UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 1, 2012

Commission File No. 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 offices)	(Zip Code)

(949) 389-6000

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 Par Value	The NASDAQ Stock Market LLC
	(NASDAQ Global Select Market)

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

None

(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  þ    No  ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ

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  ¨

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the Registrant is 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.

Large accelerated filer  þ	Accelerated filer  ¨	Non-accelerated filer  ¨	Smaller reporting company  ¨
	(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  ¨    No  þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant on September 30, 2011 was $1,284,348,000 (based on the closing price for shares of the Registrant’s common stock as reported by the NASDAQ Global Select Market on such date).

As of May 16, 2012, 97,450,000 shares of the Registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement relating to the Registrant’s 2012 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K where indicated.

QLOGIC CORPORATION

TABLE OF CONTENTS

	Page
PART I
Item 1.          Business		1
Item 1A.       Risk Factors		7
Item 1B.       Unresolved Staff Comments		19
Item 2.          Properties		20
Item 3.          Legal Proceedings		20
Item 4.          Mine Safety Disclosures		20
PART II
Item 5.           Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Security		21
Item 6.          Selected Financial Data		23
Item 7.           Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7a.         Quantitative and Qualitative Disclosures About Market Risk		36
Item 8.           Financial Statements and Supplementary Data		37
Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		67
Item 9A.       Controls and Procedures		67
Item 9B.       Other Information		67
PART III
Item 10.         Directors, Executive Officers and Corporate Governance		68
Item 11.        Executive Compensation		68
Item 12.         Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		68
Item 13.         Certain Relationships and Related Transactions, and Director Independence		68
Item 14.        Principal Accountant Fees and Services		68
PART IV
Item 15.        Exhibits and Financial Statement Schedules		69
Signatures		70
Exhibit Index		72

PART I

Item 1. Business

Introduction

QLogic Corporation was organized as a Delaware corporation in 1992. Our principal executive offices are located at 26650 Aliso Viejo Parkway, Aliso Viejo, California 92656, and our telephone number at that location is (949) 389-6000. Our website address is www.qlogic.com. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendment to these reports, that we file with or furnish to the Securities and Exchange Commission (SEC) are available free of charge on our website as soon as reasonably practicable after those reports are filed with the SEC.

On February 29, 2012, we completed the sale of our InfiniBand business. As a result of this divestiture, our results of operations for this divested business are presented as discontinued operations for all periods included in this report.

Unless the context indicates otherwise, “we,” “our,” “us,” “QLogic” and the “Company” each refer to QLogic Corporation and its subsidiaries.

All references to years refer to our fiscal years ended April 1, 2012, April 3, 2011 and March 28, 2010, as applicable, unless calendar years are specified.

Our Networking Products

We design and supply high performance network infrastructure products that provide, enhance and manage computer data communication. These products facilitate the rapid transfer of data and enable efficient resource sharing between servers, networks and storage. Our products are used in enterprise data centers, cloud computing, Web 2.0 and other environments dependent on high performance, reliable data networking.

Our products are based primarily on Fibre Channel and Ethernet technologies and are used in connection with storage networks, local area networks, and converged networks. Storage networks are used to provide data across enterprise environments. Fibre Channel is currently the dominant technology for enterprise storage networking. Local area networks, or LANs, are used to provide workstation-to-server, server-to-server, and server-to-storage connectivity using Ethernet. 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 LANs, using Ethernet speeds of 10Gb per second and greater. Fibre Channel over Ethernet, or FCoE, is a converged networking technology that uses an Ethernet LAN for both storage and local area data transmission, thus combining the benefits of Fibre Channel technology with the pervasiveness of Ethernet-based networks. Similarly, Internet Small Computer System Interface, or iSCSI, is an alternative to FCoE, also providing storage over Ethernet capabilities. Our converged products can operate individually as 10Gb Ethernet network products, FCoE products, iSCSI products, or in combination as multi-protocol products.

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 and storage subsystem solutions that are used by small, medium and large enterprises with critical business data requirements. The data center and business applications that drive requirements for our networking infrastructure products include:

• General business information technology requirements;

• Cloud computing, Web 2.0, data warehousing, data mining and online transaction processing;

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• Media-rich environments such as film and video, broadcast, medical imaging, computer-aided design and computer-aided manufacturing; and

• Server clustering, server and storage virtualization, disaster recovery, high-speed backup, data replication and data migration.

Our products primarily consist of adapters, switches, storage routers and application-specific integrated circuits, or ASICs. Adapters reside in a server and provide for connectivity of host computer servers to data and storage networks. Switches and storage routers manage the transmission and routing of data between servers and storage, as well as servers to servers. The ASICs that we sell are used in servers, storage systems and switches. ASICs used in servers in certain embedded applications are referred to as converged LAN on Motherboard, or cLOMs.

We provide Fibre Channel, iSCSI, FCoE and 10Gb Ethernet standard adapters and ASICs for rack and tower servers, as well as custom mezzanine adapters and ASICs for bladed servers. Our adapters and ASICs are also used in a variety of storage systems. All of these adapters and ASICs provide multi-protocol network connectivity.

We also provide a broad line of Fibre Channel switches, including our stackable switches which use dedicated high-speed stacking ports as inter-switch links allowing for simplified future expansion and scalability, reduction in necessary device ports, lower upfront and future expenses, and reduced management costs and complexities. In addition, we provide custom converged switching solutions as chassis, modules, or ASICs specific to particular OEM requirements.

Our intelligent storage routers are used for bridging Fibre Channel, iSCSI, FCoE and Ethernet technology-based networks and provide a multi-protocol server to storage data migration solution for business continuity, disaster recovery as well as a simple and effective method to migrate Fibre Channel or iSCSI-based data to cloud-based infrastructure and applications.

We classify our products into three broad categories: Host Products, Network Products and Silicon Products. Host Products consist of Fibre Channel adapters, iSCSI adapters, FCoE converged network adapters, and 10Gb Ethernet adapters. Network Products consist of blade, edge and high-port count modular-chassis Fibre Channel switches, Fibre Channel virtualized pass-through modules, universal access point switches, Enhanced Ethernet pass-through modules and storage routers. Silicon Products consist of ASICs, including Fibre Channel controllers, iSCSI controllers, converged network controllers, Ethernet controllers, converged switch controllers and cLOM controllers.

Host Products accounted for 77%, 76% and 76% of our net revenues for fiscal 2012, 2011 and 2010, respectively. Network Products accounted for 13%, 15% and 16% of our net revenues for fiscal 2012, 2011 and 2010, respectively. Silicon Products accounted for 10% or less of our net revenues for each of these years. For a summary of our net revenues by product category, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

Customers

Our products are incorporated in solutions from a number of server and storage system OEM customers, including Cisco Systems, Inc., Dell Inc., EMC Corporation, Fujitsu Ltd., Hewlett-Packard Company, International Business Machines Corporation, NetApp, Inc. and Oracle Corporation. A small number of these 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 86%, 85% and 88% of net revenues during fiscal 2012, 2011 and 2010, respectively.

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A summary of our customers, including their manufacturing subcontractors, that represent 10% or more of our net revenues is as follows:

	2012			2011			2010
Hewlett-Packard		27	%		26	%		25	%
IBM		18	%		19	%		19	%
Dell		11	%		11	%		11	%

We believe that our relationships with our customers are good. However, we believe 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.

Some of our OEM customers experience seasonality and uneven sales patterns in their businesses. As a result, we experience similar seasonality and uneven sales patterns. The seasonality is primarily due to the closing of a disproportionate percentage of sales transactions in the last month, weeks and days of each quarter and spikes in sales during the fourth quarter of each calendar year. Although we do not consider our business to be highly seasonal, we believe that seasonality has and may impact our business. To the extent that we experience seasonality in our business, it would most likely have a negative impact on the sequential growth rate of our net revenues during the fourth quarter of our fiscal year.

International revenues accounted for 57%, 56% and 55% of our net revenues for fiscal 2012, 2011 and 2010, respectively. For additional information on our international sales and operations, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report. For a discussion of risks related to our foreign operations, see Risk Factors, included in Part I, Item 1A of this report.

Sales and Marketing

Our products are marketed and sold primarily to OEMs by our internal sales team supported by field sales and systems engineering personnel. In addition, we sell our products through a network of regional and international distributors. We also sell our products to original design manufacturers, or ODMs, both as an extension of our OEM design organizations and as direct sales transactions.

In domestic and in certain international markets, we maintain both a sales force to serve our OEM customers and distributors that are focused on medium-sized and emerging accounts. We maintain a focused business development and outbound marketing organization to assist, train and equip the sales organizations of our OEM customers and their respective reseller organizations and partners. We maintain sales offices in the United States and various international locations. For information regarding revenue by geographic area, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

We work with our server and storage system OEM customers during their design cycles. We provide these customers with pre-sales system design support and services, as well as training classes and seminars conducted both in the field and from our worldwide offices.

Our sales efforts are focused on establishing and developing long-term relationships with our OEM customers. The sales cycle typically begins with the identification of an OEM’s requirement that could be potentially fulfilled with an existing QLogic product or a product based on a new technology. The cycle continues with technical and sales collaboration with the OEM and, if successful, leads to one of our product designs being selected as a component in a customer’s server or storage system. We then work closely with the

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customer to integrate our products with the customer’s current and next generation products or platforms. This cycle, from opportunity identification to initial production shipment, typically ranges from six to twenty-four months.

In addition to sales and marketing efforts, we actively participate with industry organizations relating to the development and acceptance of industry standards. We collaborate with peer companies through open standards bodies, cooperative testing and certifications. To ensure and promote multi-vendor interoperation, we maintain interoperability certification programs and testing laboratories.

Engineering and Development

Our industry is subject to rapid and regular technological change. Our ability to compete depends upon our ability to continually design, develop and introduce new products that take advantage of market opportunities and address emerging standards. Our strategy is to leverage our substantial base of architectural, systems and engineering expertise to address a broad range of server and storage networking solutions.

We are engaged in the design and development of ASICs, adapters and switches based on one or more of Fibre Channel, iSCSI, FCoE and Ethernet technologies. We also design and develop storage routers for bridging Fibre Channel, iSCSI, FCoE and Ethernet technology-based networks, and migrating data between storage devices.

We continue to invest in engineering and development to expand our capabilities to address the emerging technologies in the rapid evolution of storage, local area and converged networks. During fiscal 2012, 2011 and 2010, we incurred engineering and development expenses of $138.8 million, $125.2 million and $116.8 million, respectively.

Backlog

A substantial portion of our sales to OEM customers are transacted through hub arrangements whereby our products are purchased on a just-in-time basis and fulfilled from warehouse facilities, or hubs, in proximity to the facilities of our customers or their contract manufacturers. Our sales are made primarily pursuant to purchase orders, including blanket purchase orders for hub arrangements. Because the hub arrangements with our customers and industry practice allow customers to cancel or change orders with limited advance notice, we believe that backlog at any particular date is not a reliable indicator of our future revenue levels and is not material to understanding our business.

Competition

The markets for networking infrastructure components are highly competitive and characterized by short product life cycles, price erosion, rapidly changing technology, frequent product performance improvements and evolving industry standards. We believe the principal competitive factors in our industry include:

• time-to-market;

• features and functionality;

• product quality, reliability and performance;

• price;

• new product innovation;

• customer relationships;

• design capabilities;

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• customer service and technical support; and

• interoperability of components in storage, local area and converged networks.

While we expect competition to continue to increase and evolve, we believe that we compete effectively with respect to each of these factors.

Due to the diversity of products required in storage, local area and converged networking infrastructure, we compete with many companies. In the traditional enterprise storage Fibre Channel adapter and ASIC markets, our primary competitor is Emulex Corporation. In the 10Gb Ethernet adapter and ASIC markets, which include converged networking products such as FCoE and iSCSI, we primarily compete with Emulex Corporation, 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. 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.

Manufacturing

We use outside suppliers and foundries to manufacture our products. This approach allows us to avoid the high costs of owning, operating, maintaining and upgrading wafer fabrication and assembly facilities. As a result, we focus our resources on product design and development, quality assurance, sales and marketing, and supply chain management. Prior to the sale of our products, final tests are performed to ensure quality. Product test, customer-specific configuration and product localization are completed by third-party service providers or by us. We also provide fabrication process reliability tests and conduct failure analysis to confirm the integrity of our quality assurance procedures.

Our semiconductors are currently manufactured by a number of foundries. Most of the ASICs used in our products are manufactured using 180, 130, 90 or 65 nanometer process technology. In addition, we continually evaluate smaller geometries. 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.

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

We currently purchase our semiconductor products from foundries either in finished or wafer form. We use subcontractors to assemble our semiconductor products purchased in wafer form. In the assembly process for our semiconductor products, the silicon wafers are separated into individual die, which are then assembled into packages and tested.

For our adapter, switch and other products, we use third-party contract manufacturers for material procurement, assembly, test and inspection in a turnkey model, prior to shipment to our customers. These contract manufacturers are located outside the United States. To the extent that we rely on these contract manufacturers, we are not able to directly control product delivery schedules and quality assurance. The loss of

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one of our major 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. While we believe that our relationships with our contract manufacturers are good, if we are required to change a contract manufacturer or if a contract manufacturer experiences delays, disruptions, capacity constraints, component part 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 revenue and potential harm to our competitive position and relationships with customers.

Certain key components used in the manufacture of our products are purchased from single or limited sources. ASICs are purchased from single sources and other key components such as microprocessors, 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 their relationship with us, we may be unable to produce certain of our products until alternative suppliers are identified and qualified.

Many of the component parts used in our adapter, switch and other products are standard off-the-shelf items, which are, or can be, obtained from more than one source. We select suppliers on the basis of technology, manufacturing capacity, financial viability, quality and cost. Our reliance on third-party manufacturers involves risks, including possible limitations on availability of products due to market abnormalities, geopolitical instability, natural disasters, unavailability of or delays in obtaining access to certain product technologies, and the absence of complete control over delivery schedules, manufacturing yields and total production costs. The inability of our suppliers to deliver products of acceptable quality and in a timely manner or our inability to procure adequate supplies of our products could have a material adverse effect on our business, financial condition or results of operations.

Intellectual Property

While we have a number of patents issued and additional patent applications pending in the United States, Canada, Europe and Asia, we rely primarily on our trade secrets, trademarks, copyrights and contractual provisions to protect our intellectual property. We attempt to protect our proprietary information through confidentiality agreements and contractual provisions with our customers, suppliers, employees and consultants, and through other security measures. However, 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.

Our ability to compete may be affected by our ability to protect our intellectual property. We protect our rights vigorously, however there can be no assurance that these measures will be successful.

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 additional 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 the event of a patent or other intellectual property dispute, we may be required to expend significant resources to defend such claims, develop non-infringing technology or to obtain licenses to the technology that is the subject of the claim. There can be no assurance that we would be successful in such development or that any such license would be available on commercially reasonable terms, if at all. In the event of litigation to determine the validity of any third party’s claims, such litigation could result in significant expense to us, and divert the efforts of our technical and management personnel, whether or not such litigation is determined in our favor.

Some of our products are designed to include software or other intellectual property licensed from third parties. None of these licenses relate to core QLogic-developed technology, are material to our business, or require payment of amounts that are material.

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Environment

Our operations are subject to regulation under various federal, state, local and foreign laws concerning the environment, including laws addressing the discharge of pollutants into the environment, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, and third-party damage or personal injury claims, if we violate or become liable under environmental laws.

Most of our products are also subject to various laws governing chemical substances in products, including those regulating the manufacture and distribution of chemical substances and those restricting the presence of certain substances in electronic products. We could incur substantial costs, or our products could be restricted from entering certain countries, if our products become non-compliant with environmental laws. We also face increasing complexity in our product design and procurement operations as we adjust to new and future requirements relating to the materials composition of our products. For example, the European Union adopted the Waste Electrical and Electronic Equipment, or WEEE, Directive, pursuant to which European Union countries have enacted legislation making producers of electrical goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. These and similar laws adopted in other countries could impose a significant cost of doing business in those countries.

Environmental costs are presently not material to our results of operations or financial position, and we do not currently anticipate material capital expenditures for environmental control facilities.

Working Capital

Our working capital was $605.7 million as of April 1, 2012, which includes $538.0 million of cash, cash equivalents and marketable securities. For additional information, see Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources, included in Part II, Item 7 of this report.

Employees

We had 1,121 employees as of May 16, 2012. We believe our future prospects will depend, in part, on our ability to continue to attract, train, motivate, retain and manage skilled engineering, sales, marketing and executive personnel. Our employees are not represented by a labor union. We believe that our relations with our employees are good.

Item 1A. Risk Factors

Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange Commission are risks and uncertainties that could cause our actual results of operations to differ materially from the results contemplated by the forward-looking statements contained in this report or otherwise publicly disclosed by the Company.

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

The United States and other countries around the world have experienced, and are continuing to experience, economic weakness and uncertainty, including unfavorable economic conditions resulting from the ongoing debt crisis in certain countries in the European Union. 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 reduced sales volumes, lower prices for our products, longer sales cycles, increased inventory provisions and increased production costs, which could negatively impact our results of operations.

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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;

• the timing of server refresh cycles;

• 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;

• 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 marketable securities; or

• changes in accounting rules or our accounting policies.

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

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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;

• transitions to products based on emerging technologies, such as 10Gb Ethernet, which may have lower gross margins;

• 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;

• 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;

• increased warranty costs; and

• acquisitions and dispositions of businesses or product lines.

A decrease in our gross margin could adversely affect the market price of our common stock.

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.

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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, which could have a material adverse impact on investor confidence and employee retention.

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, local area and converged networks, and therefore our business is dependent on these 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.

If we are not successful in any or all of these items, our business and results of operations could be materially and adversely affected.

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 and enter new markets, 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 these 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 Fibre Channel over Ethernet, or FCoE, or 10Gb Ethernet technologies. FCoE is a relatively new converged networking technology that provides a unified storage and data network over Enhanced Ethernet, while preserving the investment by end users in their 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 FCoE to supplement, and perhaps replace,

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certain products based on Fibre Channel technology. 10Gb Ethernet is a developing technology for use in enterprise data centers. This emerging market includes well-established participants who have significantly more engineering, sales and marketing resources to dedicate to developing and penetrating the market than we do. An inability to maintain, or build on, our market share in the Fibre Channel, converged or 10Gb Ethernet markets, or the failure of these markets to expand, 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 86%, 85% and 88% of net revenues for fiscal 2012, 2011 and 2010, respectively. Total revenue from our two largest customers, Hewlett-Packard Company and International Business Machines Corporation, together accounted for over 40% of net revenues during fiscal 2012, 2011 and 2010. We are also subject to credit risk associated with the concentration of our accounts receivable.

Our customers generally order products through written purchase orders instead of long-term supply contracts and, therefore, are generally not obligated to purchase products from us for any extended period. Customers typically incorporate our products into complex devices and systems, which creates supply chain cross-dependencies. Accordingly, supply chain disruptions affecting components of our customers’ devices and/or systems could negatively impact the demand for our products, even if the supply of our products is not directly affected. Major customers also have significant leverage over us and may attempt to change the sales terms, including pricing, customer incentives and payment terms, or insist that we undertake or fund significant aspects of the design, qualification and testing that our customers have typically been responsible for, either of 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 these 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.

Competition within the markets for products such as ours 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, local area and converged networking infrastructure, we compete with many companies. In the traditional enterprise storage Fibre Channel adapter and ASIC markets, our primary competitor is Emulex Corporation. In the 10Gb Ethernet adapter and ASIC markets, which include converged networking products such as FCoE and Internet Small Computer Systems Interface, or iSCSI, we primarily compete with Emulex Corporation, 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. 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

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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, local area 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, or if our competitors introduce new products that are more successful than ours in the marketplace, our future operating results may be materially and adversely affected.

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, any of which could materially and adversely affect our operating results.

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. 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. 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.

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 other key components such as microprocessors, 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 a subcontractor experiences capacity constraints or financial difficulties, suffers damage to its facilities, experiences power outages, natural disasters 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.

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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.

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, as well as Simon Biddiscombe, our Chief Executive Officer, and H.K. Desai, our Executive Chairman. Our retention of both Messrs. Biddiscombe and Desai are particularly important to our business. If we lose the services of Messrs. Biddiscombe or Desai or other key personnel, 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. For example, the market for qualified technical personnel within India has become extremely competitive, resulting in significant wage inflation. 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, restricted stock units and our employee stock purchase program 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.

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. In addition, our customers are demanding a higher level of customization for new products, which prevents us from fully leveraging our product design work and adds to our new product development costs. When we introduce new products and product enhancements, we face additional risks relating to product transitions, including risks relating to forecasting demand. Any such adverse event or increased costs 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-

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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.

Our business is subject to seasonal fluctuations and uneven sales patterns.

A large percentage of our products are sold to customers who experience seasonality and uneven sales patterns in their businesses. As a result, we 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 our quarterly revenues and earnings.

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, which typically account for 20% or less of our net revenues, 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 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.

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 tax rate has 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, or by changes in the valuation of our deferred tax assets and liabilities. Our effective tax rate is also affected by intercompany transactions for licenses, services, funding and other items. Given the global scope of our operations, and the complexity of global tax and transfer pricing rules and regulations, it is difficult to estimate earnings within each tax jurisdiction. If actual earnings within a tax jurisdiction differ materially from our estimates, we may not achieve

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our expected effective tax rate. Additionally, our effective tax rate may be impacted by the tax effects of acquisitions, dispositions, examinations by tax authorities, stock-based compensation, uncertain tax positions and newly enacted tax legislation. 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. 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.

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 57%, 56% and 55% of our net revenues for fiscal 2012, 2011 and 2010, 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 April 1, 2012, our international subsidiaries held $351.0 million of our total cash, cash equivalents and marketable securities. These holdings by our international subsidiaries consist primarily of debt securities due from U.S. issuers, including the U.S. government and related agencies, and U.S. dollar denominated cash and money market funds. 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.

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

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earthquakes or other natural disasters. Any personal injury at 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 that have historically experienced natural disasters. Any earthquake or other natural disaster, including a hurricane, flood, volcanic eruption, tsunami or fire, affecting any of these regions could adversely affect our business, results of operations and financial condition.

In addition, as a result of a natural disaster, our major customers may face shortages of components that could negatively impact their ability to build the servers and data center devices into which our products are integrated, thereby negatively impacting the demand for our products even if the supply of our products is not directly affected by the natural disaster. For example, the earthquake, tsunami and related events that occurred in Japan in March 2011, and the extensive flooding that occurred in Thailand beginning in October 2011, caused widespread destruction in regions that include suppliers of components for many technology companies.

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, our supply of silicon chips and other components can also be interrupted by intellectual property infringement claims against our suppliers.

Individuals and groups are purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours. Although patent and intellectual property disputes may be settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and the necessary licenses or similar arrangements may not be available to us on satisfactory terms, or at all. As a result, we could be prevented from manufacturing and selling some of our products. In addition, if we litigate these kinds of claims, the litigation could be expensive, time consuming and could divert management’s attention from other matters and there is no guarantee we would prevail. Our business could suffer regardless of the outcome of the litigation.

We may engage in mergers, acquisitions, divestitures 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;

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• uncertainties in identifying and pursuing target companies;

• difficulties in assimilating 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 or divestiture. 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. Divestitures involve risks, such as difficulty splitting up businesses, distracting employees, potential loss of revenue and negatively impacting margins, and potentially disrupting customer relationships. In addition, our effective tax rate for future periods could be negatively impacted by acquisitions or divestitures.

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.

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

As of April 1, 2012, we held short-term marketable securities totaling $373.4 million. We invest 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 marketable 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.

Changes in and compliance with regulations could materially adversely affect us.

Our business, results of operations or financial condition could be materially adversely affected if laws, regulations or standards relating to us or our products are newly implemented or changed. In addition, our

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compliance with existing regulations may have a material adverse impact on us. For example, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the U.S. Securities and Exchange Commission to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. The U.S. Securities and Exchange Commission has also proposed new disclosure requirements relating to the sourcing of certain minerals from the Democratic Republic of Congo and certain other adjoining countries. When these new requirements are in effect, they could adversely affect our costs, the availability of minerals used in our products and our relationships with customers and suppliers.

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.

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 and other anti-bribery laws. Although we have 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 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.

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.

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.

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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), that 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 distributing that work.

System security risks, data protection breaches and cyber-attacks could disrupt our internal operations, and any such disruption could reduce our expected revenues, increase our expenses, damage our reputation and adversely affect our stock price.

Experienced computer programmers and hackers may be able to penetrate our network and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and, if our efforts to address these problems are not successful, this could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.

We manage and store various proprietary information and sensitive or confidential data relating to our business. We have also outsourced a number of our business functions to third party contractors. Breaches of our or our third party contractors’ security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us or our customers to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

Issues arising during the upgrade of our enterprise resource planning system could affect our operating results and ability to manage our business effectively.

We are in the process of upgrading our enterprise resource planning computer system to enhance operating efficiencies and provide more effective management of our business operations. We are investing significant financial and personnel resources into this project. However, there is no assurance that the design will meet our current and future business needs or that it will operate as designed. We are heavily dependent on these computer systems, and any significant failure or delay in the system upgrade, if encountered, could cause a substantial interruption to our business, which could result in an adverse impact on our results of operations and financial condition.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

Our principal product development, operations, sales and corporate offices are located in three buildings comprising approximately 165,000 square feet in Aliso Viejo, California. We own each of these buildings. We also lease one building comprising approximately 100,000 square feet in Shakopee, Minnesota, that houses product development and operations teams for many of our Network Products. We lease an operations, sales and fulfillment facility located in Dublin, Ireland. In addition, we lease facilities in Mountain View and Roseville, California; and Pune and Bangalore, India. We also maintain sales offices at various locations in the United States, Europe and Asia. We believe that our existing properties, including both owned and leased sites, are in good condition and suitable for the conduct of our business.

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Principal Market and Prices

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

	Sales Prices
Fiscal 2012	High		Low
First Quarter	$	18.37	$	15.16
Second Quarter		16.73		12.23
Third Quarter		15.53		11.95
Fourth Quarter		19.00		14.93

	Sales Prices
Fiscal 2011	High		Low
First Quarter	$	22.40	$	16.29
Second Quarter		19.18		14.30
Third Quarter		18.50		16.17
Fourth Quarter		18.83		16.50

Number of Common Stockholders

The number of record holders of our common stock was 465 as of May 16, 2012.

Dividends

We have never paid cash dividends on our common stock. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes, including repurchases of our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our operating results, financial condition and other factors as the board of directors deems relevant.

Recent Sales of Unregistered Securities

We did not issue any unregistered securities during fiscal 2012.

Issuer Purchases of Equity Securities

In August 2010, our Board of Directors approved a program (the August 2010 Program) to repurchase up to $200 million of our common stock over a two-year period. In November 2011, our Board of Directors approved a new program to repurchase an additional $200 million of our common stock over a two-year period commencing upon the conclusion of the August 2010 program. Set forth below is information regarding our stock repurchases made during the fourth quarter of fiscal 2012 under these programs.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Approximate Dollar Value of Shares that May Yet be  Purchased Under the Plans
January 2, 2012 — January 29, 2012		333,500	$	16.15		333,500	$	208,594,000
January 30, 2012 — February 26, 2012		325,600	$	17.45		325,600	$	202,913,000
February 27, 2012 — April 1, 2012		753,800	$	17.58		753,800	$	189,663,000
Total		1,412,900	$	17.21		1,412,900	$	189,663,000

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Stockholder Return Performance

The performance graph below shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed filed under the Acts.

The following graph compares, for the five-year period ended April 1, 2012, the cumulative total stockholder return for our common stock, the Standard & Poor’s Midcap 400 Index (S&P Midcap 400 Index) and the NASDAQ Computer Index. Measurement points are the last trading day of each of our fiscal years ended April 1, 2007, March 30, 2008, March 29, 2009, March 28, 2010, April 3, 2011 and April 1, 2012. The graph assumes that $100 was invested on April 1, 2007 in our common stock, the S&P Midcap 400 Index and the NASDAQ Computer Index and assumes reinvestment of dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNS*

AMONG QLOGIC CORPORATION,

THE STANDARD & POOR’S MIDCAP 400 INDEX

AND THE NASDAQ COMPUTER INDEX

	Cumulative Total Return
	4/1/07		3/30/08		3/29/09		3/28/10		4/3/11		4/1/12
QLogic Corporation	$	100.00	$	90.18	$	68.94	$	118.59	$	106.82	$	104.47
S&P Midcap 400 Index		100.00		93.03		59.45		97.54		123.83		126.28
NASDAQ Computer Index		100.00		98.51		80.71		125.56		158.02		186.22

* $100 invested on 4/1/07 in stock or 3/30/07 in index, including reinvestment of dividends.

Indexes calculated on month-end basis.

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Item 6. Selected Financial Data

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

	Year Ended(1)
	April 1, 2012		April 3, 2011			March 28, 2010(2)			March 29, 2009			March 30, 2008
	(In thousands, except per share amounts)
Statement of Operations Data
Net revenues	$	558,608	$	558,375		$	518,471		$	600,192		$	570,927
Cost of revenues		177,704		176,959			167,107			180,526			176,215
Gross profit		380,904		381,416			351,364			419,666			394,712
Operating expenses:
Engineering and development		138,768		125,219			116,789			109,015			111,216
Sales and marketing		77,370		73,965			68,881			76,399			74,132
General and administrative		35,299		34,148			34,242			32,639			34,049
Special charges		—		373			5,163			3,062			4,915
Total operating expenses		251,437		233,705			225,075			221,115			224,312
Operating income		129,467		147,711			126,289			198,551			170,400
Interest and other income, net		3,959		5,187			10,601			2,134			14,024
Income from continuing operations before income taxes		133,426		152,898			136,890			200,685			184,424
Income taxes		13,983		11,552			69,345			76,234			66,843
Income from continuing operations		119,443		141,346			67,545			124,451			117,581
Discontinued operations:
Income (loss) from operations, net of income taxes		910		(2,256	)		(12,597	)		(15,662	)		(21,371	)
Gain on sale, net of income taxes		109,083		—			—			—			—
Income (loss) from discontinued operations		109,993		(2,256	)		(12,597	)		(15,662	)		(21,371	)
Net income	$	229,436	$	139,090		$	54,948		$	108,789		$	96,210
Income from continuing operations per share:
Basic	$	1.17	$	1.31		$	0.58		$	0.97		$	0.83
Diluted	$	1.16	$	1.29		$	0.58		$	0.97		$	0.82
Income (loss) from discontinued operations per share:
Basic	$	1.08	$	(0.02	)	$	(0.11	)	$	(0.12	)	$	(0.15	)
Diluted	$	1.07	$	(0.02	)	$	(0.11	)	$	(0.12	)	$	(0.15	)
Net income per share:
Basic	$	2.25	$	1.29		$	0.47		$	0.85		$	0.68
Diluted	$	2.23	$	1.27		$	0.47		$	0.85		$	0.67
Balance Sheet Data
Cash and cash equivalents and investment securities	$	537,955	$	384,076		$	375,673		$	378,269		$	376,409
Total assets		913,418		757,207			750,737			780,290			810,966
Total stockholders’ equity		759,843		601,164			583,339			626,545			665,916

(1) The statement of operations data for all periods reflects the operating results of the InfiniBand business as discontinued operations.

(2) In fiscal 2010, we completed the acquisition of NetXen, Inc.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

We design and supply high performance network infrastructure products that provide, enhance and manage computer data communication. These products facilitate the rapid transfer of data and enable efficient resource sharing between servers, networks and storage. Our products are used in enterprise data centers, cloud computing, Web 2.0 and other environments dependent on high performance, reliable data networking.

Our products are based primarily on Fibre Channel and Ethernet technologies and are used in connection with storage networks, local area networks, and converged networks. Storage networks are used to provide data across enterprise environments. Fibre Channel is currently the dominant technology for enterprise storage networking. Local area networks, or LANs, are used to provide workstation-to-server, server-to-server, and server-to-storage connectivity using Ethernet. 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 LANs, using Ethernet speeds of 10Gb per second and greater. Fibre Channel over Ethernet, or FCoE, is a converged networking technology that uses an Ethernet LAN for both storage and local area data transmission, thus combining the benefits of Fibre Channel technology with the pervasiveness of Ethernet-based networks. Similarly, Internet Small Computer System Interface, or iSCSI, is an alternative to FCoE, also providing storage over Ethernet capabilities. Our converged products can operate individually as 10Gb Ethernet network products, FCoE products, iSCSI products, or in combination as multi-protocol products.

We classify our products into three broad categories: Host Products, Network Products and Silicon Products. Host Products consist of Fibre Channel adapters, iSCSI adapters, FCoE converged network adapters, and 10Gb Ethernet adapters. Network Products consist of blade, edge and high-port count modular-chassis Fibre Channel switches, Fibre Channel virtualized pass-through modules, universal access point switches, Enhanced Ethernet pass-through modules and storage routers. Silicon Products consist of Fibre Channel controllers, iSCSI controllers, converged network controllers, Ethernet controllers, converged switch controllers, and converged LAN on Motherboard, or cLOM, 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 and storage subsystem solutions that are used by small, medium and large enterprises with critical

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business data requirements. These products are incorporated in solutions from a number of server and storage system OEM customers, including Cisco Systems, Inc., Dell Inc., EMC Corporation, Fujitsu Ltd., Hewlett-Packard Company, International Business Machines Corporation, NetApp, Inc. and Oracle Corporation.

We use a fifty-two/fifty-three week fiscal year ending on the Sunday nearest March 31. Fiscal years 2012 and 2010 each comprised fifty-two weeks and ended on April 1, 2012 and March 28, 2010, respectively. Fiscal year 2011 comprised fifty-three weeks and ended on April 3, 2011. The additional week in fiscal year 2011 did not have a material impact on our results of operations.

Disposition of Business

In February 2012, we completed the sale of the product lines and certain assets associated with our InfiniBand business (the IB Business) to Intel Corporation and received $125.0 million in cash. The assets sold consisted primarily of intellectual property, inventories and property and equipment. In addition, Intel agreed to assume certain liabilities related to the IB Business. We recognized an after-tax gain on the sale of the IB Business of $109.1 million. As a result of this divestiture, our consolidated financial statements for all periods present the operations of the IB Business as discontinued operations. The following discussion and analysis is based on our continuing operations and excludes any results or discussion of our discontinued operations.

Fiscal Year and Fourth Quarter Financial Highlights and Other Information

Net revenues for fiscal 2012 of $558.6 million were consistent with fiscal 2011. Income from continuing operations for fiscal 2012 was $119.4 million, or $1.16 per diluted share, compared to $141.3 million, or $1.29 per diluted share, in fiscal 2011. During fiscal 2012, we generated $166.2 million of cash from operations, received $125.0 million of cash proceeds from the sale of the IB Business and used $126.9 million of cash to purchase common stock under our stock repurchase program.

A summary of the key factors and significant events that impacted our financial performance during the fourth quarter of fiscal 2012 are as follows:

• Net revenues of $135.1 million for the fourth quarter of fiscal 2012 decreased 8% from $146.1 million in the fourth quarter of fiscal 2011. The fourth quarter of fiscal 2011 included fourteen weeks compared to thirteen weeks in the fourth quarter of fiscal 2012. Revenues from Host Products were $105.6 million compared to $109.0 million in the fourth quarter of fiscal 2011. Revenues from Network Products were $16.4 million compared to $21.0 million in the same quarter of fiscal 2011. Revenues from Silicon Products were $13.1 million compared to $16.1 million in the fourth quarter of fiscal 2011.

• Gross profit as a percentage of net revenues was 67.6% for the fourth quarter of fiscal 2012 compared to 68.5% in the fourth quarter of fiscal 2011.

• Operating income as a percentage of net revenues for the fourth quarter of fiscal 2012 was 21.4% compared to 26.8% in the fourth quarter of fiscal 2011.

• Income from continuing operations was $29.5 million, or $0.29 per diluted share, in the fourth quarter of fiscal 2012 compared to $36.8 million, or $0.34 per diluted share, in the fourth quarter of fiscal 2011.

• Cash, cash equivalents and marketable securities increased to $538.0 million as of April 1, 2012 from $384.1 million as of April 3, 2011.

• Accounts receivable was $76.6 million as of April 1, 2012 compared to $70.1 million as of April 3, 2011. Days sales outstanding (DSO) in receivables was 52 days as of April 1, 2012.

• Inventories decreased to $19.7 million as of April 1, 2012 from $26.9 million as of April 3, 2011. Our annualized inventory turns were 8.9 in the fourth quarter of fiscal 2012.

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Results of Operations

Net Revenues

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

	2012			2011			2010
	(Dollars in millions)
Net revenues:
Host Products	$	429.8		$	422.1		$	393.9
Network Products		72.5			85.3			82.3
Silicon Products		56.3			51.0			42.3
Total net revenues	$	558.6		$	558.4		$	518.5
Percentage of net revenues:
Host Products		77	%		76	%		76	%
Network Products		13			15			16
Silicon Products		10			9			8
Total net revenues		100	%		100	%		100	%

Historically, the global marketplace for network infrastructure solutions has expanded in response to the information requirements of enterprise data centers, cloud computing, Web 2.0 and other environments dependent on high performance, reliable data networking. 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 on a like-for-like product comparison basis.

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.

Our net revenues are derived from the sale of Host Products, Network Products and Silicon Products. Net revenues of $558.6 million for fiscal 2012 were consistent with fiscal 2011. Revenue from Host Products increased $7.7 million, or 2%, and revenue from Silicon Products increased $5.3 million, or 10%. Revenue from Network Products decreased $12.8 million, or 15%. The increase in revenue from Host Products was primarily due to a 4% increase in the average selling price of the adapters sold due to a favorable change in product mix, partially offset by a 2% decrease in the quantity sold. The increase in revenue from Silicon Products was due to a 16% increase in the average selling price of the chips sold due to a favorable change in product mix, partially offset by a 5% decrease in the quantity sold. The decrease in revenue from Network Products was primarily due to a decrease in the quantity of switches sold.

Net revenues for fiscal 2011 of $558.4 million increased 8% from $518.5 million for fiscal 2010. This increase was primarily the result of a $28.2 million, or 7%, increase in revenue from Host Products and an $8.7 million, or 21%, 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 86%, 85% and 88% of net revenues during fiscal 2012, 2011 and 2010, respectively.

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A summary of our customers, including their manufacturing subcontractors, that represent 10% or more of our net revenues is as follows:

	2012			2011			2010
Hewlett-Packard		27	%		26	%		25	%
IBM		18	%		19	%		19	%
Dell		11	%		11	%		11	%

We believe 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:

	2012		2011		2010
	(In millions)
United States	$	239.2	$	244.7	$	235.2
Asia-Pacific and Japan		178.7		155.2		129.6
Europe, Middle East and Africa		113.9		125.4		121.7
Rest of world		26.8		33.1		32.0
	$	558.6	$	558.4	$	518.5

Revenues by geographic area are presented based upon the ship-to location of the customer, which is not necessarily indicative of the location of the ultimate end-user of our products. No individual country other than the United States and China represented 10% or more of net revenues for any of the years presented. Net revenues from customers in China were $72.6 million, $76.7 million and $65.7 million for fiscal 2012, 2011 and 2010, respectively.

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:

	2012			2011			2010
	(Dollars in millions)
Gross profit	$	380.9		$	381.4		$	351.4
Percentage of net revenues		68.2	%		68.3	%		67.8	%

Gross profit for fiscal 2012 decreased $0.5 million from gross profit for fiscal 2011 and was consistent as a percentage of revenue compared to the prior year.

Gross profit for fiscal 2011 increased $30.0 million, or 9%, from gross profit for fiscal 2010 and increased as a percentage of revenue to 68.3% for fiscal 2011 from 67.8% for the prior year. The increase in gross profit percentage was primarily due to higher volumes to absorb manufacturing costs and a favorable change in product mix.

Our ability to maintain our current gross profit percentage may 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

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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 continue to be difficult to reduce manufacturing costs. As a result of these and other factors, our gross profit percentage may decline in future periods.

Operating Expenses

Our operating expenses are summarized in the following table:

	2012			2011			2010
	(Dollars in millions)
Operating expenses:
Engineering and development	$	138.8		$	125.2		$	116.8
Sales and marketing		77.3			74.0			68.9
General and administrative		35.3			34.1			34.2
Special charges		—			0.4			5.2
Total operating expenses	$	251.4		$	233.7		$	225.1
Percentage of net revenues:
Engineering and development		24.8	%		22.4	%		22.5	%
Sales and marketing		13.9			13.3			13.3
General and administrative		6.3			6.1			6.6
Special charges		—			0.1			1.0
Total operating expenses		45.0	%		41.9	%		43.4	%

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 fiscal 2012, engineering and development expenses increased to $138.8 million from $125.2 million in fiscal 2011. The increase was primarily due to a $9.5 million increase in cash compensation and related employee benefit costs, primarily due to an increase in headcount related to our planned incremental investments to drive future revenue growth, and a $3.8 million increase in equipment depreciation and maintenance costs.

During fiscal 2011, engineering and development expenses increased to $125.2 million from $116.8 million in fiscal 2010. The increase was primarily due to a $10.2 million increase in cash compensation and related employee benefit costs primarily 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 $77.4 million for fiscal 2012 from $74.0 million for fiscal 2011. The increase in sales and marketing expenses was primarily due to an increase in cash compensation and related employee benefit costs, principally due to an increase in headcount.

Sales and marketing expenses increased to $74.0 million for fiscal 2011 from $68.9 million for fiscal 2010. The increase in sales and marketing expenses was primarily due to a $3.0 million increase in cash compensation and related employee benefit costs, primarily due to higher headcount and increased commissions.

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.

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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 $35.3 million for fiscal 2012 from $34.1 million for fiscal 2011 primarily due to an increase in cash compensation and related employee benefit costs. General and administrative expenses of $34.1 million for fiscal 2011 were consistent with fiscal 2010.

Special Charges.    During fiscal 2011, we recorded special charges of $0.4 million consisting of exit costs associated with severance benefits for involuntarily-terminated employees.

During fiscal 2010, we recorded special charges totaling $5.2 million related to the consolidation of facilities and workforce reductions. The special charges consisted primarily of $3.1 million of exit costs related to facilities under non-cancelable leases that we ceased using during fiscal 2010 and $1.5 million of exit costs associated with severance benefits for involuntarily-terminated employees.

As of April 1, 2012, the unpaid exit costs, consisting of facilities related charges, totaled $1.9 million and are expected to be paid over the terms of the related agreements through fiscal 2018.

Interest and Other Income, Net

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

	2012			2011			2010
	(In millions)
Interest income	$	3.4		$	3.6		$	5.4
Net gains on investment securities		1.1			2.2			5.0
Other		(0.5	)		(0.6	)		0.2
	$	4.0		$	5.2		$	10.6

Income Taxes

Our provision for income taxes is $14.0 million, $11.6 million and $69.3 million for fiscal 2012, 2011 and 2010, respectively.

Our effective income tax rate was 10% in fiscal 2012, 8% in fiscal 2011 and 51% in fiscal 2010. The decrease in our effective tax rate in fiscal 2011 from fiscal 2010 was primarily due to our foreign operations generating a higher portion of our taxable income, which is taxed at more favorable rates. In addition, during the third quarter of fiscal 2011, we recorded $15.0 million of third quarter specific income tax benefits related to the expiration of certain statutes of limitation, the retroactive reinstatement of the federal research tax credit and certain other items. 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 global scope of our operations, and the complexity of global tax and transfer pricing rules and regulations, it is 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.

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Additionally, our effective tax rate may be impacted by other items including the tax effects of acquisitions, dispositions, newly enacted tax legislation, examinations by tax authorities, stock-based compensation and uncertain tax positions.

Liquidity and Capital Resources

Our combined balances of cash, cash equivalents and marketable securities increased to $538.0 million as of April 1, 2012 from $384.1 million as of April 3, 2011. As of April 1, 2012 and April 3, 2011, our international subsidiaries held $351.0 million and $258.3 million, respectively, of our total cash, cash equivalents and marketable securities. These holdings by our international subsidiaries as of April 1, 2012 consisted primarily of debt securities due from U.S. issuers, including the U.S. government and related agencies, and U.S. dollar denominated cash and money market funds. Certain foreign regulations could impact our ability to transfer funds to the United States. We currently intend to reinvest the funds held outside of the United States in our international operations and, as a result, do not intend to repatriate these funds. Should we decide to repatriate funds held outside of the United States, we may incur a significant tax obligation.

We believe that existing cash, cash equivalents, marketable securities and expected cash flow from operations will provide sufficient funds to finance our operations for at least the next twelve months. However, it is possible that we may need to supplement our existing sources of liquidity to finance our activities beyond the next twelve months or for the future acquisition of businesses, products or technologies and there can be no assurance that sources of liquidity will be available to us at that time.

Cash provided by operating activities decreased to $166.2 million for fiscal 2012 from $190.6 million for fiscal 2011. Operating cash flow for fiscal 2012 consisted of our net income of $229.4 million, including a $103.5 million gain on sale of the IB Business, and net non-cash expenses of $65.4 million, partially offset by net cash used as a result of changes in operating assets and liabilities of $25.1 million. The changes in operating assets and liabilities included a $16.3 million use of cash for accrued taxes, primarily due to estimated tax payments remitted during the fiscal year.

Cash provided by operating activities increased to $190.6 million for fiscal 2011 from $161.8 million for fiscal 2010. Operating cash flow for fiscal 2011 consisted of our net income of $139.1 million and net non-cash expenses of $75.2 million, partially offset by net cash used as a result of changes in operating assets and liabilities of $23.7 million. The changes in operating assets and liabilities included a $15.5 million decrease in accrued taxes and a $7.5 million increase in inventories. The decrease in accrued taxes was primarily due to the expiration of certain statutes of limitation, the retroactive reinstatement of the federal research tax credit and the timing of payment obligations. The increase in inventories was primarily due to advanced purchases of silicon chips to maintain flexibility due to long lead times for these products.

Operating cash flow for fiscal 2010 consisted of our net income of $54.9 million, net non-cash expenses of $78.0 million and net cash provided as a result of changes in operating assets and liabilities of $28.9 million. The changes in operating assets and liabilities included a $21.9 million decrease in inventories and an $11.8 million increase in accrued taxes, partially offset by a $6.0 million decrease in accrued compensation. The decrease in inventories was primarily associated with the completion of a planned contract manufacturer transition in fiscal 2010, which started in fiscal 2009 and resulted in higher inventory levels at the end of fiscal 2009, and higher product shipments during the fourth quarter of fiscal 2010 compared to the prior year. The increase in accrued taxes was primarily due to the timing of expected payment obligations. The decrease in accrued compensation was primarily related to decreased incentive compensation.

Cash used in investing activities was $47.8 million for fiscal 2012 and consisted of $140.0 million of net purchases of available-for-sale securities and $32.8 million of purchases of property and equipment, partially offset by $125.0 million of proceeds from the sale of the IB Business. Cash used in investing activities was $74.8 million for fiscal 2011 and consisted primarily of $75.7 million of net purchases of available-for-sale securities

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and $23.3 million of purchases of property and equipment, partially offset by $23.8 million of proceeds from the disposition of trading securities. Cash used in investing activities was $42.9 million for fiscal 2010 and consisted of $24.5 million of purchases of property and equipment, $20.4 million of net purchases of available-for-sale securities, and $14.9 million for the acquisition of NetXen, Inc. (net of cash acquired), partially offset by $11.4 million of proceeds from the disposition of trading securities and distributions totaling $5.5 million from our cost basis investments.

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 was $101.7 million for fiscal 2012 and consisted of our purchase of $126.9 million of common stock under our stock repurchase programs and $5.5 million for minimum tax withholdings paid on behalf of employees for restricted stock units that vested during the year, partially offset by $30.7 million of proceeds from the issuance of common stock and excess tax benefits from stock-based awards. Cash used in financing activities was $158.2 million for fiscal 2011 and consisted of our purchase of $189.2 million of common stock under our stock repurchase programs and $6.8 million for minimum tax withholdings paid on behalf of employees for restricted stock units that vested during the year, partially offset by $37.8 million of proceeds from the issuance of common stock and excess tax benefits from stock-based awards. Cash used in financing activities was $132.3 million for fiscal 2010 and consisted of our purchase of $163.4 million of common stock under our stock repurchase programs, $2.9 million for minimum tax withholdings paid on behalf of employees for restricted stock units that vested during the year and the repayment of a $0.9 million line of credit assumed in the NetXen acquisition, partially offset by $34.9 million of proceeds from the issuance of common stock and excess tax benefits from stock-based awards.

Our cash flows from discontinued operations did not have a material effect on our total cash flows from operating, investing and financing activities, except for the proceeds received from the sale of the IB Business during fiscal 2012. Accordingly, we do not expect the divestiture of the IB Business to materially impact our cash flows in future periods.

Since fiscal 2003, we have had various stock repurchase programs that authorized the purchase of up to $1.95 billion of our outstanding common stock, including a program approved in November 2011 authorizing the repurchase of up to $200 million of our outstanding common stock. As of April 1, 2012, we had repurchased a total of 111.9 million shares of common stock under our stock repurchase programs for an aggregate purchase price of $1.76 billion. Pursuant to the existing stock repurchase program, we are authorized to repurchase shares with an aggregate cost of up to $189.7 million as of April 1, 2012.

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 April 1, 2012, and their impact on our cash flows in future fiscal years, is as follows:

	2013		2014		2015		2016		2017		Thereafter		Total
	(In millions)
Operating leases	$	9.4	$	8.6	$	5.6	$	1.9	$	1.9	$	2.1	$	29.5
Non-cancelable purchase obligations		38.1		—		—		—		—		—		38.1
Total	$	47.5	$	8.6	$	5.6	$	1.9	$	1.9	$	2.1	$	67.6

The amount of unrecognized tax benefits, including related accrued interest and penalties, was $64.9 million as of April 1, 2012. 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 that we believe to be reasonable under the circumstances, including the current economic environment, 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 the 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 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 selling price 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 selling price, provided that each element meets the criteria for treatment as a separate unit of accounting. When applying the relative selling price method, we determine the selling price for each deliverable using vendor-specific objective evidence (VSOE) of the selling price, if it exists. In order to establish VSOE of the selling price, we must regularly sell the product and/or service on a standalone basis with a substantial majority of the sales priced within a relatively narrow range. If VSOE of the selling price cannot be determined, we then consider third party evidence (TPE) of the selling price. Generally, we are not able to determine TPE due to the lack of similar products and services sold by other companies within the industry. If neither VSOE nor TPE exists, we determine the estimated selling price based on multiple factors including, but not limited to, cost, gross margin, market conditions and pricing practices. Revenue allocated to each element is then recognized when the basic revenue recognition criteria is met for each deliverable.

We sell certain software products and related post-contract customer support. 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 VSOE of the fair value of the element. VSOE of the fair value is based upon the price charged when

32

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 measurement date, which is generally 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 forfeitures differ from those estimates. We recognize stock-based compensation expense for awards that are subject to only a service condition on a straight-line basis over the requisite service period for the entire award, which is the vesting period for stock options and restricted stock units, and the offering period for the ESPP. For all other stock-based awards, stock-based compensation is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. 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.

33

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

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

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 available-for-sale securities are excluded from earnings and reported as a separate component of accumulated other comprehensive income until realized.

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, these securities are valued based on an income approach using an estimate of future cash flows.

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

We recognize an impairment charge on available-for-sale securities 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 and the portion of any impairment that is due to a credit loss. 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 unrealized loss compared to the cost of the investment, the length of time the investment has been in a loss position and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.

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,

34

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 goodwill with the carrying amount of that goodwill. We perform the annual test for impairment as of the first day of our fiscal fourth quarter.

During the annual goodwill impairment test in fiscal 2012, we completed step one and determined that there was no impairment of goodwill since the fair value (based on quoted market price) of the reporting unit exceeded its carrying value. In addition, as a result of the sale of the IB Business, we performed an additional impairment test and again determined that there was no impairment of goodwill. Based on these impairment tests, we believe that we have no at-risk goodwill.

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 estimates used in future impairment analyses are lower than current estimates, 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 of significant management judgment. If our actual results, or estimates used in future impairment analyses, are lower than our current estimates, we could incur impairment charges.

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Item 7a. 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 April 1, 2012, the carrying value of our cash and cash equivalents approximates fair value.

We maintain a portfolio of marketable securities consisting primarily of U.S. 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 expected duration of our portfolio of marketable securities, 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 marketable securities as of April 1, 2012 consists of $373.4 million of securities that are classified as available-for-sale. As of April 1, 2012, we had gross unrealized losses associated with our available-for-sale securities of $0.3 million that were determined by management to be temporary in nature.

We do not use derivative financial instruments.

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Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

QLogic Corporation:

We have audited the accompanying consolidated balance sheets of QLogic Corporation and subsidiaries as of April 1, 2012 and April 3, 2011, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended April 1, 2012. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule of valuation and qualifying accounts as listed in the index under Item 15(a)(2). These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of QLogic Corporation and subsidiaries as of April 1, 2012 and April 3, 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended April 1, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), QLogic Corporation’s internal control over financial reporting as of April 1, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated May 24, 2012, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Irvine, California

May 24, 2012

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

QLogic Corporation:

We have audited QLogic Corporation’s internal control over financial reporting as of April 1, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). QLogic Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, QLogic Corporation maintained, in all material respects, effective internal control over financial reporting as of April 1, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of QLogic Corporation and subsidiaries as of April 1, 2012 and April 3, 2011, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended April 1, 2012, and our report dated May 24, 2012, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Irvine, California

May 24, 2012

38

QLOGIC CORPORATION

CONSOLIDATED BALANCE SHEETS

April 1, 2012 and April 3, 2011

	2012			2011
	(In thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	164,516		$	147,780
Marketable securities		373,439			236,296
Accounts receivable, less allowance for doubtful accounts of $1,446 and $1,536 as of April 1, 2012 and April 3, 2011, respectively		76,588			70,134
Inventories		19,724			26,931
Deferred tax assets		16,780			17,754
Other current assets		35,842			20,753
Total current assets		686,889			519,648
Property and equipment, net		78,010			77,134
Goodwill		110,976			119,748
Purchased intangible assets, net		5,277			12,694
Deferred tax assets		30,558			25,333
Other assets		1,708			2,650
	$	913,418		$	757,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,198		$	34,816
Accrued compensation		28,326			25,858
Accrued taxes		2,799			6,012
Deferred revenue		6,504			10,431
Other current liabilities		9,390			5,221
Total current liabilities		81,217			82,338
Accrued taxes		64,853			62,565
Other liabilities		7,505			11,140
Total liabilities		153,575			156,043
Commitments and contingencies
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; 210,688,000 and 208,042,000 shares issued as of April 1, 2012 and April 3, 2011, respectively		211			208
Additional paid-in capital		901,734			844,546
Retained earnings		1,617,201			1,387,765
Accumulated other comprehensive income		1,033			614
Treasury stock, at cost: 111,911,000 and 103,325,000 shares as of April 1, 2012 and April 3, 2011, respectively		(1,760,336	)		(1,631,969	)
Total stockholders’ equity		759,843			601,164
	$	913,418		$	757,207

See accompanying notes to consolidated financial statements.

39

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Years Ended April 1, 2012, April 3, 2011 and March 28, 2010

	2012		2011			2010
	(In thousands, except per share amounts)
Net revenues	$	558,608	$	558,375		$	518,471
Cost of revenues		177,704		176,959			167,107
Gross profit		380,904		381,416			351,364
Operating expenses:
Engineering and development		138,768		125,219			116,789
Sales and marketing		77,370		73,965			68,881
General and administrative		35,299		34,148			34,242
Special charges		—		373			5,163
Total operating expenses		251,437		233,705			225,075
Operating income		129,467		147,711			126,289
Interest and other income, net		3,959		5,187			10,601
Income from continuing operations before income taxes		133,426		152,898			136,890
Income taxes		13,983		11,552			69,345
Income from continuing operations		119,443		141,346			67,545
Discontinued operations:
Income (loss) from operations, net of income taxes		910		(2,256	)		(12,597	)
Gain on sale, net of income taxes		109,083		—			—
Income (loss) from discontinued operations		109,993		(2,256	)		(12,597	)
Net income	$	229,436	$	139,090		$	54,948
Income from continuing operations per share:
Basic	$	1.17	$	1.31		$	0.58
Diluted	$	1.16	$	1.29		$	0.58
Income (loss) from discontinued operations per share:
Basic	$	1.08	$	(0.02	)	$	(0.11	)
Diluted	$	1.07	$	(0.02	)	$	(0.11	)
Net income per share:
Basic	$	2.25	$	1.29		$	0.47
Diluted	$	2.23	$	1.27		$	0.47
Number of shares used in per share calculations:
Basic		101,766		107,647			116,037
Diluted		102,711		109,192			117,364

See accompanying notes to consolidated financial statements.

40

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

Years Ended April 1, 2012, April 3, 2011 and March 28, 2010

	Common Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity
	Outstanding Shares			Amount
	(In thousands)
Balance at March 29, 2009		119,531		$	202	$	712,064		$	1,193,727	$	634		$	(1,280,082	)	$	626,545
Net income		—			—		—			54,948		—			—			54,948
Change in unrealized gains and losses on marketable securities, net of income taxes		—			—		—			—		572			—			572
Comprehensive income																		55,520
Issuance of common stock under stock-based awards		2,772			3		31,497			—		—			—			31,500
Decrease in excess tax benefits from stock-based awards		—			—		(1,278	)		—		—			—			(1,278	)
Stock-based compensation		—			—		35,232			—		—			—			35,232
Common stock issued related to business acquisition		112			—		1,338			—		—			—			1,338
Purchases of treasury stock		(10,108	)		—		—			—		—			(165,518	)		(165,518	)
Balance at March 28, 2010		112,307			205		778,853			1,248,675		1,206			(1,445,600	)		583,339
Net income		—			—		—			139,090		—			—			139,090
Change in unrealized gains and losses on marketable securities, net of income taxes		—			—		—			—		(592	)		—			(592	)
Comprehensive income																		138,498
Issuance of common stock under stock-based awards		3,121			3		29,307			—		—			—			29,310
Increase in excess tax benefits from stock-based awards		—			—		805			—		—			—			805
Stock-based compensation		—			—		35,007			—		—			—			35,007
Common stock issued related to business acquisition		28			—		574			—		—			—			574
Purchases of treasury stock		(10,739	)		—		—			—		—			(186,369	)		(186,369	)
Balance at April 3, 2011		104,717			208		844,546			1,387,765		614			(1,631,969	)		601,164
Net income		—			—		—			229,436		—			—			229,436
Change in unrealized gains and losses on marketable securities, net of income taxes		—			—		—			—		419			—			419
Comprehensive income																		229,855
Issuance of common stock under stock-based awards		2,646			3		24,485			—		—			—			24,488
Increase in excess tax benefits from stock-based awards		—			—		111			—		—			—			111
Stock-based compensation		—			—		32,592			—		—			—			32,592
Purchases of treasury stock		(8,586	)		—		—			—		—			(128,367	)		(128,367	)
Balance at April 1, 2012		98,777		$	211	$	901,734		$	1,617,201	$	1,033		$	(1,760,336	)	$	759,843

See accompanying notes to consolidated financial statements.

41

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended April 1, 2012, April 3, 2011 and March 28, 2010

	2012			2011			2010
	(In thousands)
Cash flows from operating activities:
Net income	$	229,436		$	139,090		$	54,948
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,626			29,777			31,803
Stock-based compensation		32,592			35,007			35,694
Amortization of acquisition-related intangible assets		4,015			4,623			8,331
Deferred income taxes		(4,813	)		4,425			5,999
Gain on sale of business		(103,509	)		—			—
Other non-cash items		5,946			1,341			(3,892	)
Changes in operating assets and liabilities, net of acquisition and disposition:
Accounts receivable		(6,533	)		3,113			(4,432	)
Inventories		(843	)		(7,528	)		21,920
Other assets		361			770			487
Accounts payable		(4,908	)		(3,192	)		240
Accrued compensation		2,468			3,705			(6,036	)
Accrued taxes		(16,265	)		(15,522	)		11,827
Deferred revenue		(2,345	)		(1,041	)		612
Other liabilities		2,935			(4,011	)		4,271
Net cash provided by operating activities		166,163			190,557			161,772
Cash flows from investing activities:
Purchases of available-for-sale securities		(573,635	)		(278,878	)		(244,083	)
Proceeds from sales and maturities of available-for-sale securities		433,644			203,160			223,729
Proceeds from disposition of trading securities		—			23,800			11,425
Distributions from other investment securities		—			329			5,464
Purchases of property and equipment		(32,731	)		(23,260	)		(24,528	)
Proceeds from sale of business		124,969			—			—
Acquisition of business, net of cash acquired		—			—			(14,931	)
Net cash used in investing activities		(47,753	)		(74,849	)		(42,924	)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards		29,961			36,090			34,375
Excess tax benefits from stock-based awards		708			1,674			591
Minimum tax withholding paid on behalf of employees for restricted stock units		(5,473	)		(6,780	)		(2,875	)
Purchases of treasury stock		(126,870	)		(189,220	)		(163,419	)
Payoff of line of credit assumed in acquisition		—			—			(934	)
Net cash used in financing activities		(101,674	)		(158,236	)		(132,262	)
Net increase (decrease) in cash and cash equivalents		16,736			(42,528	)		(13,414	)
Cash and cash equivalents at beginning of year		147,780			190,308			203,722
Cash and cash equivalents at end of year	$	164,516		$	147,780		$	190,308
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes	$	25,311		$	17,000		$	36,937

See accompanying notes to consolidated financial statements.

42

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

General Business Information

QLogic Corporation (QLogic or the Company) designs and supplies high performance network infrastructure products that provide, enhance and manage computer data communication. The Company’s products are used in enterprise data centers, cloud computing, Web 2.0 and other environments dependent on high performance, reliable data networking. The Company’s products are based primarily on Fibre Channel and Ethernet technologies and are used in connection with storage networks, local area networks (LAN) and converged networks. The Company’s products primarily consist of adapters, switches, storage routers and application-specific integrated circuits and are sold worldwide, primarily to original equipment manufacturers (OEMs) and distributors.

The Company classifies its products into three broad categories: Host Products, Network Products and Silicon Products. Host Products consist of Fibre Channel adapters, Internet Small Computer Systems Interface (iSCSI) adapters, Fibre Channel over Ethernet (FCOE) converged network adapters, and 10Gb Ethernet adapters. Network Products consist of blade, edge and high-port count modular-chassis Fibre Channel switches, Fibre Channel virtualized pass-through modules, universal access point switches, Enhanced Ethernet pass-through modules and storage routers. Silicon Products consist of Fibre Channel controllers, iSCSI controllers, converged network controllers, Ethernet controllers, converged switch controllers, and converged LAN on Motherboard (cLOM) controllers.

Principles of Consolidation

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

Financial Reporting Period

The Company uses a fifty-two/fifty-three week fiscal year ending on the Sunday nearest March 31. Fiscal years 2012 and 2010 each comprised fifty-two weeks and ended on April 1, 2012 and March 28, 2010, respectively. Fiscal year 2011 comprised fifty-three weeks and ended on April 3, 2011.

Basis of Presentation

In February 2012, the Company completed the sale of the product lines and certain assets associated with its InfiniBand business (the IB Business). The IB Business meets the criteria to be presented as discontinued operations. As a result of this divestiture, the Company’s consolidated financial statements for all periods present the operations of the IB Business as discontinued operations.

Certain immaterial reclassifications have been made to prior year amounts to conform to the current year presentation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and judgments that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Among the significant estimates affecting the

43

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consolidated financial statements are those related to revenue recognition, stock-based compensation, income taxes, investment securities, inventories, goodwill and long-lived assets.

The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Significant judgment is required in determining whether a group of assets disposed or to be disposed of meets the criteria for presentation as discontinued operations and in identifying the appropriate amounts to present as discontinued operations. In addition, significant judgment is required in determining the Company’s tax filing positions and the related assessment of recognition and measurement of uncertain tax positions. Additionally, significant judgment is required in determining whether a potential indicator of impairment of the Company’s long-lived assets exists and in estimating future cash flows for the purpose of any necessary impairment tests. Significant judgment is also required in determining the fair value of assets acquired and liabilities assumed in a business combination, including the fair value of identifiable intangible assets. As future events unfold and their effects cannot be determined with precision, actual results could differ significantly from management’s estimates.

Revenue Recognition

The Company recognizes 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, the Company uses 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 the product. However, certain of the Company’s 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 the Company’s 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, the Company recognizes revenue from these distributors based on the sell-through method using inventory information provided by the distributor. At times, the Company provides standard incentive programs to its customers. The Company accounts for its competitive pricing incentives 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, the Company records 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, the Company allocates revenue based on the relative selling price of the individual components. When more than one element, such as hardware and services, are contained in a single arrangement, the Company allocates revenue between the elements based on each element’s relative selling price, provided that each element meets the criteria for treatment as a separate unit of accounting. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence (VSOE) of the selling price, if it exists. In order to establish VSOE of the selling price, the Company must regularly sell the product and/or service on a standalone basis with a substantial majority of the sales priced within a relatively narrow range. If VSOE of the selling price cannot be determined, the Company then considers third party evidence (TPE) of the selling price. Generally, the Company is not able to determine TPE due to the lack of similar products and services sold by other companies within the industry. If neither VSOE nor TPE exists, the Company determines the estimated selling price based on multiple

44

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

factors including, but not limited to, cost, gross margin, market conditions and pricing practices. Revenue allocated to each element is then recognized when the basic revenue recognition criteria is met for each deliverable.

The Company sells certain software products and related post-contract customer support. The Company recognizes 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 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 the Company is 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

The Company recognizes compensation expense for all stock-based awards made to employees and non-employee directors, including stock options, restricted stock units and stock purchases under its Employee Stock Purchase Plan (the ESPP), based on estimated fair values on the measurement date, which is generally 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 forfeitures differ from those estimates. The Company recognizes stock-based compensation expense for awards that are subject to only a service condition on a straight-line basis over the requisite service period for the entire award, which is the vesting period for stock options and restricted stock units, and the offering period for the ESPP. For all other stock-based awards, stock-based compensation is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The determination of fair value of stock-based awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s 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, the Company uses a combination of both historical volatility, calculated based on the daily closing prices of its common stock over a period equal to the expected term of the option, and implied volatility, utilizing market data of actively traded options on its common stock.

Research and Development

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

Advertising Costs

The Company expenses all advertising costs as incurred and such costs were not material to the consolidated statements of income for all periods presented.

Income Taxes

The Company utilizes 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

45

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 the Company’s assumptions, or changes in its assumptions in future periods, are recorded in the period they become known. The Company records 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.

Income from Continuing Operations per Share

The Company computes basic income from continuing operations per share based on the weighted-average number of common shares outstanding during the periods presented. Diluted income from continuing operations per share is computed based on the weighted-average number of common and dilutive potential common shares outstanding using the treasury stock method. The Company has granted stock options, restricted stock units and other stock-based awards, which have been treated as dilutive potential common shares in computing diluted income from continuing operations per share.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, marketable securities and trade accounts receivable. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits.

The Company invests primarily in debt securities, the majority of which are high investment grade. In accordance with the Company’s investment policy, exposure to credit risk is limited by the diversification and investment in highly-rated securities.

The Company sells its products to OEMs and distributors throughout the world. As of April 1, 2012 and April 3, 2011, the Company had three customers that individually accounted for 10% or more of the Company’s accounts receivable. These customers, all of which were OEMs of servers and workstations, accounted for an aggregate of 68% and 74% of the Company’s accounts receivable as of April 1, 2012 and April 3, 2011, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. Sales to customers are denominated in U.S. dollars. As a result, the Company believes its foreign currency risk is minimal.

Cash and Cash Equivalents

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

46

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Investment Securities

Investment securities include available-for-sale marketable 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.

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 available-for-sale securities are excluded from earnings and reported as a separate component of accumulated other comprehensive income until realized.

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, these securities are valued based on an income approach using an estimate of future cash flows.

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

The Company recognizes an impairment charge on available-for-sale securities when the decline in the fair value of an investment below its cost basis is judged to be other-than-temporary. If the Company intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the Company would recognize the entire impairment in earnings. If the Company does not intend to sell the security and it is not more likely than not that it 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. The Company considers 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 unrealized loss compared to the cost of the investment, the length of time the investment has been in a loss position and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.

Realized gains or losses are determined on a specific identification basis and reported in interest and other income, net, as incurred.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of the Company’s customers to make required payments. This reserve is determined by analyzing specific customer accounts, applying estimated loss rates to the aging of remaining accounts receivable balances, and considering the impact of the current economic environment where appropriate.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market. The Company writes down the carrying value of 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 the

47

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company’s current products, expected future products and other assumptions. Once the Company writes 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.

Property and Equipment

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

Goodwill 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 goodwill with the carrying amount of that goodwill. Management determined that the Company has a single reporting unit for the purpose of testing goodwill for impairment. The Company performs the annual test for impairment as of the first day of its fiscal fourth quarter.

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. 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.

Purchased intangible assets consist primarily of technology acquired in business acquisitions. Purchased intangible assets that have definite lives are amortized on a straight-line basis over the estimated useful lives of the related assets, generally ranging from three to seven years.

Warranty

The Company’s products typically carry a warranty for periods of up to five years. The Company records a liability for product warranty obligations in the period the related revenue is recorded based on historical warranty experience. Warranty expense and the corresponding liability were not material to the consolidated financial statements for all periods presented.

48

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Comprehensive Income

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

Foreign Currency Translation

Assets and liabilities of the Company’s foreign subsidiaries that operate where the functional currency is the local currency are translated to U.S. dollars at exchange rates in effect at the balance sheet date, and income and expense accounts are translated at average exchange rates during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income. Accumulated other comprehensive income related to translation adjustments was not material to the consolidated financial statements for all periods presented. Gains and losses resulting from transactions denominated in currencies other than the functional currency are included in interest and other income, net, and were not material to the consolidated statements of income for all periods presented.

Recently Adopted Accounting Standards

In September 2009, the Financial Accounting Standards Board reached a consensus on Accounting Standards Update (ASU) 2009-13, “Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements” and ASU 2009-14, “Software (Topic 985) — Certain Revenue Arrangements That Include Software Elements.” ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 establishes a selling price hierarchy that allows for the use of an estimated selling price to determine the allocation of arrangement consideration to a deliverable in a multiple-element arrangement where neither VSOE nor third-party evidence is available for that deliverable. Overall arrangement consideration is allocated at the inception of the arrangement to all deliverables based on their relative selling prices. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. The Company adopted the provisions of these standards beginning in the first quarter of fiscal 2012 on a prospective basis. The adoption of these standards did not have a material impact on the Company’s consolidated financial statements.

Note 2. Discontinued Operations

On February 29, 2012, the Company completed the sale of the product lines and certain assets associated with its InfiniBand business to Intel Corporation and received $125.0 million in cash. In addition, Intel agreed to assume certain liabilities related to the IB Business. The assets sold consisted primarily of intellectual property, inventories and property and equipment. The Company recognized a gain on the sale of the IB Business of $103.5 million. The components of the gain on sale are as follows:

	(In thousands)
Proceeds from sale	$	124,969
Inventories		(8,050	)
Property and equipment, net		(3,359	)
Purchased intangible assets, net		(5,336	)
Goodwill		(8,772	)
Deferred revenue		5,379
Other		(1,322	)
	$	103,509

49

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of April 1, 2012, all material retained assets and liabilities of the IB Business have been recovered or settled by the Company. In connection with the divestiture, the Company entered into an agreement to provide certain transition services to Intel for a period not to exceed one year from the date of sale.

Income from discontinued operations consists of direct revenues and direct expenses of the IB Business, including cost of revenues, as well as other fixed and allocated costs to the extent that such costs were eliminated as a result of the transaction. General corporate overhead costs have not been allocated to discontinued operations. A summary of the operating results of the IB Business included in discontinued operations in the consolidated statements of income is as follows:

	2012			2011			2010
	(In thousands)
Net revenues	$	36,199		$	38,824		$	30,599
Loss from operations before income taxes	$	(2,913	)	$	(8,115	)	$	(27,183	)

Note 3. Business Acquisition

On April 27, 2009, the Company acquired NetXen, Inc. (NetXen) in a merger transaction. Cash consideration was $17.6 million for all outstanding NetXen capital stock. NetXen developed, marketed and sold Ethernet adapter and controller products targeted at the enterprise server market. The acquisition agreement required that $5.1 million of the consideration be placed into an escrow account in connection with certain representations and warranties. The escrowed amounts were accounted for as cash consideration as of the date of acquisition. During fiscal 2012, the Company received $1.4 million from the escrow account to settle all outstanding claims and has included the amount in the Company’s consolidated statement of income for fiscal 2012. As of April 1, 2012, no amounts remain in the escrow account.

Note 4. Investment Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
April 1, 2012
U.S. government and agency securities	$	141,680	$	257	$	(78	)	$	141,859
Corporate debt obligations		166,763		1,071		(166	)		167,668
Asset and mortgage-backed securities		46,395		272		(73	)		46,594
Municipal bonds		16,548		22		(2	)		16,568
Other debt securities		750		—		—			750
	$	372,136	$	1,622	$	(319	)	$	373,439
April 3, 2011
U.S. government and agency securities	$	55,875	$	94	$	(216	)	$	55,753
Corporate debt obligations		137,706		1,012		(282	)		138,436
Asset and mortgage-backed securities		22,249		293		(52	)		22,490
Municipal bonds		17,941		10		(10	)		17,941
Non-U.S. government and agency securities		1,676		—		—			1,676
	$	235,447	$	1,409	$	(560	)	$	236,296

50

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The amortized cost and estimated fair value of debt securities as of April 1, 2012, 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 marketable securities based on their ability to be traded on active markets and availability for current operations.

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due in one year or less	$	71,344	$	71,702
Due after one year through three years		205,258		205,905
Due after three years through five years		45,519		45,618
Due after five years		50,015		50,214
	$	372,136	$	373,439

The following table presents the Company’s marketable securities with unrealized losses by investment category and length of time that individual securities have been in a continuous unrealized loss position as of April 1, 2012 and April 3, 2011.

	Less Than 12 Months					12 Months or Greater					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
April 1, 2012
U.S. government and agency securities	$	76,239	$	(78	)	$	—	$	—		$	76,239	$	(78	)
Corporate debt obligations		66,997		(166	)		—		—			66,997		(166	)
Asset and mortgage-backed securities		12,996		(69	)		139		(4	)		13,135		(73	)
Municipal bonds		1,978		(2	)		—		—			1,978		(2	)
	$	158,210	$	(315	)	$	139	$	(4	)	$	158,349	$	(319	)
April 3, 2011
U.S. government and agency securities	$	25,712	$	(216	)	$	—	$	—		$	25,712	$	(216	)
Corporate debt obligations		60,595		(282	)		—		—			60,595		(282	)
Asset and mortgage-backed securities		7,991		(52	)		—		—			7,991		(52	)
Municipal bonds		1,866		(10	)		—		—			1,866		(10	)
	$	96,164	$	(560	)	$	—	$	—		$	96,164	$	(560	)

As of April 1, 2012 and April 3, 2011, the fair value of certain of the Company’s available-for-sale marketable securities was less than their cost basis. Management reviewed various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition and near-term prospects of the issuer of the investment security, the magnitude of the unrealized loss compared to the cost of the investment, the length of time the investment had been in a loss position and the Company’s intent and ability to hold the investment for a period of

51

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

time sufficient to allow for any anticipated recovery of market value. As of April 1, 2012 and April 3, 2011, the Company determined that the unrealized losses were temporary in nature and recorded them as a component of accumulated other comprehensive income.

Trading Securities

Until full liquidation of the Company’s portfolio of trading securities during fiscal 2011, 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 fiscal 2011, the Company received $9.3 million of proceeds in connection with the redemption of certain ARS by the respective issuers. In addition, during fiscal 2011, 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.

Note 5. 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.

52

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Assets measured at fair value on a recurring basis as of April 1, 2012 and April 3, 2011 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In thousands)
April 1, 2012
Cash and cash equivalents	$	162,266	$	2,250	$	—	$	164,516
Marketable securities:
U.S. government and agency securities		141,859		—		—		141,859
Corporate debt obligations		—		167,668		—		167,668
Asset and mortgage-backed securities		—		46,594		—		46,594
Municipal bonds		—		16,568		—		16,568
Other debt securities		—		750		—		750
		141,859		231,580		—		373,439
	$	304,125	$	233,830	$	—	$	537,955
April 3, 2011
Cash and cash equivalents	$	146,281	$	1,499	$	—	$	147,780
Marketable securities:
U.S. government and agency securities		55,753		—		—		55,753
Corporate debt obligations		—		138,436		—		138,436
Asset and mortgage-backed securities		—		22,490		—		22,490
Municipal bonds		—		17,941		—		17,941
Non-U.S. government and agency securities		—		1,676		—		1,676
		55,753		180,543		—		236,296
	$	202,034	$	182,042	$	—	$	384,076

The Company’s investments classified within Level 2 were primarily valued based on valuations obtained from a third-party pricing service. To estimate fair value, 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. The Company obtained documentation from the pricing service as to the methodology and summary of inputs used for the various types of securities. The pricing service maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. These observable 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 compares valuation information from the pricing service with other pricing sources to validate the reasonableness of the valuations.

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, including call and liquidity premiums.

53

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the changes in Level 3 assets measured at fair value on a recurring basis is as follows:

Year Ended April 3, 2011	Balance March 28, 2010		Total Realized Gains (Losses)			Sales and Other Settlements			Balance April 3, 2011
	(In thousands)
Auction rate securities	$	22,317	$	1,483		$	(23,800	)	$	—
Put options related to auction rate securities		1,439		(1,439	)		—			—
	$	23,756	$	44		$	(23,800	)	$	—

Note 6. Inventories

Components of inventories are as follows:

	2012		2011
	(In thousands)
Raw materials	$	3,743	$	5,702
Finished goods		15,981		21,229
	$	19,724	$	26,931

Note 7. Property and Equipment

Components of property and equipment are as follows:

	2012		2011
	(In thousands)
Land	$	11,663	$	11,663
Buildings and improvements		41,186		40,984
Production and test equipment		193,820		187,655
Furniture and fixtures		7,946		7,958
		254,615		248,260
Less accumulated depreciation and amortization		176,605		171,126
	$	78,010	$	77,134

Note 8. Goodwill

As of April 1, 2012 and April 3, 2011, the Company’s recorded balance of goodwill was $111.0 million and $119.7 million, respectively. The Company assesses its goodwill for impairment on an annual basis and when events or changes in circumstances indicate a potential impairment may exist. During the annual goodwill impairment test, the Company completed step one and determined that there was no impairment of goodwill since the fair value (based on quoted market price) of the reporting unit exceeded its carrying value.

In connection with the sale of the IB Business, the Company allocated $8.7 million of the carrying value of its goodwill to the IB Business and wrote off this amount as part of the divestiture. The allocated amount was determined on a pro rata basis based on the consideration received from the sale of the IB Business and the fair value of the reporting unit as of the date the IB Business was sold. As a result of the divestiture, the Company performed an additional impairment test and determined that there was no impairment of goodwill since the fair value (based on quoted market price) of the reporting unit exceeded its carrying value on the date of the sale.

54

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9. Purchased Intangible Assets

Purchased intangible assets consist of the following:

	April 1, 2012						April 3, 2011
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
	(In thousands)
Acquisition-related intangibles:
Core/developed technology	$	8,900	$	5,750	$	3,150	$	45,700	$	34,479	$	11,221
Other		1,010		589		421		1,010		387		623
		9,910		6,339		3,571		46,710		34,866		11,844
Other purchased intangibles:
Technology-related		2,713		1,007		1,706		2,384		1,534		850
	$	12,623	$	7,346	$	5,277	$	49,094	$	36,400	$	12,694

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

	2012		2011		2010
	(In thousands)
Continuing operations — cost of revenues	$	1,023	$	1,023	$	1,333
Discontinued operations		3,160		3,845		7,605
	$	4,183	$	4,868	$	8,938

The following table presents the estimated future amortization expense of purchased intangible assets as of April 1, 2012:

Fiscal
	(In thousands)
2013	$	1,223
2014		1,374
2015		1,193
2016		1,172
2017		315
	$	5,277

Note 10. Stockholders’ Equity

Capital Stock

The Company’s authorized capital consists of 1 million shares of preferred stock, par value $0.001 per share, and 500 million shares of common stock, par value $0.001 per share. As of April 1, 2012 and April 3, 2011, the Company had 210.7 million and 208.0 million shares of common stock issued, respectively. As of April 1, 2012, 32.3 million shares of common stock were reserved for the exercise of issued and unissued stock-based awards and 1.1 million shares were reserved for issuance in connection with the Company’s Employee Stock Purchase Plan.

55

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Treasury Stock

Since fiscal 2003, the Company has had various stock repurchase programs that authorized the purchase of up to $1.95 billion of the Company’s outstanding common stock, including a program approved in November 2011 authorizing the repurchase of up to $200 million of the Company’s outstanding common stock over a two-year period. During fiscal 2012, the Company purchased 8.6 million shares of its common stock for an aggregate purchase price of $128.4 million. During fiscal 2011, the Company purchased 10.7 million shares of its common stock for an aggregate purchase price of $186.4 million. As of April 1, 2012, the Company had purchased a total of 111.9 million shares of common stock under these repurchase programs for an aggregate purchase price of $1.76 billion.

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

Note 11. Stock-Based Compensation

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the ESPP) that operates in accordance with Section 423 of the Internal Revenue Code. The ESPP is administered by the Compensation Committee of the Board of Directors. Under the ESPP, employees of the Company who elect to participate are granted options to purchase common stock at a 15% discount from the lower of the market value of the common stock at the beginning or end of each three-month offering period. The ESPP permits an enrolled employee to make contributions to purchase shares of common stock by having withheld from their salary an amount between 1% and 10% of compensation. The total number of shares issued under the ESPP was 556,000, 449,000 and 560,000 during fiscal 2012, 2011 and 2010, respectively.

Stock Incentive Compensation Plans

The Company may grant stock-based awards to employees and directors under the QLogic 2005 Performance Incentive Plan (the 2005 Plan). Prior to the adoption of the 2005 Plan in August 2005, the Company granted options to purchase shares of the Company’s common stock to employees and directors under certain predecessor stock plans. Additionally, the Company has assumed stock options as part of acquisitions.

The 2005 Plan provides for the issuance of incentive and non-qualified stock options, restricted stock units and other stock-based incentive awards for employees. The 2005 Plan permits the Compensation Committee of the Board of Directors to select eligible employees to receive awards and to determine the terms and conditions of awards. In general, stock options granted to employees have ten-year terms and vest over four years from the date of grant. Restricted stock units represent a right to receive a share of stock at a future vesting date with no cash payment from the holder. In general, restricted stock units granted to employees vest over four years from the date of grant.

Under the terms of the 2005 Plan, as amended, non-employee directors receive grants of stock-based awards upon initial election or appointment to the Board of Directors and upon annual reelection to the Board. The target fair value of such grants are determined by reference to the equity compensation for non-employee directors of the Company’s peer group of companies. The target value is then allocated 100% to a non-qualified stock option grant in the case of the initial grant and allocated 35% to a restricted stock unit award and 65% to a non-qualified stock option grant in the case of the annual grant. All stock options and restricted stock units granted to non-employee directors have ten-year terms and vest from one to three years from the date of grant.

56

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company also entered into a stock-based performance plan in connection with a business acquisition in fiscal 2007. During fiscal 2011 and 2010 the Company issued 28,000 shares of common stock valued at $0.6 million and 112,000 shares of common stock valued at $1.3 million, respectively, under this performance plan.

As of April 1, 2012, options to purchase 19.0 million shares of common stock and 2.7 million restricted stock units were held by employees and non-employee directors. Shares available for future grant were 10.6 million under the 2005 Plan as of April 1, 2012. No further awards can be granted under any other plans.

A summary of stock option activity is as follows:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(In thousands)							(In thousands)
Outstanding at March 29, 2009		25,940		$	20.58
Granted		3,853			14.06
Exercised		(1,878	)		14.89
Forfeited (cancelled pre-vesting)		(499	)		15.54
Expired (cancelled post-vesting)		(3,160	)		25.06
Outstanding at March 28, 2010		24,256			19.50
Granted		2,829			17.74
Exercised		(2,091	)		14.18
Forfeited (cancelled pre-vesting)		(708	)		15.42
Expired (cancelled post-vesting)		(2,430	)		32.13
Outstanding at April 3, 2011		21,856			18.51
Granted		1,630			15.73
Exercised		(1,544	)		14.83
Forfeited (cancelled pre-vesting)		(686	)		15.86
Expired (cancelled post-vesting)		(2,245	)		24.93
Outstanding at April 1, 2012		19,011		$	17.91		4.8	$	24,634
Vested and expected to vest at April 1, 2012		18,683		$	17.93		4.8	$	24,196
Exercisable at April 1, 2012		15,161		$	18.40		3.9	$	17,591

57

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of restricted stock unit activity is as follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
	(In thousands)
Outstanding and unvested at March 29, 2009		1,693		$	16.18
Granted		1,488			13.85
Vested		(533	)		16.65
Forfeited		(134	)		15.85
Outstanding and unvested at March 28, 2010		2,514			14.78
Granted		965			17.79
Vested		(959	)		15.31
Forfeited		(249	)		15.11
Outstanding and unvested at April 3, 2011		2,271			15.80
Granted		1,656			15.63
Vested		(879	)		15.58
Forfeited		(362	)		15.82
Outstanding and unvested at April 1, 2012		2,686		$	15.77

During fiscal 2012, 2011 and 2010, the Company issued 546,000, 581,000 and 334,000 shares of common stock, respectively, in connection with the vesting of restricted stock units. The difference between the number of restricted stock units vested and the shares of common stock issued is the result of restricted stock units withheld in satisfaction of minimum tax withholding obligations associated with the vesting.

During fiscal 2012, the Company granted 0.2 million restricted stock units with performance and service conditions to certain senior executives, which are not included in the above table. The evaluation of the performance criteria, and accordingly the determination of the ultimate number of shares earned under these restricted stock units, will be completed in the first quarter of fiscal 2013. The shares that are earned will vest over four years from the initial date of grant.

Stock-Based Compensation Expense

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

	2012		2011		2010
	(In thousands)
Cost of revenues	$	2,506	$	2,247	$	2,276
Engineering and development		14,199		14,222		14,094
Sales and marketing		6,667		6,768		6,182
General and administrative		8,316		8,398		7,910
Total continuing operations		31,688		31,635		30,462
Discontinued operations		904		3,372		5,232
	$	32,592	$	35,007	$	35,694

58

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2010, the Company granted 464,000 restricted stock units to employees that joined QLogic in connection with the acquisition of NetXen and recognized $1.3 million, $2.4 million and $1.6 million of stock-based compensation related to these awards during fiscal 2012, 2011 and 2010, respectively, which is included in the table above.

The fair value of stock options granted and shares to be purchased under the ESPP have been estimated at the date of grant using a Black-Scholes option-pricing model. The weighted-average fair values and underlying assumptions are as follows:

	2012						2011						2010
	Stock Options			Employee Stock Purchase Plan			Stock Options			Employee Stock Purchase Plan			Stock Options			Employee Stock Purchase Plan
Fair value	$	5.73		$	3.49		$	6.62		$	3.95		$	5.31		$	3.50
Expected volatility		36	%		36	%		38	%		36	%		38	%		42	%
Risk-free interest rate		1.8	%		0.1	%		2.1	%		0.2	%		2.2	%		0.1	%
Expected life (years)		5.5			0.25			5.3			0.25			5.0			0.25
Dividend yield		—			—			—			—			—			—

Restricted stock units granted were valued based on the closing market price on the date of grant.

The Company recognized tax benefits related to stock-based compensation expense for fiscal 2012, 2011 and 2010 of $7.7 million, $7.1 million and $5.3 million, respectively. Stock-based compensation costs capitalized as part of the cost of assets for fiscal 2012, 2011 and 2010 were not material.

As of April 1, 2012, there was $51.7 million of total unrecognized compensation costs related to outstanding stock-based awards. These costs are expected to be recognized over a weighted-average period of 2.3 years.

During fiscal 2012, 2011 and 2010, the grant date fair value of options vested totaled $16.5 million, $18.5 million and $20.0 million, respectively. The intrinsic value of options exercised during fiscal 2012, 2011 and 2010 totaled $3.8 million, $8.4 million and $6.8 million, respectively. Intrinsic value of options exercised is calculated as the difference between the market price on the date of exercise and the exercise price multiplied by the number of options exercised.

The fair value of restricted stock units vested during fiscal 2012, 2011 and 2010 totaled $14.4 million, $17.1 million and $7.7 million, respectively.

The Company currently issues new shares to deliver common stock under its stock-based award plans.

Note 12. Employee Retirement Savings Plan

The Company has established a pretax savings plan under Section 401(k) of the Internal Revenue Code for substantially all U.S. employees. Under the plan, eligible employees are able to contribute up to 50% of their compensation, subject to limits specified in the Internal Revenue Code. Additionally, the Company periodically authorizes discretionary contributions to the plan. The Company’s contributions on behalf of its employees totaled $1.1 million, $0.6 million and $0.1 million in fiscal 2012, 2011 and 2010, respectively.

The Company also maintains retirement plans in certain non-U.S. locations. The total expense and total obligation of the Company for these plans were not material to the consolidated financial statements for all periods presented.

59

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13. Special Charges

During fiscal 2011, the Company recorded special charges of $0.4 million consisting of exit costs associated with severance benefits for involuntarily-terminated employees, all of which were paid during fiscal 2011.

During fiscal 2010, the Company recorded special charges totaling $5.2 million related to the consolidation of facilities and workforce reductions. The special charges consisted primarily of $3.1 million of exit costs related to facilities under non-cancelable leases that the Company ceased using during fiscal 2010 and $1.5 million of exit costs associated with severance benefits for involuntarily-terminated employees (collectively, the Fiscal 2010 Initiative). In addition, the fiscal 2010 special charges included $0.6 million of additional exit costs related to facilities that the Company ceased using. As of April 1, 2012 and April 3, 2011, unpaid exit costs related to the Fiscal 2010 Initiative, consisting of facilities related charges, totaled $1.9 million and $2.3 million, respectively, and are expected to be paid over the terms of the related agreements through fiscal 2018.

Note 14. Interest and Other Income, net

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

	2012			2011			2010
	(In thousands)
Interest income	$	3,405		$	3,561		$	5,399
Gain on sales of available-for-sale securities		1,839			2,158			4,521
Loss on sales of available-for-sale securities		(809	)		(342	)		(1,811	)
Net gains on trading securities		—			44			426
Gain on distributions of other investment securities		—			328			1,846
Other		(476	)		(562	)		220
	$	3,959		$	5,187		$	10,601

Note 15. Income Taxes

Income before income taxes from continuing operations consists of the following components:

	2012		2011		2010
	(In thousands)
United States	$	35,733	$	55,595	$	95,615
International		97,693		97,303		41,275
	$	133,426	$	152,898	$	136,890

60

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of income taxes from continuing operations are as follows:

	2012			2011			2010
	(In thousands)
Current:
Federal	$	11,054		$	(2,726	)	$	50,992
State		1,279			4,029			8,099
Foreign		1,904			4,645			2,134
Total current		14,237			5,948			61,225
Deferred:
Federal		3,360			9,208			6,704
State		(4,781	)		(2,223	)		1,104
Foreign		1,167			(1,381	)		312
Total deferred		(254	)		5,604			8,120
	$	13,983		$	11,552		$	69,345

The income tax benefit related to discontinued operations for fiscal 2012, 2011 and 2010 was $9.4 million, $5.9 million and $14.6 million, respectively. The income tax benefit for fiscal 2012 includes a $5.6 million net benefit associated with the sale of the IB Business, including the tax effect of the related liquidation of two domestic subsidiaries which were engaged in the IB Business. In connection with this liquidation, the Company recognized losses for tax purposes related to its investment in these subsidiaries. The tax benefit of these losses was substantially offset by the tax related to the gain on sale of the IB Business. The $5.6 million net tax benefit is included in the gain on sale from discontinued operations, net of income taxes, in the consolidated statement of income for fiscal 2012.

The effect of deferred taxes associated with the change in unrealized gains and losses on the Company’s available-for-sale securities was immaterial for all periods presented and was recorded in other comprehensive income.

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

	2012			2011			2010
	(In thousands)
Expected income tax provision at the statutory rate	$	46,699		$	53,514		$	47,912
State income taxes, net of federal tax benefit		1,198			3,680			4,358
Tax rate differential on foreign earnings and other international related tax items		(30,277	)		(31,231	)		20,987
Benefit from research and other credits		(5,090	)		(6,728	)		(4,261	)
Stock-based compensation		2,602			3,679			2,608
Resolution of prior period tax matters		(2,530	)		(10,995	)		(634	)
Other, net		1,381			(367	)		(1,625	)
	$	13,983		$	11,552		$	69,345

The Company implemented a globalization initiative to expand its worldwide footprint beginning in fiscal 2005. As part of this initiative, certain intellectual property and other rights were licensed to one of the Company’s international subsidiaries. During fiscal 2010, the license agreement was amended which resulted in

61

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a fully paid-up license. The Company recorded a tax charge of $29.7 million in fiscal 2010 related to the globalization initiative, primarily due to the amendment to the license agreement. As a result of the amendment, the Company determined that all payment obligations under the license agreement had been satisfied in fiscal 2010.

The components of the deferred tax assets and liabilities are as follows:

	2012			2011
	(In thousands)
Deferred tax assets:
Reserves and accruals not currently deductible	$	19,830		$	22,206
Stock-based compensation		17,237			14,570
Net operating loss carryforwards		14,635			14,443
Research credits		11,222			6,618
Investment securities		1,386			1,545
Other		2,828			3,194
Total gross deferred tax assets		67,138			62,576
Valuation allowance		(1,540	)		(3,654	)
Total deferred tax assets, net of valuation allowance		65,598			58,922
Deferred tax liabilities:
State income taxes		8,266			6,036
Property and equipment		7,044			4,086
Research and development expenditures		2,924			3,348
Purchased intangible assets		26			2,365
Total deferred tax liabilities		18,260			15,835
Net deferred tax assets	$	47,338		$	43,087

Based upon the Company’s current and historical pre-tax earnings, management believes it is more likely than not that the Company will realize the full benefit of the existing deferred tax assets as of April 1, 2012, except for the deferred tax assets related to certain investment securities and capital loss carryovers. Management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income or that there would be sufficient tax carrybacks available; however, there can be no assurance that the Company will generate any earnings or any specific level of continuing earnings in future years.

The Company’s deferred tax assets related to investment securities and capital loss carryovers consist primarily of temporary differences related to other-than-temporary impairments on the Company’s investment securities and realized losses on dispositions of investment securities that are subject to limitations on deductibility. As a result of limitations on the deductibility of capital losses and other factors, management is currently unable to assert that it is more likely than not that the Company will realize the full benefit of these deferred tax assets. Accordingly, the Company had previously recorded a valuation allowance against these deferred tax assets. The balance of this valuation allowance was $1.5 million as of April 1, 2012 and April 3, 2011.

As of April 3, 2011, the Company’s deferred tax assets relating to state net operating losses and state tax credits included attributes related to a subsidiary that filed state tax returns on a separate filing basis in certain tax jurisdictions. Based on various factors, including historical operating results, management was unable to assert that it was more likely than not that the Company would realize the benefit of these deferred tax assets and

62

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recorded a valuation allowance against these deferred tax assets of $2.2 million during fiscal 2011. In fiscal 2012, the Company wrote off these deferred tax assets and the related valuation allowance as a result of the sale of the IB business.

As of April 1, 2012, the Company has federal net operating loss carryforwards of $17.8 million, which will expire between fiscal 2027 and 2029, if not utilized, and state net operating loss carryforwards of $97.8 million, which will expire between fiscal 2017 and 2032, if not utilized. The Company also has state capital loss carryovers of $60.2 million, which will expire between fiscal 2013 and 2017, if not utilized, and state tax credit carryforwards of $10.8 million, which have no expiration date. The net operating loss carryforwards relating to acquired companies are subject to limitations on the timing of utilization.

The Company has made no provision for U.S. income taxes or foreign withholding taxes on the earnings of its foreign subsidiaries, as these amounts are intended to be indefinitely reinvested in operations outside the United States. As of April 1, 2012, the cumulative amount of undistributed earnings of the Company’s foreign subsidiaries was $376.5 million. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

The Company is no longer subject to federal income tax examinations prior to fiscal 2008 and California income tax examinations prior to fiscal 2009. The Company’s federal consolidated income tax returns for fiscal years 2008 and 2009 are currently under examination by the Internal Revenue Service. With limited exceptions, the Company is no longer subject to other state and foreign income tax examinations by taxing authorities for periods prior to fiscal 2008. 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.

A rollforward of the activity in the gross unrecognized tax benefits is as follows:

	2012			2011
	(In thousands)
Balance at beginning of year	$	57,510		$	65,385
Additions based on tax positions related to the current year		3,581			1,781
Additions for tax positions of prior years		140			472
Reductions for tax positions of prior years		(76	)		(2,834	)
Lapses of statute of limitations		(2,771	)		(7,294	)
Balance at end of year	$	58,384		$	57,510

If the unrecognized tax benefits as of April 1, 2012 were recognized, $57.2 million, net of $1.2 million of tax benefits from state income taxes, would favorably affect the Company’s effective income tax rate.

In addition to the unrecognized tax benefits noted above, the Company had accrued $4.4 million and $3.4 million of interest expense, net of the related tax benefit, and penalties as of April 1, 2012 and April 3, 2011, respectively. The Company recognized interest expense (benefit), net of the related tax effect, and penalties aggregating $1.0 million, $0.1 million and $(0.1) million during fiscal 2012, 2011 and 2010, respectively.

63

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 16. Income per Share

The following table sets forth the computation of basic and diluted income from continuing operations per share:

	2012		2011		2010
	(In thousands, except per share amounts)
Income from continuing operations	$	119,443	$	141,346	$	67,545
Shares:
Weighted-average shares outstanding — basic		101,766		107,647		116,037
Dilutive potential common shares, using treasury stock method		945		1,545		1,327
Weighted-average shares outstanding — diluted		102,711		109,192		117,364
Income from continuing operations per share:
Basic	$	1.17	$	1.31	$	0.58
Diluted	$	1.16	$	1.29	$	0.58

Stock-based awards, including stock options and restricted stock units, representing 16.6 million, 14.5 million and 20.5 million shares of common stock have been excluded from the diluted per share calculations for fiscal 2012, 2011 and 2010, respectively. These stock-based awards have been excluded from the diluted per share calculations because their effect would have been antidilutive.

Note 17. Commitments and Contingencies

Leases

The Company leases certain facilities, software and equipment under operating lease agreements. A summary of the future minimum lease commitments under non-cancelable operating leases as of April 1, 2012 is as follows:

Fiscal Year
	(In thousands)
2013	$	9,329
2014		8,614
2015		5,623
2016		1,933
2017		1,891
Thereafter		2,091
Total future minimum lease payments	$	29,481

Rent expense for fiscal 2012, 2011 and 2010 was $10.9 million, $9.4 million and $8.9 million, respectively.

Litigation

Various lawsuits, claims and proceedings have been or may be instituted against the Company. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims and proceedings may be disposed of

64

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unfavorably to the Company. Management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, would not be material to the Company’s financial condition or results of operations. However, there can be no assurance with respect to such result, and the monetary liability or financial impact to the Company from these matters could differ materially from those projected.

Indemnifications

The Company indemnifies certain of its customers against claims that products purchased from the Company infringe upon a patent, copyright, trademark or trade secret of a third party. In the event of such a claim, the Company agrees to pay all litigation costs, including attorney fees, and any settlement payments or damages awarded directly related to the infringement. The Company is not currently defending any intellectual property infringement claims and has not been informed of any pending infringement claims. Accordingly, the Company has not recorded a liability related to such indemnification obligations.

Note 18. Revenue Components, Geographic Revenues and Significant Customers

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates in one operating segment.

Revenue Components

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

	2012		2011		2010
	(In thousands)
Host Products	$	429,820	$	422,143	$	393,855
Network Products		72,541		85,244		82,309
Silicon Products		56,247		50,988		42,307
	$	558,608	$	558,375	$	518,471

Geographic Revenues

Revenues by geographic area are presented based upon the ship-to location of the customer. Net revenues by geographic area are as follows:

	2012		2011		2010
	(In thousands)
United States	$	239,198	$	244,717	$	235,213
Asia-Pacific and Japan		178,715		155,165		129,636
Europe, Middle East and Africa		113,873		125,413		121,676
Rest of world		26,822		33,080		31,946
	$	558,608	$	558,375	$	518,471

Net revenues from customers in China were $72.6 million, $76.7 million and $65.7 million for fiscal 2012, 2011 and 2010, respectively. No individual country other than the United States and China represented 10% or more of net revenues for any of the years presented.

65

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Significant Customers

A summary of the Company’s customers, including their manufacturing subcontractors, that represent 10% or more of the Company’s net revenues is as follows:

	2012			2011			2010
Hewlett-Packard		27	%		26	%		25	%
IBM		18	%		19	%		19	%
Dell		11	%		11	%		11	%

Note 19. Condensed Quarterly Results (Unaudited)

The following table summarizes certain unaudited quarterly financial information for fiscal 2012 and 2011:

	Three Months Ended (1)
	June		September		December (2)		March (3)
	(In thousands, except per share amounts)
Fiscal 2012:
Net revenues	$	144,481	$	136,275	$	142,779	$	135,073
Gross profit		99,613		92,930		97,013		91,348
Operating income		35,877		30,502		34,123		28,965
Income from continuing operations		34,196		26,507		29,221		29,519
Net income		32,426		28,654		30,025		138,331
Income from continuing operations per share:
Basic		0.33		0.26		0.29		0.30
Diluted		0.32		0.26		0.29		0.29
Net income per share:
Basic		0.31		0.28		0.30		1.40
Diluted		0.31		0.28		0.30		1.37
Fiscal 2011:
Net revenues	$	130,674	$	135,376	$	146,256	$	146,069
Gross profit		89,796		92,438		99,170		100,012
Operating income		31,323		35,887		41,394		39,107
Income from continuing operations		26,212		29,163		49,181		36,790
Net income		25,449		29,986		50,339		33,316
Income from continuing operations per share:
Basic		0.24		0.27		0.46		0.35
Diluted		0.23		0.27		0.46		0.34
Net income per share:
Basic		0.23		0.28		0.48		0.32
Diluted		0.22		0.28		0.47		0.31

(1) The statement of operations data for all periods presented reflects the operating results of the InfiniBand business as discontinued operations.

(2) During the three months ended December 26, 2010, the Company recorded $15.0 million of third quarter specific income tax benefits related to the expiration of certain statutes of limitation, the retroactive reinstatement of the federal research tax credit and certain other items.

(3) During the three months ended April 1, 2012, the Company recorded a gain on sale from discontinued operations, net of income taxes, of $109.1 million related to the divestiture of its InfiniBand business.

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

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure 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 Exchange Act (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 Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of April 1, 2012.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act. Internal control over financial reporting is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on this evaluation, our chief executive officer and chief financial officer concluded that the Company’s internal control over financial reporting was effective at a reasonable assurance level as of April 1, 2012.

The independent registered public accounting firm that audited the consolidated financial statements included in this annual report has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. See page 38 herein.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act that occurred during the fourth quarter of fiscal 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Reference is made to the Company’s Definitive Proxy Statement for its 2012 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of fiscal 2012, for information required under this Item 10. Such information is incorporated herein by reference.

The Company has adopted and implemented a Business Ethics Policy (the Code of Ethics) that applies to the Company’s officers, employees and directors. The Code of Ethics is available on our website at www.qlogic.com.

Item 11. Executive Compensation

Reference is made to the Company’s Definitive Proxy Statement for its 2012 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of fiscal 2012, for information required under this Item 11. Such information is incorporated herein by reference.

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

Reference is made to the Company’s Definitive Proxy Statement for its 2012 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of fiscal 2012, for information required under this Item 12. Such information is incorporated herein by reference.

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

Item 13. Certain Relationships and Related Transactions, and Director Independence

Reference is made to the Company’s Definitive Proxy Statement for its 2012 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of fiscal 2012, for information required under this Item 13. Such information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Reference is made to the Company’s Definitive Proxy Statement for its 2012 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of fiscal 2012, for information required under this Item 14. Such information is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) Consolidated Financial Statements

The following consolidated financial statements of the Company for the years ended April 1, 2012, April 3, 2011 and March 28, 2010 are filed as part of this report:

FINANCIAL STATEMENT INDEX

	Page Number
Reports of Independent Registered Public Accounting Firm		37
Consolidated Balance Sheets as of April 1, 2012 and April 3, 2011		39
Consolidated Statements of Income for the years ended April 1, 2012, April 3, 2011 and March 28, 2010		40
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended April 1, 2012, April 3, 2011 and March 28, 2010		41
Consolidated Statements of Cash Flows for the years ended April 1, 2012, April 3, 2011 and March 28, 2010		42
Notes to Consolidated Financial Statements		43

(a) (2) Financial Statement Schedule

The following consolidated financial statement schedule of the Company for the years ended April 1, 2012, April 3, 2011 and March 28, 2010 is filed as part of this report and is incorporated herein by reference:

Schedule II — Valuation and Qualifying Accounts

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

(a) (3) Exhibits

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

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SIGNATURES

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

QLOGIC CORPORATION
By:	/s/    SIMON BIDDISCOMBE
	Simon Biddiscombe
	President and Chief Executive Officer

Date: May 24, 2012

POWER OF ATTORNEY

Each person whose signature appears below hereby authorizes Simon Biddiscombe and/or Jean Hu, as attorney-in-fact, to sign on his or her behalf and in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K.

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

Signature	Title	Date
Principal Executive Officer:
/s/    SIMON BIDDISCOMBE         Simon Biddiscombe	President, Chief Executive Officer and Director	May 24, 2012
Principal Financial and Accounting Officer:
/s/    JEAN HU         Jean Hu	Senior Vice President and Chief Financial Officer	May 24, 2012
/s/    H.K. DESAI         H.K. Desai	Executive Chairman and Chairman of the Board	May 24, 2012
/s/    BALAKRISHNAN S. IYER         Balakrishnan S. Iyer	Director	May 24, 2012
/s/    KATHRYN B. LEWIS         Kathryn B. Lewis	Director	May 24, 2012
/s/    D. SCOTT MERCER         D. Scott Mercer	Director	May 24, 2012
/s/    GEORGE D. WELLS         George D. Wells	Director	May 24, 2012
/s/    WILLIAM M. ZEITLER         William M. Zeitler	Director	May 24, 2012

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SCHEDULE II

QLOGIC CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning  of Year		Additions: Charged to Costs and Expenses or Revenues		Deductions: Amounts Written Off, Net of Recoveries		Balance at End of Year
	(In thousands)
Year ended April 1, 2012:
Allowance for doubtful accounts	$	1,536	$	79	$	169	$	1,446
Sales returns and allowances	$	7,856	$	35,170	$	38,165	$	4,861
Year ended April 3, 2011:
Allowance for doubtful accounts	$	1,505	$	54	$	23	$	1,536
Sales returns and allowances	$	8,276	$	29,208	$	29,628	$	7,856
Year ended March 28, 2010:
Allowance for doubtful accounts	$	1,366	$	366	$	227	$	1,505
Sales returns and allowances	$	8,848	$	29,311	$	29,883	$	8,276

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Asset Purchase Agreement dated January 20, 2012, by and between QLogic Corporation and Intel Corporation (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on January 25, 2012).
3.1	Certificate of Incorporation of QLogic Corporation, as amended to date.
3.2	Amended and Restated By-Laws of QLogic Corporation, as adopted on February 9, 2012 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on February 13, 2012).
10.1	QLogic Corporation Non-Employee Director Stock Option Plan, as amended (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-8 filed on February 6, 2004 (File No. 333-112572)).*
10.2	QLogic Corporation Stock Awards Plan, as amended (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-8 filed on February 6, 2004 (File No. 333-112572)).*
10.3	Form of Indemnification Agreement between QLogic Corporation and Directors and Executive Officers (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on April 7, 2006).*
10.4	QLogic Corporation 1998 Employee Stock Purchase Plan, Amended and Restated Effective February 10, 2011 (incorporated by reference to Exhibit 10.4 of the Registrant’s Annual Report on Form 10-K for the year ended April 3, 2011).*
10.5	QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective July 16, 2009 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 21, 2009).*
10.6	Terms and Conditions of Nonqualified Stock Option under the QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective October 31, 2011 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 1, 2012).*
10.7	Terms and Conditions of Incentive Stock Option under the QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective February 10, 2011 (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K for the year ended April 3, 2011).*
10.8	Terms and Conditions of Stock Unit Award under the QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective October 31, 2011 (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 1, 2012).*
10.9	Change in Control Severance Agreement, dated December 19, 2008, between QLogic Corporation and H.K. Desai (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2008).*
10.10	Change in Control Severance Agreement, dated December 19, 2008, between QLogic Corporation and Simon Biddiscombe (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2008).*
10.11	Non-Employee Director Equity Award Program under the QLogic Corporation 2005 Performance Incentive Plan Amended and Restated Effective June 9, 2010 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 27, 2010).*

72

Exhibit No.	Description
10.12	Amendment to Change in Control Severance Agreement, effective November 15, 2010, by and between QLogic Corporation and Simon Biddiscombe (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on October 21, 2010).*
10.13	Employment Agreement, effective November 15, 2010, by and between QLogic Corporation and H.K. Desai (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on October 21, 2010).*
10.14	Amendment to Change in Control Severance Agreement, effective November 15, 2010, by and between QLogic Corporation and H.K. Desai (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed on October 21, 2010).*
10.15	Form of Change in Control Severance Agreement between QLogic Corporation and Executive Officers (incorporated by reference to Exhibit 10.15 of the Registrant’s Annual Report on Form 10-K for the year ended April 3, 2011).*
10.16	Terms and Conditions of FY2012 Performance Share Award under the QLogic Corporation 2005 Performance Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2011).*
21.1	Subsidiaries of the Registrant.
23.1	Consent of Independent Registered Public Accounting Firm.
24	Power of Attorney (included on signature page).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**

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

** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

73