares of common stock under these repurchase programs for an aggregate purchase price of $1.57 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.

7 

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5. Stock-Based Compensation

     During the six months ended September 26, 2010, the Company granted options to purchase 2.5 million shares of common stock and 0.9 million restricted stock units with weighted average grant date fair values of $6.65 and $17.79 per share, respectively.

     A summary of stock-based compensation expense, by functional line item in the condensed consolidated statements of income, is as follows:

	Three Months Ended				Six Months Ended
	September 26,		September 27,		September 26,		September 27,
	2010		2009		2010		2009
			(In thousands)
Cost of revenues	$	629	$	655	$	1,363	$	1,389
Engineering and development		3,971		4,588		8,978		9,614
Sales and marketing		1,929		1,957		4,042		3,601
General and administrative		1,740		1,864		4,209		4,079
	$	8,269	$	9,064	$	18,592	$	18,683

Note 6. Special Charges

     During the six months ended September 26, 2010, the Company recorded special charges of $0.9 million consisting of exit costs associated with severance benefits for involuntarily terminated employees, primarily related to the consolidation of certain engineering functions. As of September 26, 2010, all severance benefits had been paid.

Note 7. Income Taxes

     The Company’s provision for income taxes was $11.3 million and $11.4 million for the six months ended September 26, 2010 and September 27, 2009, respectively. The effective income tax rate was 17% and 27% for the six months ended September 26, 2010 and September 27, 2009, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the estimated income in different tax jurisdictions, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. The allocation of taxable income to domestic and foreign tax jurisdictions impacts the effective tax rate, as the Company’s income tax rate in foreign jurisdictions is generally lower than its income tax rate in the U.S.

     The Company’s federal consolidated income tax returns for fiscal years 2008 and 2009 are currently under examination by the Internal Revenue Service. Management does not believe that the results of these examinations will have a material impact on the Company’s financial condition or results of operations.

Note 8. Net Income Per Share

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

	Three Months Ended				Six Months Ended
	September 26,		September 27,		September 26,		September 27,
	2010		2009		2010		2009
	(In thousands, except per share amounts)
Net income	$	29,986	$	16,163	$	55,435	$	31,126
Shares:
Weighted-average shares outstanding — basic		108,220		117,248		109,823		118,054
Dilutive potential common shares, using treasury stock method		819		693		1,562		654
Weighted-average shares outstanding — diluted		109,039		117,941		111,385		118,708
Net income per share:
Basic	$	0.28	$	0.14	$	0.50	$	0.26
Diluted	$	0.28	$	0.14	$	0.50	$	0.26

8 

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Stock-based awards, including stock options and restricted stock units, representing 20.6 million and 16.0 million shares of common stock have been excluded from the diluted net income per share calculations for the three and six months ended September 26, 2010, respectively, and 24.6 million and 26.5 million shares of common stock have been excluded from the diluted net income per share calculations for the three and six months ended September 27, 2009, respectively. These stock-based awards have been excluded from the diluted net income per share calculations because their effect would have been antidilutive.

Note 9. Comprehensive Income

     Components of comprehensive income are as follows:

	Three Months Ended					Six Months Ended
	September 26,			September 27,		September 26,		September 27,
	2010			2009		2010		2009
				(In thousands)
Net income	$	29,986		$	16,163	$	55,435	$	31,126
Other comprehensive income:
Change in unrealized gains/losses on investment securities, net of income taxes		(70	)		290		77		513
	$	29,916		$	16,453	$	55,512	$	31,639

9 

     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. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of several factors, including, but not limited to those factors set forth and discussed in Part 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. You are cautioned, therefore, not to place undue reliance on these forward-looking statements, which are made only as of the date of this report. We undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

     We are a designer and supplier of high performance network infrastructure products that perform, enhance and manage the communication of data in computer system applications. Our products are used in connection with three distinct types of networks: Storage Networks, High Performance Computing, or HPC, Networks, and Converged Networks. Storage Networks are used to provide critical data across enterprise environments and primarily use Fibre Channel technology. HPC Networks utilize advanced parallel processing over a large number of servers and typically are used for applications where very large amounts of data must be processed quickly and efficiently. The HPC Network products that we sell are based on InfiniBand^® technology. Converged Networks are designed to address the evolving data center by consolidating and unifying various classes of connectivity and networks, such as storage area networks and local area networks, using Ethernet speeds of 10Gb and greater.

     We classify our products into three broad categories: Host Products, Network Products and Silicon Products. Host Products consist of Fibre Channel and Internet Small Computer Systems Interface, or iSCSI, host bus adapters; InfiniBand^® host channel adapters; and converged network adapters, which consist of adapters based on 10Gb Ethernet connectivity. Network Products consist of Fibre Channel switches, including stackable edge switches, bladed switches, virtualized pass-through modules, and high-port count modular-chassis switches; InfiniBand switches, including high-end multi-protocol directors, edge and bladed switches; Enhanced Ethernet pass-through modules; and storage routers for bridging Fibre Channel, Fibre Channel over Ethernet and iSCSI networks. Silicon Products consist of Fibre Channel controllers, iSCSI controllers, converged network controllers and Ethernet controllers.

     Our products are sold worldwide, primarily to original equipment manufacturers, or OEMs, and distributors. Our customers rely on our various networking infrastructure products to deliver solutions to information technology professionals in virtually every business sector. Our products are found primarily in server, workstation and storage subsystem solutions that are used by small, medium and large enterprises with critical business data requirements. These products are incorporated in solutions from a number of storage system and computer system OEM customers, including Cisco Systems, Inc., Dell Inc., EMC Corporation, Hewlett-Packard Company, International Business Machines Corporation, NetApp, Inc., Oracle Corporation and many others.

Second Quarter Financial Highlights and Other Information

     The key factors and significant events that impacted our financial performance during the second quarter of fiscal 2011 are as follows:

• Net revenues of $146.5 million for the second quarter of fiscal 2011 increased sequentially by $3.9 million, or 3%, from $142.6 million in the first quarter of fiscal 2011. Revenues from Host Products of $104.2 million for the second quarter of fiscal 2011 increased sequentially by $1.7 million, or 2%, from $102.5 million in the first quarter of fiscal 2011. Revenues from Network Products of $27.2 million for the second quarter of fiscal 2011 increased sequentially by $1.6 million, or 6%, from $25.6 million in the first quarter of fiscal 2011.

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• Gross profit as a percentage of net revenues increased to 65.6% for the second quarter of fiscal 2011 from 65.1% for the first quarter of fiscal 2011.

• Operating income as a percentage of net revenues increased to 23.8% for the second quarter of fiscal 2011 from 19.9% in the first quarter of fiscal 2011.

• Net income of $30.0 million, or $0.28 per diluted share, in the second quarter of fiscal 2011 increased sequentially by $4.6 million, or 18%, from $25.4 million, or $0.22 per diluted share, in the first quarter of fiscal 2011.

• Cash, cash equivalents and investment securities were $304.0 million at September 26, 2010 compared to $348.6 million at June 27, 2010.

• Accounts receivable was $86.4 million as of September 26, 2010, compared to $74.6 million as of June 27, 2010. Days sales outstanding (DSO) in receivables was 54 days as of September 26, 2010 compared to 48 days as of June 27, 2010.

• Inventories were $24.9 million as of September 26, 2010, compared to $24.4 million as of June 27, 2010. Our annualized inventory turns were 8.1 turns in the second and first quarter of fiscal 2011.

     As a result of worldwide economic weakness and uncertainty, it is extremely difficult for us and our customers to forecast future revenue levels based on historical information and trends. Portions of our expenses are fixed and others are tied to expected levels of revenue. To the extent that we do not achieve our anticipated level of revenue, our operating results could be adversely affected until such expenses are reduced to an appropriate level.

Results of Operations

Net Revenues

     A summary of our net revenues by product category is as follows:

	Three Months Ended						Six Months Ended
	September 26,			September 27,			September 26,			September 27,
	2010			2009			2010			2009
				(Dollars in millions)
Net revenues:
Host Products	$	104.2		$	94.0		$	206.6		$	182.3
Network Products		27.2			24.5			52.9			49.5
Silicon Products		12.4			9.6			24.3			17.0
Service and other		2.7			3.4			5.3			5.4
Total net revenues	$	146.5		$	131.5		$	289.1		$	254.2
Percentage of net revenues:
Host Products		71	%		71	%		72	%		72	%
Network Products		19			19			18			19
Silicon Products		8			7			8			7
Service and other		2			3			2			2
Total net revenues		100	%		100	%		100	%		100	%

     Historically, the global marketplace for network infrastructure solutions has expanded in response to the information requirements of enterprise business environments. The markets we serve 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.

     The United States and other countries around the world have experienced, and may continue to experience, economic weakness and uncertainty. Economic uncertainty has adversely affected, and in the future may adversely affect, information technology spending rates. Accordingly, it is extremely difficult for us to forecast future sales levels and historical information may not be indicative of future trends.

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     Our net revenues are derived primarily from the sale of Host Products, Network Products and Silicon Products. Net revenues increased 11% to $146.5 million for the three months ended September 26, 2010 from $131.5 million for the three months ended September 27, 2009. This increase was primarily the result of a $10.2 million, or 11%, increase in revenue from Host Products; a $2.7 million, or 11%, increase in revenue from Network Products; and a $2.8 million, or 30%, increase in revenue from Silicon Products. The increase in revenue from Host Products was primarily due to an increase in the quantity of adapters sold. The increase in revenue from Network Products was primarily due to a 17% increase in the number of Fibre Channel switches sold, partially offset by a 9% decrease in the average selling prices of these products, and a 4% increase in the number of InfiniBand switches sold. The increase in revenue from Silicon Products was primarily due to an increase in the quantity of chips sold. Net revenues for the three months ended September 26, 2010 included $2.7 million of service and other revenues compared with $3.4 million of service and other revenues for the three months ended September 27, 2009. We do not expect service and other revenues to be significant to our overall revenues.

     Net revenues increased 14% to $289.1 million for the six months ended September 26, 2010 from $254.2 million for the six months ended September 27, 2009. This increase was primarily the result of a $24.3 million, or 13%, increase in revenue from Host Products and a $7.3 million, or 43%, increase in revenue from Silicon Products. The increase in revenue from Host Products was primarily due to an increase in the quantity of adapters sold. The increase in revenue from Silicon Products was due primarily to an increase in the quantity of chips sold.

     A small number of our customers account for a substantial portion of our net revenues, and we expect that a small 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 87% of net revenues during the six months ended September 26, 2010 and September, 27, 2009, respectively.

     We believe that our major customers continually evaluate whether or not to purchase products from alternative or additional sources. 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				Six Months Ended
	September 26,		September 27,		September 26,		September 27,
	2010		2009		2010		2009
			(In millions)
United States	$	68.6	$	58.5	$	132.5	$	119.4
Asia-Pacific and Japan		38.3		36.5		77.4		62.7
Europe, Middle East and Africa		31.2		27.8		63.3		56.2
Rest of the world		8.4		8.7		15.9		15.9
	$	146.5	$	131.5	$	289.1	$	254.2

     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. Net revenues from customers in China were $18.8 million and $40.2 million for the three and six months ended September 26, 2010, respectively, and $20.6 million and $32.2 million for the three and six months ended September 27, 2009, respectively. No individual country other than the United States and China represented 10% or more of net revenues for the periods presented.

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, logistics 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						Six Months Ended
	September 26,			September 27,			September 26,			September 27,
	2010			2009			2010			2009
				(Dollars in millions)
Gross profit	$	96.1		$	83.7		$	189.0		$	162.0
Percentage of net revenues		65.6	%		63.7	%		65.4	%		63.7	%

     Gross profit for the three months ended September 26, 2010 increased $12.4 million, or 15%, from gross profit for the three months ended September 27, 2009. The gross profit percentage for the three months ended September 26, 2010 was 65.6% and

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increased from 63.7% for the corresponding period in the prior year. The increase in gross profit percentage was primarily due to higher volumes to absorb manufacturing costs and a $0.8 million decrease in amortization of purchased intangible assets.

     Gross profit for the six months ended September 26, 2010 increased $27.0 million, or 17%, from gross profit for the six months ended September 27, 2009. The gross profit percentage for the six months ended September 26, 2010 was 65.4% and increased from 63.7% for the corresponding period in the prior year. The increase in gross profit percentage was primarily due to higher volumes to absorb manufacturing costs and a $1.1 million decrease in amortization of purchased intangible assets.

     Our ability to maintain our current gross profit percentage can be significantly affected by factors such as manufacturing volumes over which fixed costs are absorbed, sales discounts and customer incentives, component costs, the mix of products shipped, the transition to new products, competitive price pressures, the timeliness of volume shipments of new products, 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.

Operating Expenses

     Our operating expenses are summarized in the following table:

	Three Months Ended						Six Months Ended
	September 26,			September 27,			September 26,			September 27,
	2010			2009			2010			2009
				(Dollars in millions)
Operating expenses:
Engineering and development	$	32.8		$	34.2		$	67.5		$	68.3
Sales and marketing		20.4			20.0			40.9			39.5
General and administrative		8.0			7.8			16.5			16.1
Special charges		—			0.9			0.9			0.9
Total operating expenses	$	61.2		$	62.9		$	125.8		$	124.8
Percentage of net revenues:
Engineering and development		22.4	%		26.1	%		23.4	%		26.9	%
Sales and marketing		13.9			15.2			14.1			15.5
General and administrative		5.5			6.0			5.7			6.4
Special charges		—			0.6			0.3			0.3
Total operating expenses		41.8	%		47.9	%		43.5	%		49.1	%

     Engineering and Development. Engineering and development expenses consist primarily of compensation and related employee benefit costs, service and material costs, occupancy and equipment costs and related computer support costs. During the three months ended September 26, 2010, engineering and development expenses decreased to $32.8 million from $34.2 million for the three months ended September 27, 2009. The decrease was primarily due to a $0.9 million decrease in outside service costs related to new product development and a $0.6 million decrease in stock-based compensation.

     During the six months ended September 26, 2010, engineering and development expenses decreased to $67.5 million from $68.3 million for the six months ended September 27, 2009. The decrease was primarily due to a $1.5 million decrease in outside service costs related to new product development, a $0.6 million decrease in stock-based compensation and a $0.6 million decrease in occupancy and related computer support costs, partially offset by a $1.9 million increase in cash compensation and related employee benefit costs due to an increase in headcount.

     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 employee benefit costs, sales commissions, promotional activities and travel for sales and marketing personnel. Sales and marketing expenses increased to $20.4 million for the three months ended September 26, 2010 from $20.0 million for the three months ended September 27, 2009. The increase in sales and marketing expenses was due primarily to a $0.5 million increase in cash compensation and related employee benefit costs, primarily due to higher headcount and increased commissions, and a $0.5 million increase in promotional costs, including the costs for certain sales and marketing programs. These increases were partially offset by a $0.8 million decrease in amortization of purchased intangible assets due to an intangible asset becoming fully amortized during fiscal 2010.

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     Sales and marketing expenses increased to $40.9 million for the six months ended September 26, 2010 from $39.5 million for the six months ended September 27, 2009. The increase in sales and marketing expenses was due primarily to a $1.4 million increase in cash compensation and related employee benefit costs, primarily due to higher headcount and increased commissions, a $0.5 million increase in promotional costs, including the costs for certain sales and marketing programs, a $0.5 million increase in travel costs and a $0.5 million increase in outside services. These increases were partially offset by a $1.6 million decrease in amortization of purchased intangible assets due to an intangible asset becoming fully amortized during fiscal 2010.

     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 employee 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 increased to $8.0 million for the three months ended September 26, 2010 from $7.8 million for the three months ended September 27, 2009.

     General and administrative expenses increased to $16.5 million for the six months ended September 26, 2010 from $16.1 million for the six months ended September 27, 2009.

     Special Charges. During the six months ended September 26, 2010, we recorded special charges of $0.9 million consisting of exit costs associated with severance benefits for involuntarily terminated employees, primarily related to the consolidation of certain engineering functions.

     During the six months ended September 27, 2009, we recorded special charges of $0.9 million related to our acquisition of NetXen, Inc (NetXen). The special charges consisted of exit costs related to the former NetXen leased facility that we vacated and severance benefits for involuntarily terminated employees.

     Unpaid exit costs related to leased facilities, including the exit costs recorded prior to fiscal 2011, totaled $2.7 million as of September 26, 2010 and are expected to be paid over the terms of the related agreements through fiscal 2018. As of September 26, 2010, all severance benefits had been paid.

Interest and Other Income, Net

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

	Three Months Ended				Six Months Ended
	September 26,		September 27,		September 26,			September 27,
	2010		2009		2010			2009
			(In millions)
Interest income	$	0.8	$	1.4	$	1.9		$	3.0
Net gains on investment securities		1.0		0.9		1.7			2.1
Other		—		—		(0.1	)		0.2
	$	1.8	$	2.3	$	3.5		$	5.3

     Interest income is earned on our portfolio of investment securities and cash equivalents. The decrease in interest income for the three and six months ended September 26, 2010 from the corresponding periods in the prior year was primarily due to a decline in interest rates and a decline in the balance of our investment securities.

     During the six months ended September 26, 2010, net gains on investment securities were $1.7 million and included $1.4 million of net gains on sales of available-for-sale securities and a $0.3 million gain from distributions of our investments in a money market fund and an enhanced cash fund sponsored by The Reserve (an asset management company). During the six months ended September 27, 2009, net gains on investment securities were $2.1 million, principally related to sales of available-for-sale securities.

Income Taxes

     Our effective income tax rate was 17% and 27% for the six months ended September 26, 2010 and September 27, 2009, respectively. The decrease in our effective tax rate for the six months ended September 26, 2010 as compared to the six months ended

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September 27, 2009 is primarily due to higher income generated from our foreign operations, which are taxed at more favorable rates, partially offset by a reduced research credit as a result of the suspension of the federal benefit as of December 31, 2009. We expect the annual effective tax rate for fiscal 2011 to approximate 17% as compared to our actual annual effective tax rate of 50% for fiscal 2010. Our estimated annual effective tax rate for fiscal 2011 is favorably impacted by higher income generated from our foreign operations, which are taxed at more favorable rates. Our fiscal 2010 annual effective tax rate was impacted by a $29.7 million tax charge in the fourth quarter of fiscal 2010 related to an amendment of a technology license agreement with one of our international subsidiaries. As a result of the amendment, we determined that all payment obligations under the license agreement had been satisfied.

     Our federal consolidated income tax returns for fiscal years 2008 and 2009 are currently under examination by the Internal Revenue Service. We do not believe that the results of these examinations will have a material impact on our financial condition or results of operations.

     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, examinations by tax authorities, stock-based compensation, tax legislation related to the expiration or reinstatement of federal research credits, and uncertain tax positions.

Liquidity and Capital Resources

     Our combined balances of cash, cash equivalents and investment securities decreased to $304.0 million at September 26, 2010 from $375.7 million at March 28, 2010. As of September 26, 2010 and March 28, 2010, our international subsidiaries held 61% and 47%, respectively, of our total cash, cash equivalents and investment securities. These holdings by our international subsidiaries consist primarily of U.S. dollar denominated cash, money market and certificate of deposit accounts. Certain foreign regulations could impact our ability to transfer funds to the United States. Additionally, should we decide to repatriate cash held outside of the United States, we may incur a significant tax obligation.

     We believe that existing cash, cash equivalents, investment 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 increased to $57.3 million for the six months ended September 26, 2010 from $48.6 million for the six months ended September 27, 2009. Operating cash flow for the six months ended September 26, 2010 reflects our net income of $55.4 million and net non-cash charges of $39.8 million, partially offset by a net increase in the non-cash components of working capital of $37.9 million. The increase in the non-cash components of working capital was primarily due to a $13.2 million increase in accounts receivable, an $8.7 million decrease in accrued taxes, a $6.4 million decrease in accounts payable and a $5.5 million increase in inventories. The increase in accounts receivable was primarily due to the timing of cash collections and an increase in net revenues. The decreases in accrued taxes and accounts payable were primarily due to the timing of payment obligations. The increase in inventories was due to advanced purchases of silicon chips to maintain flexibility due to long lead times for these products.

     Cash provided by investing activities was $73.7 million for the six months ended September 26, 2010 and consisted primarily of $59.2 million of net proceeds from sales and maturities of available-for-sale securities and $23.8 million of proceeds from redemptions of auction rate securities (ARS) at par value, partially offset by $9.7 million of purchases of property and equipment. During the six months ended September 27, 2009, cash used in investing activities was $35.4 million and consisted of $16.8 million of net purchases of available-for-sale securities, $14.8 million for the acquisition of NetXen (net of cash acquired), and $12.6 million of purchases of property and equipment, partially offset by $8.8 million of proceeds from redemptions of ARS at par value.

     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 $121.1 million for the six months ended September 26, 2010 consisted of our purchase of $124.0 million of common stock under our stock repurchase programs and $5.9 million for minimum tax withholdings paid on behalf

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of employees for restricted stock units that vested during the period, partially offset by $8.8 million of proceeds from the issuance of common stock and excess tax benefits from stock-based awards. During the six months ended September 27, 2009, cash used in financing activities of $63.6 million consisted primarily of our purchase of $67.4 million of common stock under our stock repurchase program and $2.4 million for minimum tax withholdings paid on behalf of employees for restricted stock units that vested during the period, partially offset by $7.2 million of proceeds from the issuance of common stock and excess tax benefits from stock-based awards.

     Since fiscal 2003, we have had various stock repurchase programs that authorized the purchase of up to $1.75 billion of our outstanding common stock, including a program approved in August 2010 authorizing the repurchase of up to $200 million of our outstanding common stock. As of September 26, 2010, we had repurchased a total of 99.7 million shares of our common stock under our stock repurchase programs for an aggregate purchase price of $1.57 billion. During the six months ended September 26, 2010, we repurchased 7.2 million shares for an aggregate purchase price of $123.4 million. Pursuant to the existing stock repurchase program, we are authorized to repurchase shares with an aggregate cost of up to $181.0 million as of September 26, 2010.

     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 September 26, 2010, and their impact on our cash flows in future fiscal years, is as follows:

	2011
	(Remaining
	six months)		2012		2013		2014		2015		Thereafter		Total
	(In millions)
Operating leases	$	3.4	$	5.6	$	3.8	$	3.7	$	2.8	$	5.9	$	25.2
Non-cancelable purchase obligations		63.6		—		—		—		—		—		63.6
Total	$	67.0	$	5.6	$	3.8	$	3.7	$	2.8	$	5.9	$	88.8

     The amount of unrecognized tax benefits, including related accrued interest and penalties, was $66.8 million at September 26, 2010. We are not able to provide a reasonable estimate of the timing of future tax payments related to these obligations.

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Critical Accounting Policies and Estimates

     The preparation of financial statements in accordance with U.S. generally accepted accounting principles 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, which 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 all of 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 that contain a limited right to return unsold product and price protection provisions. These return rights and price protection provisions limit our ability to reasonably estimate product returns and the final price of the inventory sold to distributors. As a result, the price to the customer is not fixed or determinable at the time products are delivered to distributors. Accordingly, 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. 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. Service and other 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. 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). We recognize revenue from software products when all of 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.

Stock-Based Compensation

     We recognize compensation expense for all stock-based 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. Stock-based compensation is recognized for the portion of the award that is ultimately expected to vest. Forfeitures are estimated at the time of grant based on historical trends and revised, if necessary, in subsequent periods if actual

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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. Changes in the subjective assumptions can materially affect the estimated fair value of stock-based awards.

Income Taxes

     We utilize the asset and liability method of accounting for income taxes. Income tax positions taken or expected to be taken in a tax return should be recognized in the first reporting period that it is more likely than not the tax position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Previously recognized income tax positions that fail to meet the recognition threshold in a subsequent period are derecognized in that period. Differences between actual results and our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. We record potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

     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 earnings in the period that includes the enactment date.

     A valuation allowance is recorded when it is more likely than not that some or all of a deferred tax asset will not be realized. An adjustment to earnings would occur if we determine that we are able to realize a different amount of our deferred tax assets than currently expected.

     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.

Investment Securities

     Our investment securities include available-for-sale securities, trading securities and other investment securities and are classified in the consolidated balance sheets based on the nature of the security and the availability for use in current operations.

     Our available-for-sale securities are recorded at fair value, based on quoted market prices or other observable inputs. 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 accumulated other comprehensive income until realized.

     Our trading securities are recorded at fair value with unrealized holding gains and losses included in earnings and reported in interest and other income, net. In the absence of quoted market prices for trading securities, we value these securities based on an income approach using an estimate of future cash flows.

     Our other investment securities are accounted for under the cost method and recorded at the lower of fair value or cost.

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     We recognize an impairment charge on our available-for-sale and cost method investments when the decline in the fair value of an investment below its cost basis is judged to be other-than-temporary. If we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, we would recognize the entire impairment in earnings. If we do not intend to sell the security and it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is separated into (a) the amount representing the credit loss and (b) the amount related to all other factors. The amount of the other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. Significant judgment is required in determining the fair value of investment securities in inactive markets as well as determining when declines in fair value constitute an other-than-temporary impairment. We consider various factors 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 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

     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. The amount assigned to in-process research and development is capitalized and accounted for as an indefinite-lived intangible asset until the underlying projects are completed or abandoned.

     Goodwill is not amortized but instead is tested at least annually for impairment, or more frequently when events or changes in circumstances indicate a potential impairment, 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 is less than its carrying amount, goodwill is considered 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.

     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 current 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. Significant judgment is required in determining whether a potential indicator of impairment of our long-lived assets exists. Recoverability of assets to be held and used is measured by the comparison of the carrying amount of an asset or asset group to future undiscounted net cash flows expected to be generated by the asset or asset group. If such an asset or asset group is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. Assets to be disposed of are reported at the lower of their 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

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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.

Recently Issued Accounting Standards Not Yet Effective

     In September 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-13, which provides amendments to Accounting Standards Codification (ASC) Topic 605 “Multiple-Deliverable Revenue Arrangements.” ASU No. 2009-13 replaces and significantly changes certain guidance in ASC Topic 605. ASU No. 2009-13 modifies the separation criteria of ASC Subtopic 605-25 for revenue arrangements with multiple deliverables by eliminating the criterion for objective and reliable evidence of fair value for the undelivered products or services. ASU No. 2009-13 also eliminates the use of the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables based on their relative selling price. ASU No. 2009-13 provides a hierarchy for estimating the selling price for each of the deliverables. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We are currently assessing the impact ASU No. 2009-13 will have on our consolidated results of operations and financial position.

     In September 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements.” Pursuant to ASU No. 2009-14, all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality will no longer be within the scope of ASC Subtopic 985-605 and will be required to be accounted for under the guidance in ASU No. 2009-13. ASU No. 2009-14 provides a list of items to consider when determining whether the software and non-software components function together to deliver a product’s essential functionality. ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We are currently assessing the impact ASU No. 2009-14 will have on our consolidated results of operations and financial position.

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 September 26, 2010, the carrying value of our cash and cash equivalents approximates fair value.

     We maintain a portfolio of investment securities consisting primarily of debt securities, including government and agency securities, corporate debt obligations, asset and mortgage-backed securities and municipal bonds, the majority of which 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 ratings and we limit our exposure to any one issuer or type of investment. Our portfolio of investment securities as of September 26, 2010 consists of $103.9 million of securities that are classified as available-for-sale. As of September 26, 2010, we had gross unrealized losses associated with our available-for-sale securities of less than $0.1 million that were determined by management to be temporary in nature.

     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 September 26, 2010. There was no change in our internal control over financial reporting during our quarter ended September 26, 2010 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 28, 2010, as set forth below. 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 28, 2010.

Our operating results may be adversely affected by unfavorable economic and market conditions.

     The United States and other countries around the world have experienced, and may continue to experience, economic weakness and uncertainty. Economic uncertainty has adversely affected, and in the future may adversely affect, information technology, or IT, spending rates. Reductions in IT spending rates could result in longer sales cycles, increased inventory provisions, increased production costs, lower prices for our products and reduced sales volumes, which could negatively impact our revenue and operating results.

     As a result of worldwide economic uncertainty, it is extremely difficult for us and our customers to forecast future revenue levels based on historical information and trends. Portions of our expenses are fixed and others are tied to expected levels of revenue. To the extent that we do not achieve our anticipated level of revenue, our operating results could be adversely affected until such expenses are reduced to an appropriate level. We may not be able to identify and implement appropriate cost savings in a timely manner.

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.

     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;

• industry consolidation among both our competitors and our customers;

• customer policies pertaining to desired inventory levels of our products;

• sales discounts and customer incentives;

• the availability and sale of new products;

• changes in our average selling prices;

• variations in manufacturing capacities, efficiencies and costs;

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

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

• variations in operating expenses;

• changes in effective income tax rates, including those resulting from changes in tax laws;

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• our ability to timely produce products that comply with new environmental restrictions or related requirements of our original equipment manufacturer, or OEM, customers;

• actual events, circumstances, outcomes and amounts differing from judgments, assumptions and estimates used in determining the value of certain assets (including the amounts of related valuation allowances), liabilities and other items reflected in our consolidated financial statements;

• the timing of revenue recognition and revenue deferrals;

• gains or losses related to our investment securities;

• changes in accounting rules or our accounting policies;

• general economic and other conditions affecting the timing of customer orders and capital spending; or

• changes in the global economy that impact IT spending.

     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.

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;

• changes in manufacturing volumes over which fixed costs are absorbed;

• increased price competition;

• introduction of new products by us or our competitors, including products with advantages in price, performance or features;

• our inability to reduce manufacturing-related or component costs;

• entry into new markets or the acquisition of new businesses;

• amortization and impairments of purchased intangible assets;

• sales discounts and customer incentives;

• increases in material, labor or overhead costs;

• excess inventory and inventory holding charges;

• changes in distribution channels; and

• increased warranty costs.

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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 revenues and operating results and the published expectations of public market analysts;

• quarterly fluctuations in our revenues and operating results;

• introduction of new products or changes in product pricing policies by our competitors or us;

• conditions in the markets in which we operate;

• changes in market projections by industry forecasters;

• changes in estimates of our earnings or rating upgrades/downgrades of our stock by public market analysts;

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

• rumors or dissemination of false information; and

• general economic and geopolitical conditions.

     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 networking markets that we serve and if these markets do not continue to develop, our business will suffer.

     Our products are used in storage, high performance computing, or HPC, and converged networks, and therefore our business is dependent on these network infrastructure markets. Our success in generating revenue in these markets 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 our products;

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

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

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

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

     Blade server products have gained acceptance in the market over the past few years. Blade servers use custom storage, HPC and converged network infrastructure products, including bladed switches and mezzanine cards, which have lower average selling prices than the network 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.

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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 significant investment. 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.

     Some of our products are based on the Fibre Channel over Ethernet, or FCoE, protocol. FCoE is a relatively new converged networking technology that provides a unified storage and data network over Enhanced Ethernet, while preserving the investment in existing Fibre Channel infrastructure and storage. As with most emerging technologies, it is expected that the market for FCoE will take a number of years to fully develop and mature. We expect products based on the FCoE protocol to supplement, and perhaps replace, certain products based on the Fibre Channel protocol. As a result, an inability to maintain our market share in the Fibre Channel market and build upon our market share in the FCoE market could have a material adverse effect on our business or results of operations.

We depend on a small number of customers and any decrease in revenues 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 small 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 87% of net revenues for the six months ended September 26, 2010 and September 27, 2009, respectively. Total revenue from our two largest customers, Hewlett-Packard Company and International Business Machines Corporation, accounted for over 40% of net revenues during the six months ended September 26, 2010 and September 27, 2009. We are also subject to credit risk associated with the concentration of our accounts receivable. In addition, worldwide economic uncertainty 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, customer incentives and payment terms, which could have a material adverse effect on our business, financial condition or results of operations. 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 achieved. If we are unable to achieve such cost reductions, our gross margins could decline and such a decline could have a material adverse effect on our business, financial condition or results of operations.

     The ongoing consolidation in the technology industry could adversely impact our business. There is the potential for some of our customers to merge with or acquire one or more of our other customers. There is also a potential that one of our large customers could acquire one of our current competitors. In either case, demand for our products could decrease as a result of such industry consolidation, which 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, because our customers require us to maintain products at hub locations near their facilities, it is 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 networking infrastructure components are highly competitive and are characterized by short product life cycles, price erosion, rapidly changing technology, frequent product performance improvements and evolving industry standards. Due to the diversity of products required in storage, HPC and converged networking infrastructure, we compete with many companies. In the traditional enterprise storage Fibre Channel adapter market, our primary competitor is Emulex Corporation, with Brocade Communications Systems, Inc. also participating. In the iSCSI adapter market, our primary competitor is Broadcom Corporation and we also compete indirectly with companies offering software initiator solutions. In the 10Gb Ethernet adapter market, which includes converged networking products, we compete with Emulex Corporation, Brocade Communications Systems, Inc., Broadcom Corporation and Intel Corporation. In the Fibre Channel switch and storage router markets, we compete primarily with Brocade Communications Systems, Inc. and Cisco Systems, Inc. In the InfiniBand adapter and switch markets, we compete primarily with Mellanox Technologies, Ltd. and Voltaire 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 storage, HPC and converged networking infrastructure products, additional domestic and foreign manufacturers may increase their presence in these markets either through the development of new products or through industry consolidation. 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 may 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 like-for-like product comparison basis) to decline in the future as a result of competitive pricing pressures, increased sales discounts and customer incentives, new product introductions by us or our competitors, or other factors. In addition, there is a general market trend of customers migrating away from the distribution channel for product purchases to OEMs, where products have a lower average unit price. 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 revenues, gross margins and profitability could decline.

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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.

     Certain key components used in the manufacture of our products are purchased from single or limited sources. Application-specific integrated circuits, or ASICs, are purchased from single sources and microprocessors, certain connectors, logic chips, power supplies and programmable logic devices are purchased from limited sources. If one of these suppliers experiences an interruption in its ability to supply our needs, or chooses to sever its 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.

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 on 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 potential harm to our competitive position and relationships with customers.

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

     As of September 26, 2010, we held short-term investment securities totaling $103.9 million. We invest primarily in debt securities, the majority of which are high investment grade, and we limit the exposure to credit risk 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. For example, in the past we have recorded impairment charges related to investment securities, including securities issued by companies in the financial services sector that had previously been rated AA or higher. A deterioration in the economy, including tightening of credit markets or significant volatility in interest rates, could cause declines in value of our investment securities 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.

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

     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 and to risks that components purchased from third-party subcontractors and incorporated into our products may not meet our specifications or may otherwise fail prematurely. From time to time, we have found errors in existing, new or enhanced products. In addition, our products are frequently combined with other products, including software, from other vendors, and these products often need to interface with existing networks, each of which have different specifications and utilize multiple protocol standards. As a result, when problems occur, it may be difficult to identify the source of the problem. 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.

     Historically, the technology 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 adapter 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 networking infrastructure products to lower-cost products.

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, examinations by tax authorities, stock-based compensation, uncertain tax positions and newly enacted tax legislation. For example, proposed changes to certain U.S. tax rules for U.S. corporations doing business outside the United States include limiting the ability of U.S. corporations to deduct certain expenses attributable to offshore earnings, modifying the foreign tax credit rules and accelerating taxes related to certain transfers of intangible assets offshore. In addition, the current expiration of the research credit may impact the tax rate in future periods. Although the scope of the proposed changes is unclear, it is possible that these or other changes in the U.S. tax laws could increase our effective tax rate and adversely affect our profitability. Finally, we are subject to examination of our income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities which may result in the assessment of additional income taxes, and our federal consolidated income tax returns for fiscal years 2008 and 2009 are currently under examination by the IRS. We regularly assess the likelihood of adverse outcomes resulting from examinations to determine the adequacy of our provisions for income taxes. However, unanticipated outcomes from examinations could have a material adverse effect on our financial condition or results of operations.

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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 environment, 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 and could have a material adverse effect on our results of operations.

Because we have operations in foreign countries and depend on foreign customers and suppliers, we are subject to international economic, currency, regulatory, political and other risks that could harm our business, financial condition and results of operations.

     International revenues accounted for 54% and 53% of our net revenues for the six months ended September 26, 2010 and September 27, 2009, 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 outside of the United States;

• currency fluctuations;

• overlapping or differing tax structures;

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

• general trade restrictions.

     As of September 26, 2010, our international subsidiaries held 61% of our total cash, cash equivalents and investment securities. These holdings by our international subsidiaries consist primarily of U.S. dollar denominated cash, money market and certificate of deposit accounts. Certain foreign regulations could impact our ability to transfer funds to the United States. Additionally, should we decide to repatriate cash held outside of the United States, we may incur a significant tax obligation.

     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. In addition, a significant portion of our inventory is purchased from international suppliers, who invoice us in U.S. dollars. If the relative value of the U.S. dollar in comparison to the currency of our foreign suppliers should decrease, our suppliers may increase prices, which could result in a decline of our gross margin. 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 could 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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If we are unable to attract and retain key personnel, we may not be able to sustain or grow our business.

     Our future success largely depends on our key engineering, sales, marketing and executive personnel, including highly skilled semiconductor design personnel and software developers. We recently announced plans to transition H.K. Desai, our current Chief Executive Officer, to Executive Chairman, and Simon Biddiscombe, our current Chief Financial Officer, to Chief Executive Officer. Our retention of both Mr. Desai and Mr. Biddiscombe in their current and planned future roles, and the management of this leadership transition, is particularly important to our business. In addition, we are currently conducting a search for a new Chief Financial Officer to replace Mr. Biddiscombe upon his planned appointment to Chief Executive Officer. If we lose the services of Mr. Desai, Mr. Biddiscombe or other key personnel, fail to effectively manage this executive transition or do not hire or retain other personnel for key positions, our business could 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. Our recent implementation of various cost saving measures, as well as past reductions in force, could negatively impact employee morale and potentially make attracting and retaining qualified employees more difficult in the future. As a result, 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. However, 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. 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.

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

     We have in the past received notices of claimed infringement of intellectual property rights and been involved in intellectual property litigation. 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

30

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.

If we fail to carefully manage the use of “open source” software in our products, we may be required to license key portions of our products on a royalty-free basis or expose key parts of our source code.

     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.

Our business could be materially adversely affected by changes in regulations or standards regarding energy use of our products.

     We continually seek ways to increase the energy efficiency of our products. Recent analyses have estimated the amount of global carbon emissions that are due to information technology products. As a result, governmental and non-governmental organizations have turned their attention to development of regulations and standards to drive technological improvements and reduce the amount of carbon emissions. There is a risk that these regulations or standards, once developed, will not fully address the complexity of the technology developed by the IT industry or will favor certain technological approaches that we do not currently utilize. Depending on the regulations or standards that are ultimately adopted, compliance could adversely affect our business, results of operations or financial condition.

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

     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, volcanic eruption, 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 2008, our Board of Directors approved a program to repurchase up to $300 million of our common stock over a two-year period. In August 2010, our Board of Directors approved a new program to repurchase up to an additional $200 million of our common stock over a two-year period. Set forth below is information regarding our stock repurchases made during the second quarter of fiscal 2011 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
June 28, 2010 — July 25, 2010		1,067,000	$	17.77		1,067,000	$	32,937,000
July 26, 2010 — August 22, 2010		1,814,800	$	15.62		1,814,800	$	4,595,000
August 23, 2010 — September 26, 2010		1,487,600	$	15.86		1,487,600	$	181,000,000
Total		4,369,400	$	16.23		4,369,400	$	181,000,000

     We previously purchased 15.6 million shares under the November 2008 program for an aggregate purchase price of $248.1 million.

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Item 6. Exhibits

     Exhibits

Exhibit No.
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.

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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: October 29, 2010

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EXHIBIT INDEX

Exhibit No.
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.

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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: October 29, 2010

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: October 29, 2010

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 September 26, 2010 (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: October 29, 2010

     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.