10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2014

Commission file number 0-23298

QLogic Corporation

(Exact name of registrant as specified in its charter)

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

26650 Aliso Viejo Parkway

Aliso Viejo, California 92656

(Address of principal executive office and zip code)

(949) 389-6000

(Registrant’s telephone number, including area code)

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

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 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

As of October 22, 2014, 88,144,000 shares of the Registrant’s common stock were outstanding.

QLOGIC CORPORATION

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item  1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of September 28, 2014 and March 30, 2014		1
	Condensed Consolidated Statements of Income for the three and six months ended September 28, 2014 and September 29, 2013		2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 28, 2014 and September 29, 2013		3
	Condensed Consolidated Statements of Cash Flows for the six months ended September 28, 2014 and September 29, 2013		4
	Notes to Condensed Consolidated Financial Statements		5
Item  2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item  3.	Quantitative and Qualitative Disclosures About Market Risk		18
Item  4.	Controls and Procedures		19
	PART II. OTHER INFORMATION
Item  1.	Legal Proceedings		20
Item  1A.	Risk Factors		20
Item  6.	Exhibits		32
	Signatures		33

i

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 28, 2014			March 30, 2014
	(Unaudited; In thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	86,930		$	91,258
Marketable securities		189,839			186,783
Accounts receivable, less allowance for doubtful accounts of $1,216 and $1,186 as of September 28, 2014 and March 30, 2014, respectively		85,469			65,213
Inventories		30,142			18,036
Deferred tax assets		13,997			15,080
Other current assets		18,841			16,590
Total current assets		425,218			392,960
Property and equipment, net		82,972			84,912
Goodwill		192,492			194,107
Purchased intangible assets, net		61,231			69,903
Deferred tax assets		29,818			32,827
Other assets		21,847			23,554
	$	813,578		$	798,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,178		$	30,657
Accrued compensation		19,700			26,956
Accrued taxes		2,312			981
Deferred revenue		3,695			3,954
Other current liabilities		8,824			16,123
Total current liabilities		71,709			78,671
Accrued taxes		12,605			17,095
Other liabilities		8,699			9,071
Total liabilities		93,013			104,837
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; 214,758,000 and 213,786,000 shares issued as of September 28, 2014 and March 30, 2014, respectively		215			214
Additional paid-in capital		968,368			958,008
Retained earnings		1,689,081			1,672,071
Accumulated other comprehensive income		203			435
Treasury stock, at cost: 126,616,000 shares as of September 28, 2014 and March 30, 2014		(1,937,302	)		(1,937,302	)
Total stockholders’ equity		720,565			693,426
	$	813,578		$	798,263

See accompanying notes to condensed consolidated financial statements.

1

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(Unaudited; In thousands, except per share amounts)
Net revenues	$	127,503	$	112,622	$	246,952	$	225,738
Cost of revenues		52,093		36,313		100,847		72,932
Gross profit		75,410		76,309		146,105		152,806
Operating expenses:
Engineering and development		35,480		34,790		73,301		75,177
Sales and marketing		15,453		16,431		31,487		35,844
General and administrative		8,697		7,553		17,597		15,292
Special charges		2,259		4,349		4,803		16,382
Total operating expenses		61,889		63,123		127,188		142,695
Operating income		13,521		13,186		18,917		10,111
Interest and other income, net		296		25		438		798
Income before income taxes		13,817		13,211		19,355		10,909
Income taxes		2,807		2,234		2,345		2,982
Net income	$	11,010	$	10,977	$	17,010	$	7,927
Net income per share:
Basic	$	0.13	$	0.13	$	0.19	$	0.09
Diluted	$	0.12	$	0.13	$	0.19	$	0.09
Number of shares used in per share calculations:
Basic		87,914		87,430		87,654		88,288
Diluted		88,102		87,669		88,177		88,720

See accompanying notes to condensed consolidated financial statements.

2

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended					Six Months Ended
	September 28, 2014			September 29, 2013		September 28, 2014			September 29, 2013
	(Unaudited; In thousands)
Net income	$	11,010		$	10,977	$	17,010		$	7,927
Other comprehensive income, net of income taxes:
Changes in fair value of marketable securities:
Changes in unrealized gains		(347	)		602		(148	)		(1,319	)
Net realized losses (gains) reclassified into earnings		64			135		127			(259	)
		(283	)		737		(21	)		(1,578	)
Foreign currency translation adjustments		(269	)		252		(211	)		(42	)
Total other comprehensive income (loss)		(552	)		989		(232	)		(1,620	)
Comprehensive income	$	10,458		$	11,966	$	16,778		$	6,307

See accompanying notes to condensed consolidated financial statements.

3

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	September 28, 2014			September 29, 2013
	(Unaudited; In thousands)
Cash flows from operating activities:
Net income	$	17,010		$	7,927
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,855			15,730
Stock-based compensation		10,275			12,989
Deferred income taxes		4,077			3,632
Asset impairments		1,011			2,429
Other non-cash items		810			1,698
Changes in operating assets and liabilities:
Accounts receivable		(20,287	)		(1,818	)
Inventories		(12,106	)		2,797
Other assets		(840	)		180
Accounts payable		6,162			(102	)
Accrued compensation		(7,256	)		(7,141	)
Accrued taxes, net		(3,012	)		(905	)
Other liabilities		(7,930	)		3,249
Net cash provided by operating activities		11,769			40,665
Cash flows from investing activities:
Purchases of available-for-sale securities		(84,318	)		(162,673	)
Proceeds from sales and maturities of available-for-sale securities		80,376			172,629
Purchases of property and equipment		(12,068	)		(15,389	)
Net cash used in investing activities		(16,010	)		(5,433	)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards		3,536			4,565
Minimum tax withholding paid on behalf of employees for restricted stock units		(3,450	)		(4,514	)
Purchases of treasury stock		—			(44,212	)
Other financing activities		(173	)		(96	)
Net cash used in financing activities		(87	)		(44,257	)
Net decrease in cash and cash equivalents		(4,328	)		(9,025	)
Cash and cash equivalents at beginning of period		91,258			95,532
Cash and cash equivalents at end of period	$	86,930		$	86,507

See accompanying notes to condensed consolidated financial statements.

4

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

In the opinion of management of QLogic Corporation (QLogic or the Company), the accompanying unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2014. The results of operations for the three and six months ended September 28, 2014 are not necessarily indicative of the results that may be expected for the entire fiscal year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Among the significant estimates affecting the consolidated financial statements are those related to revenue recognition, stock-based compensation, income taxes, marketable securities, inventories, goodwill and long-lived assets. The actual results experienced by the Company could differ materially from management’s estimates.

Recently Adopted Accounting Standards

In July 2013, the Financial Accounting Standards Board issued an accounting standard update that requires certain unrecognized tax benefits to be presented as a reduction to deferred tax assets rather than as liabilities when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The Company adopted this standard in the first quarter of fiscal 2015 on a prospective basis and the adoption did not have a material effect on the Company’s condensed consolidated balance sheet.

Note 2. Business Acquisition

Broadcom Corporation

In March 2014, the Company acquired certain 10/40/100Gb Ethernet controller-related assets from Broadcom Corporation (Broadcom) primarily relating to the NetXtreme^® II Ethernet controller family and licensed certain related intellectual property under non-exclusive licenses for total cash consideration of $147.8 million and the assumption of certain liabilities.

The Company preliminarily estimated the fair value of the assets acquired and liabilities assumed and allocated a portion of the total purchase consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values at the acquisition date. During the six months ended September 28, 2014, the Company completed the identification and valuation of certain acquired property and equipment and also completed the transfer of property and equipment in a foreign jurisdiction that was subject to local compliance requirements, resulting in a total increase in property and equipment of $1.6 million with a corresponding decrease in goodwill. The excess of the total purchase consideration over the aggregate estimated fair value of the net assets acquired was recorded as goodwill. The goodwill associated with this acquisition is expected to be tax deductible. The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:

	(In thousands)
Inventories	$	2,880
Other current assets		307
Property and equipment		4,070
Goodwill		81,516
Purchased intangible asset		60,100
Accrued compensation		(987	)
Other current liabilities		(129	)
	$	147,757

Included in the preliminary purchase price allocation is a provisional amount related to a purchased intangible asset consisting of developed technology, which has an estimated useful life of five years. The preliminary fair value of this purchased intangible asset was based on estimates and assumptions made by management at the time of the acquisition. The Company is in the process of completing the identification and valuation of the intangible assets, which may result in adjustments to goodwill and the provisional amounts recorded for the purchased intangible asset, as well as recording the fair value of additional identifiable intangible assets. These adjustments may also result in changes to related amortization expense. The Company expects to finalize the purchase price allocation during fiscal 2015.

5

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 3. Marketable 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)
September 28, 2014
U.S. government and agency securities	$	49,859	$	20	$	(43	)	$	49,836
Corporate debt obligations		72,863		133		(70	)		72,926
Mortgage-backed securities		33,503		176		(109	)		33,570
Municipal bonds		20,234		106		(9	)		20,331
Other debt securities		13,187		9		(20	)		13,176
	$	189,646	$	444	$	(251	)	$	189,839
March 30, 2014
U.S. government and agency securities	$	49,237	$	16	$	(55	)	$	49,198
Corporate debt obligations		74,386		200		(72	)		74,514
Mortgage-backed securities		32,778		191		(187	)		32,782
Municipal bonds		24,989		133		(9	)		25,113
Other debt securities		5,178		3		(5	)		5,176
	$	186,568	$	543	$	(328	)	$	186,783

The amortized cost and estimated fair value of debt securities as of September 28, 2014, 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	$	16,734	$	16,756
Due after one year through three years		131,683		131,778
Due after three years through five years		19,417		19,400
Due after five years		21,812		21,905
	$	189,646	$	189,839

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 September 28, 2014 and March 30, 2014.

	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)
September 28, 2014
U.S. government and agency securities	$	26,232	$	(40	)	$	677	$	(3	)	$	26,909	$	(43	)
Corporate debt obligations		28,999		(70	)		—		—			28,999		(70	)
Mortgage-backed securities		8,552		(34	)		6,705		(75	)		15,257		(109	)
Municipal bonds		2,899		(9	)		—		—			2,899		(9	)
Other debt securities		6,594		(20	)		—		—			6,594		(20	)
	$	73,276	$	(173	)	$	7,382	$	(78	)	$	80,658	$	(251	)
March 30, 2014
U.S. government and agency securities	$	26,879	$	(55	)	$	—	$	—		$	26,879	$	(55	)
Corporate debt obligations		19,906		(72	)		—		—			19,906		(72	)
Mortgage-backed securities		11,261		(145	)		2,838		(42	)		14,099		(187	)
Municipal bonds		3,322		(9	)		—		—			3,322		(9	)
Other debt securities		2,955		(5	)		—		—			2,955		(5	)
	$	64,323	$	(286	)	$	2,838	$	(42	)	$	67,161	$	(328	)

6

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of September 28, 2014 and March 30, 2014, the fair value of certain of the Company’s available-for-sale securities was less than their cost basis. Management reviewed various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition and near-term prospects of the issuer of the 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 time sufficient to allow for any anticipated recovery of market value. As of September 28, 2014 and March 30, 2014, the Company determined that the unrealized losses were temporary in nature and recorded them as a component of accumulated other comprehensive income.

Note 4. Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts receivable and accounts payable. The carrying value of accounts receivable and accounts payable approximates fair value.

A summary of the assets measured at fair value on a recurring basis as of September 28, 2014 and March 30, 2014 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Total
	(In thousands)
September 28, 2014
Cash and cash equivalents	$	86,930	$	—	$	86,930
Marketable securities:
U.S. government and agency securities		49,836		—		49,836
Corporate debt obligations		—		72,926		72,926
Mortgage-backed securities		—		33,570		33,570
Municipal bonds		—		20,331		20,331
Other debt securities		—		13,176		13,176
		49,836		140,003		189,839
	$	136,766	$	140,003	$	276,769
March 30, 2014
Cash and cash equivalents	$	91,258	$	—	$	91,258
Marketable securities:
U.S. government and agency securities		49,198		—		49,198
Corporate debt obligations		—		74,514		74,514
Mortgage-backed securities		—		32,782		32,782
Municipal bonds		—		25,113		25,113
Other debt securities		—		5,176		5,176
		49,198		137,585		186,783
	$	140,456	$	137,585	$	278,041

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.

7

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5. Inventories

Components of inventories are as follows:

	September 28, 2014		March 30, 2014
	(In thousands)
Raw materials	$	2,932	$	2,041
Finished goods		27,210		15,995
	$	30,142	$	18,036

Note 6. Stock-Based Compensation

During the six months ended September 28, 2014, the Company granted 2.0 million restricted stock units with a weighted average grant date fair value of $10.16 per share.

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Cost of revenues	$	258	$	239	$	613	$	823
Engineering and development		2,309		2,257		5,280		6,608
Sales and marketing		1,073		1,230		2,083		3,023
General and administrative		1,095		1,092		2,299		2,535
	$	4,735	$	4,818	$	10,275	$	12,989

Note 7. Special Charges

A summary of the special charges recorded during the three and six months ended September 28, 2014 and September 29, 2013, respectively, is as follows:

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Exit costs	$	2,259	$	4,349	$	3,292	$	13,953
Asset impairments		—		—		1,011		2,429
Other charges		—		—		500		—
	$	2,259	$	4,349	$	4,803	$	16,382

March 2014 Initiative

In March 2014, the Company commenced a restructuring plan (March 2014 Initiative) primarily designed to consolidate its Ethernet product roadmap following the acquisition of the Ethernet controller-related assets from Broadcom. This restructuring plan primarily includes a workforce reduction and the consolidation and elimination of certain engineering activities. The Company substantially completed these restructuring activities during the second quarter of fiscal 2015.

During the three and six months ended September 28, 2014, the Company recorded special charges of $2.0 million and $3.7 million, respectively, in connection with the March 2014 Initiative. Special charges for the three months ended September 28, 2014 consisted entirely of exit costs. Special charges for the six months ended September 28, 2014 consisted of $2.7 million of exit costs and $1.0 million of asset impairment charges related to abandoned property and equipment. The exit costs consist of severance and related costs associated with involuntarily terminated employees.

The aggregate amount of the exit costs recorded in connection with the March 2014 Initiative is $11.8 million and consisted of $7.5 million of workforce reduction costs and $4.3 million of contract cancellation and other costs.

8

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Activity and liability balances for exit costs related to the March 2014 Initiative are as follows:

	Workforce Reduction			Contract Cancellation and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,177		$	4,311		$	7,488
Charged to costs and expenses		2,724			(73	)		2,651
Payments		(5,567	)		(4,238	)		(9,805	)
Balance as of September 28, 2014	$	334		$	—		$	334

June 2013 Initiative

In June 2013, the Company commenced a restructuring plan (June 2013 Initiative) designed to enhance product focus and streamline business operations. The restructuring plan includes a workforce reduction and the consolidation and elimination of certain engineering activities. In connection with this plan, the Company ceased development of future application-specific integrated circuits (ASICs) for switch products.

During the three and six months ended September 28, 2014, the Company recorded special charges of $0.3 million and $0.6 million in connection with the June 2013 Initiative, consisting of exit costs associated with severance and related costs for involuntarily terminated employees. Certain employees that were notified of their termination are required to provide future services for varying periods. Severance costs related to these services are recognized ratably over the estimated requisite service period. The Company expects to incur approximately $1 million of additional severance costs in connection with these employees over the requisite service period.

The aggregate amount of the exit costs recorded in connection with the June 2013 Initiative is $18.0 million and consisted of $14.5 million of workforce reduction costs and $3.5 million of facilities and other costs.

Activity and liability balances for exit costs related to the June 2013 Initiative are as follows:

	Workforce Reduction			Facilities and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,528		$	4,621		$	8,149
Charged to costs and expenses		641			—			641
Payments		(1,404	)		(611	)		(2,015	)
Balance as of September 28, 2014	$	2,765		$	4,010		$	6,775

The total unpaid exit costs related to both initiatives are expected to be paid over the terms of the related agreements through fiscal 2018. As of September 28, 2014, unpaid exit costs totaling $2.1 million and $5.0 million are included in other current liabilities and other liabilities, respectively.

Note 8. Income Taxes

The Company’s provision for income taxes was $2.8 million and $2.3 million for the three and six months ended September 28, 2014, respectively, and $2.2 million and $3.0 million for the three and six months ended September 29, 2013, respectively. Income tax expense for the six months ended September 28, 2014 benefited from adjustments to previously recognized uncertain tax position liabilities as a result of additional information received during fiscal 2015 related to these tax positions and certain other discrete items. Income tax expense for the six months ended September 28, 2014 and September 29, 2013 was also impacted by the effect of a discrete tax related item associated with the difference between stock-based compensation expense and the deduction related to stock-based awards on income tax returns. The Company’s provision for income taxes is based on the estimated income for the year, the composition of the estimated income in different tax jurisdictions, and the tax effect, if any, in the applicable quarterly periods of newly enacted tax legislation, resolution of tax audits, changes in uncertain tax positions, and other discrete tax-related items. The allocation of taxable income to domestic and foreign tax jurisdictions impacts the effective tax rate, as the Company’s income tax rate in foreign jurisdictions is generally lower than its income tax rate in the United States.

9

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s federal consolidated income tax returns for fiscal years 2010, 2011 and 2012 are currently under examination by the Internal Revenue Service. Management does not believe that the results of this examination will have a material impact on the Company’s financial condition or results of operations.

Note 9. Net Income Per Share

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands, except per share amounts)
Net income	$	11,010	$	10,977	$	17,010	$	7,927
Shares:
Weighted-average shares outstanding — basic		87,914		87,430		87,654		88,288
Dilutive potential common shares, using treasury stock method		188		239		523		432
Weighted-average shares outstanding — diluted		88,102		87,669		88,177		88,720
Net income per share:
Basic	$	0.13	$	0.13	$	0.19	$	0.09
Diluted	$	0.12	$	0.13	$	0.19	$	0.09

Stock-based awards, including stock options and restricted stock units, representing 11.0 million and 11.5 million shares of common stock have been excluded from the diluted per share calculations for the three and six months ended September 28, 2014, respectively, and 15.0 million and 16.1 million shares of common stock have been excluded from the diluted per share calculations for the three and six months ended September 29, 2013, respectively. These stock-based awards have been excluded from the diluted per share calculations because their effect would have been antidilutive.

Note 10. Subsequent Event

In October 2014, the Company’s board of directors authorized a program to repurchase up to $100 million of its outstanding common stock over a period of up to 18 months.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

We design and supply high performance server and storage networking connectivity 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 (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 (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 (iSCSI) is an alternative to FCoE and provides storage over Ethernet capabilities. Our converged network products can operate individually as 10Gb Ethernet products, FCoE products, iSCSI products, or in combination as multi-protocol products.

We classify our products into two categories – Advanced Connectivity Platforms and Legacy Connectivity Products. Advanced Connectivity Platforms are comprised primarily of adapters and application-specific integrated circuits (ASICs) for server and storage connectivity applications. Legacy Connectivity Products are comprised primarily of Fibre Channel switch products.

Our products are sold worldwide, primarily to original equipment manufacturers (OEMs) and distributors. Our customers rely on our various server and storage connectivity 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 enterprises with critical 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, Huawei Technologies Co. Ltd., Inspur Group Co., Ltd., International Business Machines Corporation, Lenovo Group Ltd., NetApp, Inc. and Oracle Corporation.

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Business Acquisition

In March 2014, we acquired certain 10/40/100Gb Ethernet controller-related assets from Broadcom Corporation (Broadcom) primarily relating to the NetXtreme^® II Ethernet controller family and licensed certain related intellectual property under non-exclusive licenses for total cash consideration of $147.8 million and the assumption of certain liabilities. This business acquisition expands our product portfolio and is expected to accelerate our time to market for next generation products in the server Ethernet connectivity market.

Restructuring Plans

In March 2014, we commenced a restructuring plan primarily designed to consolidate our Ethernet product roadmap following the acquisition of the Ethernet controller-related assets from Broadcom. This restructuring plan primarily includes a workforce reduction and the consolidation and elimination of certain engineering activities. During the six months ended September 28, 2014, we recorded special charges of $3.7 million in connection with this plan, consisting of $2.7 million of exit costs and $1.0 million of asset impairment charges related to abandoned property and equipment. We substantially completed these restructuring activities during the second quarter of fiscal 2015.

In June 2013, we commenced a restructuring plan designed to enhance product focus and streamline business operations. This restructuring plan includes a workforce reduction and the consolidation and elimination of certain engineering activities. In connection with this plan, we ceased development of future ASICs for switch products. During the six months ended September 28, 2014, we recorded special charges of $0.6 million related to this restructuring plan, consisting of exit costs. We expect to incur approximately $1 million of additional severance costs in connection with this plan primarily related to employees required to provide future services. The additional severance costs will be recognized over the requisite service period.

Second Quarter Financial Highlights

A summary of our financial performance during the second quarter of fiscal 2015 is as follows:

• Net revenues of $127.5 million for the second quarter of fiscal 2015 increased 7% from $119.4 million in the first quarter of fiscal 2015. Revenue from Advanced Connectivity Platforms was $114.9 million for the second quarter of fiscal 2015 and increased 10% from $104.7 million in the first quarter of fiscal 2015. Revenue from Legacy Connectivity Products was $12.6 million in the second quarter of fiscal 2015 compared to $14.7 million in first quarter of fiscal 2015.

• Gross profit as a percentage of net revenues was 59.1% in the second quarter of fiscal 2015 compared to 59.2% in the first quarter of fiscal 2015.

• Operating income increased to $13.5 million in the second quarter of fiscal 2015 from $5.4 million in the first quarter of fiscal 2015. We recorded special charges of $2.3 million during the second quarter of fiscal 2015 and $2.5 million during the first quarter of fiscal 2015.

• Net income of $11.0 million, or $0.12 per diluted share, in the second quarter of fiscal 2015 increased from $6.0 million, or $0.07 per diluted share, in the first quarter of fiscal 2015.

• Cash, cash equivalents and marketable securities increased to $276.8 million as of September 28, 2014 from $250.4 million as of June 29, 2014.

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Results of Operations

Net Revenues

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

	Three Months Ended						Six Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
	(Dollars in millions)
Net revenues:
Advanced Connectivity Platforms	$	114.9		$	94.0		$	219.6		$	187.2
Legacy Connectivity Products		12.6			18.6			27.4			38.5
	$	127.5		$	112.6		$	247.0		$	225.7
Percentage of net revenues:
Advanced Connectivity Platforms		90	%		83	%		89	%		83	%
Legacy Connectivity Products		10			17			11			17
		100	%		100	%		100	%		100	%

Historically, the global marketplace for server and storage connectivity 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 for existing products over time.

The market for our Fibre Channel products is mature and has declined during recent periods. This market decline may be the result of a shift in the information technology (IT) data center deployment model, as more enterprise data centers are using private or public clouds to provide a portion of their requirements. This shift has adversely impacted the enterprise server market. To the extent the Fibre Channel market continues to decline, our quarterly operating results would be negatively impacted. In addition, the United States and other countries around the world have experienced, and are continuing to experience, economic weakness and uncertainty. Political instability in certain regions of the world is significantly contributing to this economic uncertainty. Economic uncertainty is adversely affecting, and in the future may continue to adversely affect, IT spending rates, which may have a negative impact on our revenue and operating results. As a result of these factors, it is extremely difficult for us to forecast future sales levels and historical information may not be indicative of future trends.

Net revenues of $127.5 million for the three months ended September 28, 2014 increased 13% from $112.6 million for the three months ended September 29, 2013. The increase in net revenues was the result of a $20.9 million, or 22%, increase in revenue from Advanced Connectivity Platforms, partially offset by a $6.0 million decrease in revenue from Legacy Connectivity Products. The increase in revenue from Advanced Connectivity Platforms was primarily driven by an increase in revenue from Ethernet products associated with an acquisition in the fourth quarter of fiscal 2014. We expect our revenue from Advanced Connectivity Platforms to grow during fiscal 2015, primarily driven by increased shipments of our Ethernet products. The decrease in revenue from Legacy Connectivity Products was primarily due to a decrease in the quantity of switches sold. We expect net revenue from our Legacy Connectivity Products to continue to decline over time. As part of the restructuring plan we implemented in June 2013, we ceased development of future ASICs for switch products; however, we will continue to sell and support products based on the current generation switch ASICs.

Net revenues of $247.0 million for the six months ended September 28, 2014 increased 9% from $225.7 million for the six months ended September 29, 2013. The increase in net revenues was the result of a $32.4 million, or 17%, increase in revenue from Advanced Connectivity Platforms, partially offset by an $11.1 million decrease in revenue from Legacy Connectivity Products. The increase in revenue from Advanced Connectivity Platforms was primarily due to an increase in revenue from Ethernet products. The decrease in revenue from Legacy Connectivity Products was primarily due to a decrease in the quantity of switches 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 84% of net revenues during each of the six months ended September 28, 2014 and September 29, 2013.

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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:

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In millions)
United States	$	47.1	$	47.2	$	94.4	$	96.3
Asia-Pacific and Japan		55.5		41.0		105.8		79.7
Europe, Middle East and Africa		20.3		20.1		38.2		40.7
Rest of world		4.6		4.3		8.6		9.0
	$	127.5	$	112.6	$	247.0	$	225.7

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. The United States and China are the only countries that represented 10% or more of net revenues for the periods presented. Net revenues from customers in China were $22.2 million and $41.3 million for the three and six months ended September 28, 2014, respectively, and $13.5 million and $27.4 million for the three and six months ended September 29, 2013, 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 and other assets. A summary of our gross profit and related percentage of net revenues is as follows:

	Three Months Ended						Six Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
	(Dollars in millions)
Gross profit	$	75.4		$	76.3		$	146.1		$	152.8
Percentage of net revenues		59.1	%		67.8	%		59.2	%		67.7	%

Gross profit for the three months ended September 28, 2014 decreased $0.9 million, or 1%, from gross profit for the three months ended September 29, 2013. Gross profit was positively impacted by the 13% increase in net revenues. The gross profit percentage for the three months ended September 28, 2014 decreased to 59.1% from 67.8% for the corresponding quarter in the prior year. The decrease in gross profit and gross profit percentage was primarily due to an unfavorable product mix, as lower margin Ethernet products increased as a percentage of total revenue and also incremental acquisition-related costs of $3.9 million for amortization of purchased intangible assets.

Gross profit for the six months ended September 28, 2014 decreased $6.7 million, or 4%, from gross profit for the six months ended September 29, 2013. Gross profit was positively impacted by the 9% increase in net revenues. The gross profit percentage for the six months ended September 28, 2014 decreased to 59.2% from 67.7% for the corresponding period in the prior year. The decrease in gross profit and gross profit percentage was primarily due to an unfavorable product mix, as lower margin Ethernet products increased as a percentage of total revenue and also incremental acquisition-related costs of $8.1 million for amortization of purchased intangible assets and $1.0 million for acquired inventory valuation step-up amortization.

Our ability to maintain our current gross profit percentage may be significantly affected by factors such as the mix of products shipped, manufacturing volumes over which fixed costs are absorbed, sales discounts and customer incentives, component costs, the transition to new products, competitive price pressures, the timeliness of volume shipments of new products, our ability to achieve manufacturing cost reductions, and amortization and impairments of purchased intangible assets and other assets. We anticipate that it will continue to be difficult to reduce manufacturing costs. In addition, our anticipated future growth in revenue is expected to be driven primarily by increased shipments of Ethernet products that have a lower gross profit percentage than our historical corporate average. As a result of these and other factors, our gross profit percentage may vary over time and could decline in future periods.

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Operating Expenses

Our operating expenses are summarized in the following table:

	Three Months Ended						Six Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
	(Dollars in millions)
Operating expenses:
Engineering and development	$	35.5		$	34.8		$	73.3		$	75.2
Sales and marketing		15.4			16.4			31.5			35.8
General and administrative		8.7			7.6			17.6			15.3
Special charges		2.3			4.3			4.8			16.4
	$	61.9		$	63.1		$	127.2		$	142.7
Percentage of net revenues:
Engineering and development		27.8	%		30.9	%		29.7	%		33.3	%
Sales and marketing		12.1			14.6			12.8			15.9
General and administrative		6.8			6.7			7.1			6.8
Special charges		1.8			3.8			1.9			7.2
		48.5	%		56.0	%		51.5	%		63.2	%

Engineering and Development. Engineering and development expenses consist primarily of compensation and related employee benefit costs, outside service and material costs, occupancy and equipment costs and related computer support costs. During the three months ended September 28, 2014, engineering and development expenses increased to $35.5 million from $34.8 million for the three months ended September 29, 2013, primarily due to an increase in equipment depreciation and maintenance costs.

During the six months ended September 28, 2014, engineering and development expenses decreased to $73.3 million from $75.2 million for the six months ended September 29, 2013. The decrease was primarily due to a $2.3 million decrease in cash compensation and related employee benefit costs and a $1.3 million decrease in stock-based compensation, both principally due to cost savings achieved as a result of our restructuring plans, partially offset by a $1.1 million increase in equipment depreciation and maintenance costs.

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

Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related employee benefit costs, sales commissions, promotional activities and travel for sales and marketing personnel. During the three months ended September 28, 2014, sales and marketing expenses decreased to $15.4 million from $16.4 million for the three months ended September 29, 2013, principally due to a decrease in cash compensation and related employee benefit costs.

During the six months ended September 28, 2014, sales and marketing expenses decreased to $31.5 million from $35.8 million for the six months ended September 29, 2013. The decrease was primarily due to a $1.8 million decrease in cash compensation and related employee benefit costs and a $0.9 million decrease in stock-based compensation, both principally due to a reduction in headcount resulting from our restructuring plans. The decrease in sales and marketing expenses also included a $1.3 million decrease in promotional expenses.

General and Administrative. General and administrative expenses consist primarily of compensation and related employee benefit costs for executive, finance, accounting, human resources, legal and information technology personnel. Non-compensation components of general and administrative expenses include accounting, legal and other professional fees, facilities expenses and other corporate expenses. General and administrative expenses increased to $8.7 million for the three months ended September 28, 2014 from $7.6 million for the three months ended September 29, 2013, primarily due to an increase in consulting and outside services.

General and administrative expenses increased to $17.6 million for the six months ended September 28, 2014 from $15.3 million for the six months ended September 29, 2013, primarily due to an increase in consulting and outside services.

Special Charges. During the three and six months ended September 28, 2014, we recorded special charges of $2.3 million and $4.8 million, respectively. The special charges for the three months ended September 28, 2014 consisted entirely of exit costs. The special charges for the six months ended September 28, 2014 consisted of $3.3 million of exit costs, $1.0 million of asset impairment charges related to abandoned property and equipment and $0.5 million of other charges.

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During the three and six months ended September 29, 2013, we recorded special charges of $4.3 million and $16.4 million, respectively. The special charges for the three months ended September 29, 2013 consisted entirely of exit costs. The special charges for the six months ended September 29, 2013 consisted of $14.0 million of exit costs and $2.4 million of asset impairment charges primarily related to abandoned property and equipment.

The exit costs for all periods include severance and related costs associated with involuntarily terminated employees. Certain employees that were notified of their termination are required to provide services for varying periods in excess of statutory notice periods. Severance costs related to these services are recognized ratably over the estimated requisite service period. Exit costs for the six months ended September 29, 2013 also included the estimated costs associated with the portion of a facility under a non-cancelable lease that we ceased using. We expect to incur approximately $1 million of additional exit costs associated with the restructuring plan initiated in June 2013, principally related to severance costs for terminated employees that are required to provide services beyond the statutory notice period.

The unpaid exit costs of $7.1 million as of September 28, 2014 are expected to be paid over the terms of the related agreements through fiscal 2018, including $2.1 million during the next twelve months.

Income Taxes

Our income tax expense was $2.3 million and $3.0 million for the six months ended September 28, 2014 and September 29, 2013, respectively.

Our effective tax rate was 12% and 27% for the six months ended September 28, 2014 and September 29, 2013, respectively. The decrease in our effective tax rate was primarily due to adjustments to previously recognized uncertain tax position liabilities recorded during the six months ended September 28, 2014.

Our federal consolidated income tax returns for fiscal years 2010, 2011 and 2012 are currently under examination by the Internal Revenue Service. We do not believe that the results of this examination will have a material impact on our financial condition or results of operations.

Considering 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. Additionally, our effective tax rate may be impacted by other items, including the tax effects of acquisitions and dispositions, changes to tax laws or regulations, examinations by tax authorities, stock-based compensation, uncertain tax positions and changes in our ability to realize deferred tax assets.

Liquidity and Capital Resources

Our combined balances of cash, cash equivalents and marketable securities decreased to $276.8 million as of September 28, 2014 from $278.0 million as of March 30, 2014. As of September 28, 2014 and March 30, 2014, our international subsidiaries held $218.2 million and $232.8 million, respectively, of our total cash, cash equivalents and marketable securities. These holdings by our international subsidiaries 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 invest 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.

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Revolving Credit Facility

We have a credit agreement that provides us with a $125 million unsecured revolving credit facility that matures in March 2018. Borrowings under the credit agreement may be used for general corporate purposes, including permitted share repurchases and acquisitions. Under the credit agreement, we may increase the revolving commitments or obtain incremental term loans in an aggregate amount up to an additional $100 million, subject to certain conditions. There were no borrowings outstanding under the credit agreement as of September 28, 2014.

Operating, Investing and Financing Activities

Cash provided by operating activities was $11.8 million for the six months ended September 28, 2014 compared to cash provided by operating activities of $40.7 million for the six months ended September 29, 2013. Operating cash flow for the six months ended September 28, 2014 consisted of our net income of $17.0 million and net non-cash expenses of $40.0 million, partially offset by net cash used as a result of changes in operating assets and liabilities of $45.2 million. The changes in operating assets and liabilities included a $20.3 million increase in accounts receivable, a $12.1 million increase in inventories and a $7.9 million decrease in other liabilities. The increase in accounts receivable was primarily due to customer mix and an increase in revenue, as well as the timing of customer shipments and cash collections during the period. The increase in inventories was primarily due to product purchases in support of future customer demand and advanced purchases of ASICs due to long lead times. The decrease in other liabilities was primarily due to the payment of severance and related costs associated with our restructuring plans.

We expect our business will continue to require additional investments in certain components of working capital. The product fulfillment model associated with our fiscal 2014 acquisitions is expected to require additional investments in inventory during fiscal 2015.

Operating cash flow for the six months ended September 29, 2013 consisted of our net income of $7.9 million and net non-cash expenses of $36.5 million, partially offset by net cash used as a result of changes in operating assets and liabilities of $3.7 million. The changes in operating assets and liabilities included a $7.1 million decrease in accrued compensation, partially offset by a $3.2 million increase in other liabilities. The decrease in accrued compensation was primarily due to the timing of payment obligations. The increase in other liabilities was primarily due to accrued exit costs associated with our restructuring plan.

Cash used in investing activities was $16.0 million for the six months ended September 28, 2014 and consisted of $12.1 million of purchases of property and equipment and $3.9 million of net purchases of available-for-sale securities. During the six months ended September 29, 2013, cash used in investing activities was $5.4 million and consisted of $15.4 million of purchases of property and equipment, partially offset by $10.0 million of net sales and maturities of available-for-sale securities.

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

Cash used in financing activities was $0.1 million for the six months ended September 28, 2014. During the six months ended September 29, 2013, cash used in financing activities was $44.3 million and consisted primarily of our purchase of common stock under our stock repurchase program.

In October 2014, our board of directors authorized a program to repurchase up to $100 million of our outstanding common stock over a period of up to 18 months. Stock may be purchased from time to time, in the open market or through private transactions, subject to market conditions. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements and other market and economic conditions.

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Contractual Obligations and Commitments

We have certain contractual obligations and commitments to make future payments in the form of non-cancelable purchase orders to our suppliers and commitments under operating lease arrangements. A summary of our contractual obligations as of September 28, 2014, and their impact on our cash flows in future fiscal years, is as follows:

	2015 (Remaining six months)		2016		2017		2018		2019		Total
	(In millions)
Operating leases	$	4.5	$	7.3	$	4.1	$	1.9	$	0.2	$	18.0
Non-cancelable purchase obligations		54.5		1.2		—		—		—		55.7
Total	$	59.0	$	8.5	$	4.1	$	1.9	$	0.2	$	73.7

Our liability for unrecognized tax benefits, including related accrued interest and penalties, was $12.6 million as of September 28, 2014. We are not able to provide a reasonable estimate of the timing of future tax payments related to these obligations.

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, in making judgments about the carrying values of assets and liabilities.

For a description of the accounting policies that we believe to be our most critical accounting policies and estimates, see Critical Accounting Policies and Estimates included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended March 30, 2014. There have been no material changes in any of our critical accounting policies and estimates during the six months ended September 28, 2014. These accounting policies are significantly affected 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.

Recently Issued Accounting Standards Not Yet Effective

In May 2014, the Financial Accounting Standards Board issued an accounting standard update which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance when it becomes effective. The new standard is effective for us in the first quarter of fiscal 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the effect this new guidance will have on our consolidated financial statements and related disclosures, and have not yet selected a transition method.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any off-balance sheet arrangements other than operating leases.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of September 28, 2014, 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 and mortgage-backed securities, 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 September 28, 2014 consists of $189.8 million of securities that are classified as available-for-sale. As of September 28, 2014, 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.

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We do not use derivative financial instruments.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 28, 2014. There was no change in our internal control over financial reporting during our quarter ended September 28, 2014 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

OTHER INFORMATION

Item 1. 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 1A. Risk Factors

We have updated the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the year ended March 30, 2014, as set forth below. We do not believe any of the updates constitute material changes from the risk factors previously discussed in our Annual Report on Form 10-K for the year ended March 30, 2014.

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

We have experienced, are currently experiencing, and expect to experience in future periods, fluctuations in sales and operating results from quarter to quarter. For example, the market for our Fibre Channel products is mature and has declined during recent periods. This market decline may be the result of a shift in the information technology (IT) data center deployment model, as more enterprise data centers are using private or public clouds to provide a portion of their requirements. This shift has adversely impacted the enterprise server market. To the extent the Fibre Channel market continues to decline, our quarterly operating results would be negatively impacted.

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. Accordingly, it is extremely difficult for us to forecast future sales levels and historical information may not be indicative of future trends. In addition, there can be no assurance that we will maintain our current gross margins or profitability in the future.

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 our competitors, our customers or our suppliers;

• 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;

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• 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 (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 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 primarily due to product mix.

Our gross margin is expected to vary over time primarily due to product mix, including the impact of our acquisition of Ethernet controller-related assets in the fourth quarter of fiscal 2014. We expect that our Ethernet products will represent a higher percentage of our future revenues and these products have a lower gross margin percentage than our historical corporate average. In addition, our gross margins may be adversely affected by numerous other factors, including:

• other changes in product mix;

• transitions to products based on emerging technologies, 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, technologies or product lines.

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

Our operating results have been, are being, and may in the future be, adversely affected by unfavorable economic conditions.

Certain countries around the world have experienced, and are continuing to experience, economic weakness and uncertainty. Political instability in certain regions of the world is significantly contributing to this economic uncertainty. Economic uncertainty is adversely affecting, and in the future may continue to adversely affect, IT spending rates. For example, certain of our large OEM customers are reporting significant weakness in particular markets and geographies. Reductions in IT spending rates have resulted in reduced sales volumes, and could result in lower prices for our products, longer sales cycles, increased inventory provisions and increased production costs, all of which could negatively impact our results of operations.

As a result of worldwide economic weakness and uncertainty, it is extremely difficult for us and our customers to forecast future revenue levels based on historical information and trends. To the extent that we do not achieve our anticipated level of revenue, our operating results could be adversely affected.

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:

• 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 or downgrades of our stock by public market analysts;

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

• rumors or dissemination of false information; and

• general economic and geopolitical conditions.

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

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• 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 technologies, evolving industry standards and continuing improvements in products and services. Examples of these changing technologies include system-on-chip products and both software-defined-networking and software-defined-storage products. 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. Some new markets may require engagement with customers with whom we have limited or no prior experience. Our competitors may be developing alternative technologies, or entering into exclusive strategic alliances with our major customers, either of which may adversely affect the market acceptance of our products, our ability to enter new markets, or our ability to secure customer design wins. 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 in 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 (FCoE) or 10Gb Ethernet technologies. FCoE is a 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 many 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, certain products based on Fibre Channel technology. 10Gb Ethernet is a technology for use in enterprise data centers. The market for 10Gb Ethernet products 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 84% of net revenues for each of the six months ended September 28, 2014 and September 29, 2013. Total revenue from our three largest customers, Hewlett-Packard Company, International Business Machines Corporation (IBM) and Dell, Inc., collectively accounted for more than 50% of net revenues during each of the six months ended September 28, 2014 and September 29, 2013. On October 1, 2014, IBM and Lenovo Group Ltd. (Lenovo) completed the initial closing for Lenovo’s acquisition of IBM’s x86 server business. While we expect our sales related to IBM’s x86 server business to continue with Lenovo after completion of this transaction, to the extent unexpected delays or transition issues occur in connection with the sale of this business, we could experience an adverse effect on our business or results of operations.

A significant portion of the products we sell are incorporated into servers manufactured by our major customers. Certain of our large OEM customers are reporting weakness in this market. If server sales by our major customers continue to be adversely affected by the IT spending environment or server market factors, demand for our products could decrease further, which could have a material adverse effect on our business, financial condition or results of operations.

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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 possibility that one of our large customers could acquire one of our current competitors. As a result of such transactions, demand for our products could decrease, 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 connectivity products are highly competitive and are characterized by short product life cycles, price erosion, rapidly changing technology, frequent product performance improvements and evolving industry standards. Due to the diversity of products required in storage, local area and converged networking, we compete with many companies. In the traditional enterprise storage Fibre Channel adapter and application-specific integrated circuit (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 (iSCSI) we compete primarily with Emulex Corporation, Mellanox Technologies, Ltd., Chelsio Communications, Inc. and Intel Corporation. We may also compete with some of our server and storage systems customers, some of which have the capability to develop products comparable to those we offer.

We need to continue to develop products appropriate to our markets to remain competitive as our competitors continue to introduce products with improved features. While we continue to devote significant resources to engineering and development, these efforts may not be successful or competitive products may not be developed and introduced in a timely manner. In addition, while relatively few competitors offer a full range of storage, local area and converged networking connectivity 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.

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 businesses, technologies or product lines. For example, we completed two acquisitions in fiscal 2014, including the acquisition of 10/40/100Gb Ethernet controller-related assets from Broadcom Corporation. Mergers and acquisitions involve numerous risks, including:

• the failure of markets for the products of acquired businesses, technologies or product lines to develop as expected;

• uncertainties in identifying and pursuing acquisition targets;

• the challenges in achieving strategic objectives, cost savings and other benefits expected from acquisitions;

• the risk that the financial returns on acquisitions will not support the expenditures incurred to acquire such businesses or the capital expenditures needed to develop such businesses;

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• difficulties in assimilating the acquired businesses, technologies or product lines;

• the failure to successfully manage additional business locations, including the additional infrastructure and resources necessary to support and integrate such locations;

• the existence of unknown product defects related to acquired businesses, technologies or product lines 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 businesses, technologies or product lines;

• risks related to the effect that internal control processes of acquired businesses 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 customers of acquired businesses;

• the inability to qualify the acquired products with OEM partners on a timely basis, or at all;

• the potential loss of key employees related to acquired businesses, technologies or product lines; 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 condition 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 condition and results of operations.

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. Prasad Rampalli joined the Company as President and Chief Executive Officer in February 2014 and during our leadership transition it is especially important that we retain key personnel. If we lose the services of 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, we have periodically 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 equity awards 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, the guidelines of proxy advisory firms relating to stockholder

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approval of shares available under equity compensation plans and share usage could make it more difficult for us to obtain such approval and therefore 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.

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 problems. 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. ASICs are purchased from single sources. For example, in connection with our acquisition of 10/40/100Gb Ethernet controller-related assets, we entered into a development and supply agreement which requires us to purchase the ASICs used in the related products exclusively from Broadcom. 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 or significantly change 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, labor shortages or labor strikes, 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 or on commercially acceptable terms.

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

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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 and longer lead times associated with smaller product geometries and more complex production operations. 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-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 connectivity 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 or near the facilities of their contract manufacturers, 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.

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 our expected effective tax rate.

Additionally, our effective tax rate may be impacted by the tax effects of acquisitions, dispositions, changes to tax laws or regulations, examinations by tax authorities, stock-based compensation, uncertain tax positions, and changes in our ability to realize deferred tax assets. Significant judgment and estimates are required in determining the impact on our effective tax rate related to these items, including whether it is more likely than not that some or all of our deferred tax assets will be realized. Such estimates are subject to uncertainty due to various factors, including the economic environment, industry and market conditions, and the length of time of the projections included in the analyses. If our actual results are less favorable than current estimates, or we revise our

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estimates downward in future analyses, a valuation allowance may be required related to our deferred tax assets with a corresponding adjustment to earnings in the period in which such determination is made, which could have a material effect on our results of operations. In addition, the Organisation for Economic Co-operation and Development (OECD), an international association of 34 countries including the United States, is contemplating changes to numerous long-standing tax principles. These contemplated changes, if finalized and adopted by countries, will increase tax uncertainty and may adversely affect our provision for income taxes.

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. For example, our federal consolidated income tax returns for fiscal years 2010, 2011 and 2012 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 62% and 57% of our net revenues for the six months ended September 28, 2014 and September 29, 2013, respectively. We expect that international revenues will continue to account for a significant percentage of our net revenues for the foreseeable future. In addition, we maintain operations in foreign countries and a significant portion of our inventory purchases are from suppliers that are located outside the United States. As a result, we are subject to several risks, which include:

• a greater difficulty of administering and managing our business globally;

• compliance with multiple, and potentially conflicting, regulatory requirements, such as import or export requirements, tariffs and other barriers;

• less effective intellectual property protections outside of the United States;

• currency fluctuations;

• overlapping or differing tax structures;

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

• general trade restrictions.

As of September 28, 2014, our international subsidiaries held $218.2 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 earthquakes or other natural disasters. Any personal injury at, or damages 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.

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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.

Our distributors may not effectively sell our products and their reseller customers may purchase products from our competitors, which could negatively affect our results of operations.

Our distributors, which currently account for less than 15% 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 selling products from other suppliers, thus reducing their efforts 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.

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

As of September 28, 2014, we held short-term marketable securities totaling $189.8 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 and adversely affect us.

Our business, results of operations or financial condition could be materially and adversely affected if new laws, regulations or standards relating to us or our products are implemented or existing ones are changed. In addition, our compliance with existing regulations may have a material adverse impact on us. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was enacted in 2010. 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. The U.S. Securities and Exchange Commission has also finalized new disclosure requirements relating to the sourcing of so-called conflict minerals from the Democratic Republic of Congo and certain other adjoining countries. Our disclosures have been and will be predicated upon the timely receipt of accurate information from suppliers, who may be unwilling or unable to provide us with the relevant information. As a result, these new requirements 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,

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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.

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, 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 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 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.

Our ability to borrow and maintain outstanding borrowings under our credit agreement is subject to certain covenants.

We have a credit agreement that provides us with a $125 million unsecured revolving credit facility that matures in March 2018. Borrowings under the credit agreement may be used for general corporate purposes, including permitted share repurchases and acquisitions. Under the credit agreement, we may increase the revolving commitments or obtain incremental term loans in an aggregate amount up to an additional $100 million, subject to certain conditions. Our ability to borrow under the credit agreement is subject to continued compliance with certain financial and non-financial covenants. In addition, a breach of any of the covenants or other provisions in the credit agreement could result in an event of default, which if not cured or waived, could result in outstanding borrowings becoming immediately due and payable. We may be unable to maintain compliance with these covenants and, if we fail to do so, we may be unable to obtain waivers or amend the covenants. In the event that some or all of our outstanding borrowings are accelerated and become immediately due and payable, we may not have the funds to repay, or the ability to refinance, our borrowings. There were no borrowings outstanding under the credit agreement as of September 28, 2014.

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Item 6. Exhibits

Exhibits

Exhibit No.
10.1	QLogic Corporation Deferred Compensation Plan, effective August 1, 2014.*
10.2	Form of Terms and Conditions of Stock Unit Award under the QLogic Corporation 2005 Performance Incentive Plan, as amended.*
10.3	QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective July 10, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 29, 2014).*
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.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

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SIGNATURES

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

QLOGIC CORPORATION
By:	/s/ PRASAD L. RAMPALLI
	Prasad L. Rampalli
	President and
	Chief Executive Officer

By:	/s/ JEAN HU
	Jean Hu
	Senior Vice President and
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Date: October 27, 2014

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EXHIBIT INDEX

Exhibit No.
10.1	QLogic Corporation Deferred Compensation Plan, effective August 1, 2014.*
10.2	Form of Terms and Conditions of Stock Unit Award under the QLogic Corporation 2005 Performance Incentive Plan, as amended.*
10.3	QLogic Corporation 2005 Performance Incentive Plan, Amended and Restated Effective July 10, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 29, 2014).*
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.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

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EX-10.1

EXHIBIT 10.1

QLOGIC CORPORATION

DEFERRED COMPENSATION PLAN

QLogic Corporation, a Delaware corporation (the “Company”), hereby establishes the QLogic Corporation Deferred Compensation Plan (the “Plan”), effective August 1, 2014 (the “Effective Date”), for the purpose of attracting and retaining high quality executives and promoting in them increased efficiency and an interest in the successful operation of the Company. The Plan is intended, and shall be interpreted, to comply in all respects with Code Section 409A and those provisions of ERISA applicable to an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees.”

ARTICLE I

DEFINITIONS

1.1 “Account” or “Accounts” shall mean the bookkeeping account or accounts established under this Plan pursuant to Article 4.

1.2 “Base Salary” shall mean a Participant’s annual base salary, excluding incentive and discretionary bonuses, commissions, reimbursements and other non-regular remuneration, received from the Company prior to reduction for any salary deferrals under benefit plans sponsored by the Company, including but not limited to, plans established pursuant to Code Section 125 or qualified pursuant to Code Section 401(k).

1.3 “Beneficiary” or “Beneficiaries” shall mean the person, persons or entity designated as such pursuant to Section 7.1.

1.4 “Board” shall mean the Board of Directors of the Company.

1.5 “Bonus(es)” shall mean amounts paid to the Participant by the Company in the form of discretionary or annual incentive compensation or any other bonus designated by the Committee, before reductions for contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Company. For purposes of clarity, “Bonus” excludes equity awards granted by the Company (but would include discretionary incentive compensation paid in the form of equity).

1.6 “Code” shall mean the Internal Revenue Code of 1986, as amended, as interpreted by Treasury regulations and applicable authorities promulgated thereunder.

1.7 “Committee” shall mean the person or persons appointed by the Board to administer the Plan in accordance with Article 9.

1.8 “Commissions” shall mean commissions payable to the Participant for the applicable Plan Year (as determined by the Committee in compliance with Code Section 409A) before reductions for contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Company.

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1.9 “Compensation” shall mean all amounts eligible for deferral for a particular Plan Year under Section 3.1.

1.10 “Compensation Committee” shall mean the Compensation Committee of the Board.

1.11 “Crediting Rate” shall mean the notional gains and losses credited on the Participant’s Account balance which are based on the Participant’s choice among the investment alternatives made available by the Committee pursuant to Section 3.3 of the Plan.

1.12 “Deferral Account” shall mean an Account maintained for each Participant that is credited with Participant deferrals pursuant to Section 4.1. A separate Deferral Account shall be maintained for each different time and/or form of distribution elected by the Participant.

1.13 “Disability” or “Disabled” shall mean (consistent with the requirements of Code Section 409A) that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s Employer. For purposes of this Plan, a Participant shall be deemed Disabled if determined to be totally disabled by the Social Security Administration. A Participant shall also be deemed Disabled if determined to be disabled in accordance with the applicable disability insurance program of such Participant’s Employer, provided that the definition of “disability” applied under such disability insurance program complies with the requirements of this Section.

1.14 “Distributable Amount” shall mean the vested balance in the applicable Account as determined under Article 4.

1.15 “Eligible Executive” shall mean a highly compensated or management level employee of an Employer selected by the Committee to be eligible to participate in the Plan; provided, however, that no employee shall be selected to be eligible to participate in the Plan unless (a) the individual’s participation in the Plan had been approved by the Compensation Committee or the individual is in a group of employees approved by the Compensation Committee for participation in the Plan, or (b) the individual is a Vice President or more senior officer of his or her Employer. Notwithstanding anything else contained herein to the contrary, the Committee shall limit the class of persons selected to participate in the Plan to a select group of management or highly compensated employees, as set forth in Sections 201, 301 and 401 of ERISA. In order to accomplish the foregoing, the Committee may, at any time and in its sole discretion, terminate the ability of an Eligible Executive or a Participant to defer Compensation (or to defer additional Compensation) under Article III (provided, that any such termination shall not affect any deferral election that was previously made and as to which the deadline to make such election has passed).

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1.16 “Employer(s)” shall be defined as follows:

(a) Except as otherwise provided in part (b) of this Section, the term “Employer” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

(b) For the purpose of determining whether a Participant has experienced a Separation from Service, the term “Employer” shall mean:

(1) The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred or contributed under this Plan arises; and

(2) All other entities with which the entity described above would be aggregated and treated as a single employer under Code Section 414(b) (controlled group of corporations) and Code Section 414(c) (a group of trades or businesses, whether or not incorporated, under common control), as applicable. In order to identify the group of entities described in the preceding sentence, the Committee shall use an ownership threshold of 50% as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (A) Code Section 1563 for determining a controlled group of corporations under Code Section 414(b), and (B) Treas. Reg. §1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).

(c) Notwithstanding anything else in this Plan to the contrary: (1) a Participant’s benefits with respect to this Plan shall be paid by the Participant’s Employer to which such benefits relate, and (2) a Participant shall have no right or claim to Plan benefits from any Employer other than the Employer referenced in the foregoing clause.

1.17 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, including Department of Labor and Treasury regulations and applicable authorities promulgated thereunder.

1.18 “Financial Hardship” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B))) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, but shall in all events correspond to the meaning of the term “unforeseeable emergency” under Code Section 409A.

1.19 “Fund” or “Funds” shall mean one or more of the investments selected by the Committee pursuant to Section 3.3 of the Plan.

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1.20 “Hardship Distribution” shall mean an accelerated distribution of benefits or a cancellation of deferral elections pursuant to Section 6.6 as to a Participant who has suffered a Financial Hardship.

1.21 “Interest Rate” shall mean, for each Fund, the rate of return derived from the net gain or loss on the assets of such Fund, as determined by the Committee.

1.22 “Participant” shall mean any Eligible Executive who becomes a Participant in this Plan in accordance with Article 2.

1.23 “Participant Election(s)” shall mean the forms or procedures by which a Participant makes elections with respect to (a) voluntary deferrals of his/her Compensation, (b) the Funds, which shall act as the basis for crediting of interest on Account balances, and (c) the form and timing of distributions from Accounts. Participant Elections may take the form of an electronic communication followed by appropriate confirmation according to specifications established by the Committee.

1.24 “Payment Date” shall mean the date by which a total distribution of the Distributable Amount shall be made or the date by which installment payments of the Distributable Amount shall commence.

(a) For benefits triggered by the Participant’s Separation from Service, the Payment Date shall be the first business day of the seventh month commencing after the month in which the Separation from Service occurs, and the applicable amount shall be calculated as of the last business day of the sixth month commencing after the month in which the Separation from Service occurs (provided, that if the Participant’s death occurs after the Participant’s Separation from Service and prior to such Payment Date, the Payment Date shall be the first business day of the month following the month in which the Participant’s death occurs, and the applicable amount shall be calculated as of the last business day of the month in which the Participant’s death occurs). Subsequent installments, if any, shall be calculated as of the last business day of January of each Plan Year following the Plan Year in which the initial installment occurs, and shall be made in February of such succeeding Plan Year.

(b) For benefits triggered by the death or Disability of a Participant, the Payment Date shall be the first business day of the month commencing after the month in which the event triggering the payout occurs, and the applicable amount shall be calculated as of the last business day of the month in which the event triggering the payout occurs. In the case of death, the Committee shall be provided with documentation reasonably necessary to establish the fact of the Participant’s death; and

(c) The Payment Date of a Scheduled Distribution shall be the first business day of April of the Plan Year in which the distribution is scheduled to commence, and the applicable Distributable Amount shall be calculated as of the last business day of January of such Plan Year. Subsequent installments, if any, shall be calculated as of the last business day of January of each succeeding Plan Year, and shall be made in February of such succeeding Plan Year.

4

Notwithstanding the foregoing, any distribution of benefits hereunder will be considered to be made on the applicable Payment Date if such payment is made not later than the last day on which such benefits may be distributed under Code Section 409A without violation of the provisions thereof, as reasonably determined by the Committee.

1.25 “Performance-Based Compensation” shall mean compensation the entitlement to or amount of which is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(e).

1.26 “Plan Year” shall mean the calendar year, except that the first Plan Year shall begin on the Effective Date and end on the last day of the calendar year in which the Effective Date occurs.

1.27 “Retirement” shall mean a Participant’s Separation from Service after having attained age fifty-five (55) and completed at least five (5) Years of Service.

1.28 “Scheduled Distribution” shall mean a scheduled distribution date elected by the Participant for distribution of amounts from a specified Deferral Account, including notional earnings thereon, as provided under Section 6.5.

1.29 “Separation from Service” shall mean a termination of services provided by a Participant to his or her Employer, whether voluntarily or involuntarily, other than by reason of death or Disability, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h). In determining whether a Participant has experienced a Separation from Service, the following provisions shall apply:

(a) For a Participant who provides services to an Employer as an employee, except as otherwise provided in part (c) of this Section, a Separation from Service shall occur when such Participant has experienced a termination of employment with such Employer. A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her Employer reasonably anticipate that either (i) no further services will be performed for the Employer after a certain date, or (ii) that the level of bona fide services the Participant will perform for the Employer after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed by such Participant (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Employer if the Participant has been providing services to the Employer less than 36 months).

If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and the Employer shall be treated as continuing intact, provided that the period of such leave does not exceed 6 months, or if longer, so long as

5

the Participant retains a right to reemployment with the Employer under an applicable statute or by contract. If the period of a military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such 6-month period. In applying the provisions of this paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer.

(b) For a Participant, if any, who provides services to an Employer as an independent contractor, except as otherwise provided in part (c) of this Section, a Separation from Service shall occur upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for such Employer, provided that the expiration of such contract(s) is determined by the Committee to constitute a good-faith and complete termination of the contractual relationship between the Participant and such Employer.

(c) For a Participant, if any, who provides services to an Employer as both an employee and an independent contractor, a Separation from Service generally shall not occur until the Participant has ceased providing services for such Employer as both an employee and as an independent contractor, as determined in accordance with the provisions set forth in parts (a) and (b) of this Section, respectively. Similarly, if a Participant either (i) ceases providing services for an Employer as an independent contractor and begins providing services for such Employer as an employee, or (ii) ceases providing services for an Employer as an employee and begins providing services for such Employer as an independent contractor, the Participant will not be considered to have experienced a Separation from Service until the Participant has ceased providing services for such Employer in both capacities, as determined in accordance with the applicable provisions set forth in parts (a) and (b) of this Section.

Notwithstanding the foregoing provisions in this part (c), if a Participant provides services for an Employer as both an employee and as a member of the Board, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the services provided by such Participant as a member of the Board shall not be taken into account in determining whether the Participant has experienced a Separation from Service as an employee, and the services provided by such Participant as an employee shall not be taken into account in determining whether the Participant has experienced a Separation from Service as a member of the Board.

1.30 “Termination of Service” shall mean a Participant’s Separation from Service that does not qualify as a Retirement.

1.31 “Years of Service” shall mean the cumulative consecutive years of continuous full-time employment with the Employer (including approved leaves of absence of six months or less or legally protected leaves of absence), beginning on the date the Participant first began service with the Employer, and counting each anniversary thereof. A partial year of employment shall not be treated as a Year of Service.

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ARTICLE II

PARTICIPATION

2.1 Enrollment Requirements; Commencement of Participation

(a) As a condition to participation, each Eligible Executive shall complete, execute and return to the Committee the appropriate Participant Elections, as well as such other documentation and information as the Committee reasonably requests, by the deadline(s) established by the Committee. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole discretion, are necessary.

(b) Each Eligible Executive shall commence participation in the Plan on the date that the Committee determines that the Eligible Executive has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period.

(c) If an Eligible Executive fails to meet all requirements established by the Committee within the period required, that Eligible Executive shall not be eligible to participate in the Plan during such Plan Year.

ARTICLE III

CONTRIBUTIONS & DEFERRAL ELECTIONS

3.1 Elections to Defer Compensation. Elections to defer Compensation shall take the form of a whole percentage of up to a maximum of:

(1) 80% of Base Salary,

(2) 80% of Bonuses, and

(3) 80% of Commissions

A Participant’s deferral election for each type of Compensation listed above (or, in the event separate elections are permitted for particular types of Bonuses, for each such Bonus) shall only be valid and accepted by the Committee if such election reflects a minimum deferral of 2%. Deferral amounts are calculated prior to the deduction of applicable payroll withholding requirements for employment and income taxes and employee benefit plans, and it is the responsibility of the Participant to ensure that, following any deferral of Compensation under this Plan, sufficient Compensation remains to adequately cover such payroll withholding requirements.

The Committee may, in its sole discretion, adjust the minimum and maximum deferral percentages described in this Section for one or more types of Compensation (including, without limitation, for particular types of Bonuses) and for one or more Plan Years; such revised deferral percentages shall be indicated on a Participant Election form approved by the Committee. Notwithstanding the foregoing, in no event shall the minimum and maximum deferral

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percentages be adjusted after the last date on which deferral elections for the applicable type(s) of Compensation must be submitted and become irrevocable in accordance with Section 3.2 below and the requirements of Code Section 409A.

3.2 Timing of Deferral Elections; Effect of Participant Election(s).

(a) General Timing Rule for Deferral Elections. Except as otherwise provided in this Section 3.2, in order for a Participant to make a valid election to defer Compensation, the Participant must submit Participant Election(s) on or before the deadline established by the Committee, which shall be no later than the December 31^st preceding the Plan Year in which such Compensation will be earned.

Any deferral election made in accordance with this Section 3.2(a) shall be irrevocable; provided, however, that if the Committee permits or requires Participants to make a deferral election by the deadline described above for an amount that qualifies as Performance-Based Compensation, the Committee may permit a Participant to subsequently change his or her deferral election for such compensation by submitting new Participant Election(s) in accordance with Section 3.2(d) below.

(b) Timing of Deferral Elections for New Plan Participants. An Eligible Executive who first becomes eligible to participate in the Plan on or after the beginning of a Plan Year, as determined in accordance with Treas. Reg. §1.409A-2(a)(7)(ii) and the “plan aggregation” rules provided in Treas. Reg. §1.409A-1(c)(2), may be permitted to make an election to defer the portion of Compensation for such Plan Year attributable to services to be performed after such election, provided that the Participant submits Participant Election(s) on or before the deadline established by the Committee, which in no event shall be later than thirty (30) days after the Participant first becomes eligible to participate in the Plan.

If a deferral election made in accordance with this Section 3.2(b) relates to Compensation earned based upon a specified performance period, the amount eligible for deferral shall be equal to (i) the total amount of compensation for the performance period, multiplied by (ii) a fraction, the numerator of which is the number of days remaining in the performance period after the Participant’s deferral election is submitted, and the denominator of which is the total number of days in the performance period.

Any deferral election made in accordance with this Section 3.2(b) shall become irrevocable no later than the 30^th day after the date the Participant first becomes eligible to participate in the Plan.

(c) Timing of Deferral Elections for Performance-Based Compensation. Subject to the limitations described below, the Committee may determine that an irrevocable deferral election for an amount that qualifies as Performance-Based Compensation may be made by submitting Participant Election(s) on or before the deadline established by the Committee, which in no event shall be later than six (6) months before the end of the performance period. In order for a Participant to be eligible to make a deferral election for Performance-Based

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Compensation in accordance with the deadline established pursuant to this Section 3.2(c), the Participant must have performed services continuously from the later of (i) the beginning of the performance period for such compensation, or (ii) the date upon which the performance criteria for such compensation are established, through the date upon which the Participant makes the deferral election for such compensation. In no event shall a deferral election submitted under this Section 3.2(c) be permitted to apply to any amount of Performance-Based Compensation that has become both substantially certain to be paid and readily ascertainable.

(d) Timing Rule for Deferral of Compensation Subject to Risk of Forfeiture. With respect to Compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right, the Committee may determine that an irrevocable deferral election for such compensation may be made by timely delivering Participant Election(s) to the Committee in accordance with its rules and procedures, no later than the 30^th day after the Participant obtains the legally binding right to the compensation, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse, as determined in accordance with Treas. Reg. §1.409A-2(a)(5).

Any deferral election(s) made in accordance with this Section 3.2(d) shall become irrevocable no later than the 30^th day after the Participant obtains the legally binding right to the compensation subject to such deferral election(s).

(e) Duration of Compensation Deferral Election. A Participant may increase, decrease, terminate or recommence a deferral election with respect to Compensation for any subsequent Plan Year by filing a Participant Election during the enrollment period established by the Committee prior to the beginning of such Plan Year (or at such other time contemplated under this Section 3.2), which election shall be effective on the first day of the next following Plan Year (unless otherwise specified on the Participant Election). In the absence of an affirmative election by the Participant to the contrary and provided that the Participant continues to be eligible to defer Compensation hereunder, the deferral election(s) for a Plan Year shall continue in effect for future Plan Years.

3.3 Investment Elections.

(a) Participant Designation. At the time of entering the Plan and/or of making a deferral election under the Plan, the Participant shall designate, on a Participant Election provided by the Committee, the Funds in which the Participant’s Accounts shall be deemed to be invested for purposes of determining the amount of earnings and losses to be credited to each Account. The Participant may specify that all or any percentage of his or her Accounts shall be deemed to be invested, in whole percentage increments, in one or more of the Funds selected as alternative investments under the Plan from time to time by the Committee pursuant to subsection (b) of this Section. If a Participant fails to make an election among the Funds as described in this section, the Participant’s Account balance shall automatically be allocated into the lowest-risk Fund, as determined by the Committee in its sole discretion. A Participant may

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change any designation made under this Section as permitted by the Committee by filing a revised election, on a Participant Election provided by the Committee. Notwithstanding the foregoing, the Committee, in its sole discretion, may impose limitations on the frequency with which one or more of the Funds elected in accordance with this Section may be added or deleted by such Participant; furthermore, the Committee, in its sole discretion, may impose limitations on the frequency with which the Participant may change the portion of his or her Account balance allocated to each previously or newly elected Fund.

(b) Investment Funds. The Committee may select, in its sole and absolute discretion, each of the types of commercially available investments communicated to the Participant pursuant to subsection (a) of this Section to be the Funds. The Interest Rate of each such commercially available investment shall be used to determine the amount of earnings or losses to be credited to the Participant’s Account under Article IV. The Participant’s choice among investments shall be solely for purposes of calculation of the Crediting Rate on Accounts. The Company and the Employers shall have no obligation to set aside or invest amounts as directed by the Participant and, if the Company and/or the Employer elects to invest amounts as directed by the Participant, the Participant shall have no more right to such investments than any other unsecured general creditor of such entity.

3.4 Distribution Elections.

(a) Initial Election. At the time of making a deferral election under the Plan, the Participant shall designate the time and form of distribution of deferrals made pursuant to such election (together with any earnings credited thereon) from among the alternatives specified under Article VI for the applicable distribution. A new distribution election may be made at the time of subsequent deferral elections with respect to deferrals in Plan Years beginning after the election is made, in accordance with the Participant Election forms. In the absence of an affirmative election by the Participant to the contrary and provided that the Participant continues to be eligible to defer Compensation hereunder, the distribution election(s) for a Plan Year shall continue in effect for future Plan Years.

(b) Modification of Election. A distribution election with respect to previously deferred amounts may only be changed under the terms and conditions specified in Code Section 409A and this Section. Except as permitted under Code Section 409A, no acceleration of a distribution is permitted. A subsequent election that delays payment or changes the form of payment shall be permitted if and only if all of the following requirements are met:

(1) the new election does not take effect until at least twelve (12) months after the date on which the new election is made;

(2) in the case of payments made on account of Retirement or a Termination of Service or a Scheduled Distribution, the new election delays payment for at least five (5) years from the date that payment would otherwise have been made, absent the new election; and

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(3) in the case of payments made according to a Scheduled Distribution, the new election is made not less than twelve (12) months before the date on which payment would have been made (or, in the case of installment payments, the first installment payment would have been made) absent the new election.

For purposes of application of the above change limitations, installment payments shall be treated as a single payment under Code Section 409A and only one change shall be allowed to be made by a Participant with respect to the time/form of benefits to be received by such Participant upon Retirement for an Account. Election changes made pursuant to this Section shall be made in accordance with rules established by the Committee and shall comply with all requirements of Code Section 409A and applicable authorities.

ARTICLE IV

ACCOUNTS

4.1 Deferral Accounts. The Committee shall establish and maintain up to five (5) Deferral Accounts for each Participant under the Plan; provided, however, that the Committee may, in its sole discretion and on a prospective basis, increase the number of Deferral Accounts that may be established and maintained for one or more Participants. Each Participant’s Deferral Accounts shall be further divided into separate subaccounts (“Fund Subaccounts”), each of which corresponds to a Fund designated pursuant to Section 3.3. A Participant’s Deferral Accounts shall be credited as follows:

(a) As soon as reasonably possible after amounts are withheld and deferred from a Participant’s Compensation, the Committee shall credit the Fund Subaccounts of the Participant’s Deferral Accounts with an amount equal to Compensation deferred by the Participant in accordance with the designation under Section 3.3; that is, the portion of the Participant’s deferred Compensation designated to be deemed to be invested in a Fund shall be credited to the Fund Subaccount to be invested in that Fund;

(b) Each business day, each Fund Subaccount of a Participant’s Deferral Accounts shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such Fund Subaccount as of the prior day, less any distributions valued as of the end of the prior day, by the Interest Rate for the corresponding Fund as determined by the Committee pursuant to Section 3.3(b); and

(c) In the event that a Participant elects for a given Plan Year’s deferral of Compensation one or more Scheduled Distributions, amounts attributed to the deferral of Compensation for such Plan Year shall be accounted for in a manner which allows separate accounting for the deferral of Compensation and investment gains and losses associated with amounts allocated to each such separate Scheduled Distribution.

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4.2 Trust. The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company’s creditors. Benefits paid to the Participant from any such trust or trusts shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan.

4.3 Statement of Accounts. The Committee shall provide each Participant with electronic statements at least quarterly setting forth the Participant’s Account balance as of the end of each applicable period.

ARTICLE V

VESTING

5.1 Vesting of Deferral Accounts. The Participant shall be vested at all times in amounts credited to the Participant’s Deferral Accounts.

ARTICLE VI

DISTRIBUTIONS

6.1 Retirement Distributions.

(a) Timing and Form of Retirement Distributions for Deferral Accounts. Except as otherwise provided herein, in the event of a Participant’s Retirement, the Distributable Amount credited to the Participant’s Deferral Accounts shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Retirement, unless the Participant has made an alternative benefit election on a timely basis to receive substantially equal annual installments over up to ten (10) years. In accordance with a Participant Election form approved by the Committee, a Participant may be permitted to separately elect the form of distribution upon Retirement for each Deferral Account.

6.2 Termination Distributions. Except as otherwise provided herein, in the event of a Participant’s Termination of Service, the Distributable Amount credited to the Participant’s Deferral Accounts shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Termination of Service. Otherwise, Termination Distribution will be paid as elected, but limited to a maximum of five (5) annual installments.

6.3 Disability Distributions. Except as otherwise provided herein, in the event of a Participant’s Disability prior to Separation from Service, the Distributable Amount credited to the Participant’s Deferral Accounts shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Disability.

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6.4 Death Benefits.

(a) Prior to Commencement of Benefits. In the event that the Participant dies prior to commencement of a benefit described in this Article VI, the Participant’s Beneficiary shall receive a death benefit equal to the Distributable Amount credited to the Participant’s Deferral Accounts in a lump sum on the Payment Date following the Participant’s death.

(b) After Commencement of Benefits. In the event that the Participant dies after commencement of a benefit described in this Article VI, such Participant’s benefits shall continue to be paid to the Participant’s Beneficiary at the same time and in the same form as they would have been paid to the Participant had the Participant not died.

6.5 Scheduled Distributions.

(a) Scheduled Distribution Election. Participants shall be entitled to elect to receive a Scheduled Distribution from his or her Deferral Accounts. In the case of a Participant who has elected to receive a Scheduled Distribution, such Participant shall receive the Distributable Amount, with respect to the specified deferrals, including earnings thereon, which have been elected by the Participant to be subject to such Scheduled Distribution election in accordance with Section 3.4 of the Plan. The Committee shall determine the earliest commencement date that may be elected by the Participant for each Scheduled Distribution and such date shall be indicated on the Participant Election. The Participant may elect to receive the Scheduled Distribution in a single lump sum or substantially equal annual installments over a period of up to five (5) years. A Participant may delay and change the form of a Scheduled Distribution, provided such extension complies with the requirements of Section 3.4.

(b) Relationship to Other Benefits. In the event that distribution of a Participant’s Account is triggered prior to commencement of a Scheduled Distribution, the amounts subject to such Scheduled Distribution shall not be distributed under this Section 6.5, but rather shall be distributed in accordance with the other applicable Section of this Article VI. In the event of a Participant’s Separation from Service, Disability or death after a Scheduled Distribution has commenced installment payments, such Scheduled Distribution benefits shall continue to be paid at the same time and in the same form as they would have been paid to the Participant had the Separation from Service, Disability, or death, as applicable, not occurred.

6.6 Hardship Distribution. Upon a finding by the Committee that the Participant has suffered a Financial Hardship, in accordance with Code Section 409A, the Committee may, at the request of the Participant, accelerate distribution of the Participant’s benefits and/or approve cancellation of the Participant’s deferral elections under the Plan in the amount reasonably necessary to alleviate such Financial Hardship, subject to the following conditions:

(a) The request to take a Hardship Distribution shall be made by filing a form provided by and filed with the Committee prior to the end of any calendar month.

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(b) The amount distributed pursuant to this Section with respect to the Financial Hardship shall not exceed the amount necessary to satisfy such Financial Hardship, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(c) The amount (if any) determined by the Committee as a Hardship Distribution shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Hardship Distribution determination is made by the Committee.

6.7 Limited Cashouts. Notwithstanding any provision in this Plan to the contrary, the Committee may, in its sole discretion, distribute in a mandatory lump sum any Participant’s entire Account under the Plan, provided that any such distribution is made in accordance with the requirements of Treas. Reg. §1.409A-3(j)(4)(v) or its successor (any such payment, a “Limited Cashout”). Specifically, any such Limited Cashout pursuant to this Section 6.7 shall be subject to the following requirements:

(a) The Committee’s exercise of discretion to make the Limited Cashout shall be evidenced in writing no later than the date of the lump sum payment;

(b) The lump sum payment shall result in the termination and liquidation of the entirety of the Participant’s Account under the Plan, as applicable, as well as the Participant’s interest in all other plans, agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Treas. Reg. §1.409A–1(c)(2) with the Account that is being distributed from this Plan; and

(c) The lump sum payment (and the Participant’s entire interest in any and all other “plans” that would be aggregated with the Account being distributed from this Plan in accordance with Treas. Reg. §1.409A–1(c)(2)) is not greater than the applicable dollar amount under Code Section 402(g)(1)(B) at the time of the Limited Cashout.

Any such Limited Cashout shall be calculated as of the last business day of the month in which the Committee’s determination to make the Limited Cashout occurs, and such lump sum payment shall be made within 60 days following such determination.

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ARTICLE VII

PAYEE DESIGNATIONS AND LIMITATIONS

7.1 Beneficiaries.

(a) Beneficiary Designation. The Participant shall have the right, at any time, to designate any person or persons as Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant’s death. If the Participant names someone other than his or her spouse as a Beneficiary, the Committee may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Committee, executed by such Participant’s spouse and returned to the Committee. The Beneficiary designation shall be effective when it is submitted to and acknowledged by the Committee during the Participant’s lifetime in the format prescribed by the Committee.

(b) Absence of Valid Designation. If a Participant fails to designate a Beneficiary as provided above, or if every person designated as Beneficiary predeceases the Participant or dies prior to complete distribution of the Participant’s benefits, then the Committee shall deem the Participant’s estate to be the Beneficiary and shall direct the distribution of such benefits to the Participant’s estate.

7.2 Payments to Minors. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead such payment shall be made (a) to that person’s living parent(s) to act as custodian, (b) if that person’s parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, to act as custodian, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within sixty (60) days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

7.3 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of any and all liability of the Committee and the Company under the Plan.

ARTICLE VIII

LEAVE OF ABSENCE

8.1 Paid Leave of Absence. If a Participant is authorized by the Participant’s Employer to take a paid leave of absence from the employment of the Employer, and such leave of absence does not constitute a Separation from Service, (a) the Participant shall continue to be considered eligible for the benefits provided under the Plan, and (b) deferrals shall continue to be withheld during such paid leave of absence in accordance with Article III.

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8.2 Unpaid Leave of Absence If a Participant is authorized by the Participant’s Employer to take an unpaid leave of absence from the employment of the Employer for any reason, and such leave of absence does not constitute a Separation from Service, such Participant shall continue to be eligible for the benefits provided under the Plan. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment with the Employer, the Participant may elect to defer for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan, provided the Participant is eligible to make such deferral elections hereunder and a Participant Election is delivered to and accepted by the Committee for each such election in accordance with Article III above.

ARTICLE IX

ADMINISTRATION

9.1 Committee. The Plan shall be administered by a Committee appointed by the Board, which shall have the exclusive right and full discretion (a) to appoint agents to act on its behalf, (b) to select and establish Funds, (c) to interpret the Plan, (d) to decide any and all matters arising hereunder (including the right to remedy possible ambiguities, inconsistencies, or admissions), (e) to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan and (f) to make all other determinations and resolve all questions of fact necessary or advisable for the administration of the Plan, including determinations regarding eligibility for benefits payable under the Plan. All interpretations of the Committee with respect to any matter hereunder shall be final, conclusive and binding on all persons affected thereby. No member of the Committee or agent thereof shall be liable for any determination, decision, or action made in good faith with respect to the Plan. The Company will indemnify and hold harmless the members of the Committee and its agents from and against any and all liabilities, costs, and expenses incurred by such persons as a result of any act, or omission, in connection with the performance of such persons’ duties, responsibilities, and obligations under the Plan, other than such liabilities, costs, and expenses as may result from the bad faith, willful misconduct, or criminal acts of such persons.

9.2 Claims Procedure. Any Participant, former Participant or Beneficiary may file a written claim with the Committee setting forth the nature of the benefit claimed, the amount thereof, and the basis for claiming entitlement to such benefit. The Committee shall determine the validity of the claim and communicate a decision to the claimant promptly and, in any event, not later than ninety (90) days after the date of the claim. The claim may be deemed by the claimant to have been denied for purposes of further review described below in the event a decision is not furnished to the claimant within such ninety (90) day period. If additional information is necessary to make a determination on a claim, the claimant shall be advised of the need for such additional information within forty-five (45) days after the date of the claim. The claimant shall have up to one hundred eighty (180) days to supplement the claim information, and the claimant shall be advised of the decision on the claim within forty-five (45) days after the earlier of the date the supplemental information is supplied or the end of the one hundred

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eighty (180) day period. Every claim for benefits which is denied shall be denied by written notice setting forth in a manner calculated to be understood by the claimant (a) the specific reason or reasons for the denial, (b) specific reference to any provisions of the Plan (including any internal rules, guidelines, protocols, criteria, etc.) on which the denial is based, (c) description of any additional material or information that is necessary to process the claim, and (d) an explanation of the procedure for further reviewing the denial of the claim and shall include an explanation of the claimant’s right to submit the claim for binding arbitration in the event of an adverse determination on review.

9.3 Review Procedures. Within sixty (60) days after the receipt of a denial on a claim, a claimant or his/her authorized representative may file a written request for review of such denial. Such review shall be undertaken by the Committee and shall be a full and fair review. The claimant shall have the right to review all pertinent documents. The Committee shall issue a decision not later than sixty (60) days after receipt of a request for review from a claimant unless special circumstances, such as the need to hold a hearing, require a longer period of time, in which case a decision shall be rendered as soon as possible but not later than one hundred twenty (120) days after receipt of the claimant’s request for review. The decision on review shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the claimant with specific reference to any provisions of the Plan on which the decision is based and shall include an explanation of the claimant’s right to submit the claim for binding arbitration in the event of an adverse determination on review.

ARTICLE X

MISCELLANEOUS

10.1 Termination of Plan. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to terminate the Plan with respect to all of its Participants. In the event of a Plan termination, no new deferral elections shall be permitted for the affected Participants. However, after the Plan termination the Account balances of such Participants shall continue to be credited with deferrals attributable to any deferral election that was in effect prior to the Plan termination to the extent deemed necessary to comply with Code Section 409A and related Treasury Regulations, and additional amounts shall continue to be credited or debited to such Participants’ Account balances pursuant to Article IV. In addition, following a Plan termination, Participant Account balances shall remain in the Plan and shall not be distributed until such amounts become eligible for distribution in accordance with the other applicable provisions of the Plan. Notwithstanding the preceding sentence, to the extent permitted by Treas. Reg. §1.409A-3(j)(4)(ix) or as otherwise permitted under Code Section 409A, the Employer may provide that upon termination of the Plan, all Account balances of the Participants shall be distributed, subject to and in accordance with any rules established by such Employer deemed necessary to comply with the applicable requirements and limitations of Code Section 409A.

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10.2 Amendment. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer. Notwithstanding the foregoing, no amendment or modification shall be effective to decrease the value of a Participant’s vested Account balance in existence at the time the amendment or modification is made.

10.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of any Employer. No assets of any Employer shall be held under any trust (except as provided in Section 4.3) or held in any way as collateral security for the fulfilling of the obligations of any Employer. Any and all of each Employer’s assets shall be, and remain, the general unpledged, unrestricted assets of the Employer. Each Employer’s obligations under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future to those persons to whom the Employer has a benefit obligation under the Plan (as determined in accordance with the terms hereof), and the respective rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

10.4 Restriction Against Assignment. The Employer shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or entity. No part of a Participant’s Accounts shall be liable for the debts, contracts, or engagements of any Participant, Beneficiary, or their successors in interest, nor shall a Participant’s Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. No part of a Participant’s Accounts shall be subject to any right of offset against or reduction for any amount payable by the Participant or Beneficiary, whether to the Company or any other party, under any arrangement other than under the terms of this Plan.

10.5 Withholding. The Participant shall make appropriate arrangements with the Employer for satisfaction of any federal, state or local income tax withholding requirements, Social Security and other employment tax or other requirements applicable to the granting, crediting, vesting or payment of benefits under the Plan. There shall be deducted from each payment made under the Plan or any other Compensation payable to the Participant (or Beneficiary) all taxes that are required to be withheld by the Employer in respect to such payment or this Plan. To the extent permissible under Code Section 409A, the Employer shall have the right to reduce any payment (or other Compensation) by the amount of cash sufficient to provide the amount of said taxes.

10.6 Code Section 409A. The Company and each other Employer intends that the Plan comply with the requirements of Code Section 409A (and all applicable Treasury Regulations and other guidance issued thereunder), and the Plan shall be operated and interpreted consistent with that intent. Notwithstanding the foregoing, neither the Company nor any other Employer makes any representation that the Plan complies with Code Section 409A.

10.7 Effect of Payment; Release. Any payment made in good faith to a Participant or the Participant’s Beneficiary shall, to the extent thereof, be in full satisfaction of all claims

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against the Committee, its members, the Employer and the Company. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

10.8 Errors in Account Statements, Deferrals or Distributions. In the event an error is made in an Account statement, such error shall be corrected on the next statement following the date such error is discovered. In the event of an operational error, including, but not limited to, errors involving deferral amounts, overpayments or underpayments, such operational error shall be corrected in a manner consistent with and as permitted by any correction procedures established under Code Section 409A. If any portion of a Participant’s Account(s) under this Plan is required to be included in income by the Participant prior to receipt due to a failure of this Plan to comply with the requirements of Code Section 409A, the Committee may determine that such Participant shall receive a distribution from the Plan in an amount equal to the lesser of (i) the portion of his or her Account required to be included in income as a result of the failure of the Plan to comply with the requirements of Code Section 409A, or (ii) the unpaid vested Account balance.

10.9 Domestic Relations Orders. Notwithstanding any provision in this Plan to the contrary, in the event that the Committee receives a domestic relations order, as defined in Code Section 414(p)(1)(B), pursuant to which a court has determined that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan, the Committee shall have the right to immediately distribute the spouse’s or former spouse’s vested interest in the Participant’s benefits under the Plan to such spouse or former spouse to the extent necessary to fulfill such domestic relations order, provided that such distribution is in accordance with the requirements of Code Section 409A.

10.10 Employment Not Guaranteed. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continue the provision of services in any capacity whatsoever to the Employer.

10.11 No Guarantee of Tax Consequences. The Employer, Company, Board, Compensation Committee and Committee make no commitment or guarantee to any Participant that any federal, state or local tax treatment will apply or be available to any person eligible for benefits under the Plan and assume no liability whatsoever for the tax consequences to any Participant.

10.12 Successors of the Company. The rights and obligations of the Company and each other Employer under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company or such Employer, as applicable.

10.13 Notice. Any notice or filing required or permitted to be given to the Company or the Participant under the Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, in the case of the Employer, to the principal office of the Employer, directed to the attention of the Committee, and in the case of the Participant, to the last known address of the Participant indicated on the employment records of the Employer. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Notices to the Employer may be permitted by electronic communication according to specifications established by the Committee.

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10.14 Headings. Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof.

10.15 Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

10.16 Governing Law. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. To the extent any provision of, or legal issue relating to, this Plan is not fully preempted by federal law, such issue or provision shall be governed by the laws of the State of California.

10.17 Entire Agreement. Unless specifically indicated otherwise, this Plan supersedes any and all prior communications, understandings, arrangements or agreements between the parties, including the Employer, the Company, the Board, the Committee and any and all Participants, whether written, oral, express or implied relating thereto.

10.18 Binding Arbitration. Any claim, dispute or other matter in question of any kind relating to this Plan which is not resolved by the claims procedures under this Plan shall be settled by arbitration in accordance with the applicable employment dispute resolution rules of the American Arbitration Association. Notice of demand for arbitration shall be made in writing to the opposing party and to the American Arbitration Association within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrators shall be final and may be enforced in any court of competent jurisdiction. The arbitrators may award reasonable fees and expenses to the prevailing party in any dispute hereunder and shall award reasonable fees and expenses in the event that the arbitrators find that the losing party acted in bad faith or with intent to harass, hinder or delay the prevailing party in the exercise of its rights in connection with the matter under dispute.

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IN WITNESS WHEREOF, the Compensation Committee of the Board of Directors of the Company has approved the adoption of this Plan as of the Effective Date and has authorized the execution of this Plan by a duly authorized representative of the Company this 25^th day of July, 2014.

QLogic Corporation
By	/s/ Jean Hu
Name:	Jean Hu
Title:	Senior Vice President and Chief Financial Officer

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EX-10.2

EXHIBIT 10.2

QLOGIC CORPORATION

2005 PERFORMANCE INCENTIVE PLAN

TERMS AND CONDITIONS OF STOCK UNIT AWARD

1. General.

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

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

2. Vesting.

Subject to adjustment under Section 7.1 of the Plan and further subject to early termination under Section 6 of these Terms, the Award shall vest and become non-forfeitable with respect to: [Remaining Vesting terms to be determined at time of grant].

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

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

Nothing contained in this Stock Unit Award Agreement or the Plan constitutes a continued employment or service commitment by the Corporation, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any right to remain employed by or in service to the Corporation,

interferes in any way with the right of the Corporation at any time to terminate such employment or service, or affects the right of the Corporation to increase or decrease the Grantee’s other compensation. In jurisdictions that do not recognize an at will employment relationship, the prior sentence is subject to Grantee’s contract of employment and applicable law.

4. No Stockholder Rights.

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

5. Crediting of Vested Stock Units; Tax Withholding.

5.1 Crediting of Vested Stock Units.

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

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

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

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

6. Termination of Employment/Service.

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

7. Restrictions on Transfer.

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

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8. Adjustment.

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

9. Data Privacy Consent.

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

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

10. Nature of Grant.

In accepting the grant of the Award, Grantee acknowledges that: (i) the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, suspended or terminated by the Corporation at any time, as provided in the Plan and these Terms; (ii) the grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of stock units, or benefits in lieu of stock units even if stock units have been granted repeatedly in the past; (iii) all decisions with respect to

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future grants will be at the sole discretion of the Corporation; (iv) Grantee’s participation in the Plan shall not create a right to further employment or service and shall not interfere with the ability of the Corporation to terminate Grantee’s employment or service relationship at any time with or without cause (subject to Grantee’s contract of employment or service, if one exists, and applicable law); (v) Grantee’s participation in the Plan is voluntary; (vi) in the event that Grantee is not an employee of the Corporation, the Award grant will not be interpreted to form an employment contract or relationship with the Corporation, and furthermore, the Award grant will not be interpreted to form an employment contract with the Corporation and any of its affiliates; (vii) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (viii) if Grantee vests in his or her Award and shares of Common Stock are no longer restricted, the value of those shares of Common Stock acquired upon vesting may increase or decrease in value, even below the price at which such Award was originally granted; and (ix) no claim or entitlement to compensation or damages arises from termination of the Award or diminution in value of the Award or shares of Common Stock acquired pursuant to the Award whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or employment or otherwise howsoever. Grantee irrevocably releases the Corporation and its affiliates from any such claim that may arise and Grantee shall not be entitled to any compensation or damages whatsoever or however described by reason of any termination, withdrawal or alteration of rights or expectations under the Plan.

11. Clawback Policy.

Notwithstanding anything else contained herein or in the Plan to the contrary, but subject to applicable law, this Stock Unit Award Agreement is subject to the Company’s clawback policy, as well as the “clawback” provisions of applicable law, rules and regulations, as each may be adopted and in effect from time to time (collectively, the “Clawback Policy”). The provisions of the Clawback Policy are in addition to (and not in lieu of) any rights to repayment the Company may have under Section 304 of the Sarbanes-Oxley Act of 2002 and other applicable laws.

12. Notices.

Any notice to be given under the terms of this Stock Unit Award Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records or at Grantee’s place of work, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be delivered in person or by pre-paid post/mail shall be enclosed in a properly sealed envelope addressed as aforesaid. Any such notice shall be given only when received, but if the Grantee is no longer employed by or in service to the Corporation, shall be deemed to have been duly given five business days after the date posted/mailed in accordance with the foregoing provisions of this Section 12.

13. Plan.

The Award and all rights of the Grantee under this Stock Unit Award Agreement are subject to the terms and conditions of the Plan, incorporated herein by this reference. The

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

14. Entire Agreement.

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

15. Governing Law.

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

16. Effect of this Agreement.

Subject to the Corporation’s right to terminate the Award pursuant to Section 7.2 of the Plan, this Stock Unit Award Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Corporation.

17. Limitation on Grantee’s Rights.

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

18. Section Headings.

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

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19. Construction.

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

20. Acceptance.

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

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EX-31.1

EXHIBIT 31.1

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,

as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Prasad L. Rampalli, certify that:

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

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

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

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

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

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

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

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

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

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

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

By:	/s/ PRASAD L. RAMPALLI
	Prasad L. Rampalli
	Chief Executive Officer

Date: October 27, 2014

EX-31.2

EXHIBIT 31.2

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,

as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jean Hu, certify that:

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

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

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

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

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

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

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

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

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

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

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

By:	/s/ JEAN HU
	Jean Hu
	Chief Financial Officer

Date: October 27, 2014

EX-32

EXHIBIT 32

Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934,

as amended, and 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

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

(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ PRASAD L. RAMPALLI

Prasad L. Rampalli

Chief Executive Officer

/s/ JEAN HU

Jean Hu

Chief Financial Officer

Dated: October 27, 2014

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

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Net Income Per Share - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Earnings Per Share [Abstract]
Stock-based awards excluded from the diluted per share calculations	11.0	15.0	11.5	16.1

XML

Stock-Based Compensation - Summary of Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 4,735	$ 4,818	$ 10,275	$ 12,989
Cost of Revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	258	239	613	823
Engineering and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	2,309	2,257	5,280	6,608
Sales and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	1,073	1,230	2,083	3,023
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,095	$ 1,092	$ 2,299	$ 2,535

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Business Acquisition - Additional Information (Detail) (Broadcom 10/40/100Gb Ethernet Business [Member], USD $) In Millions, unless otherwise specified	1 Months Ended	6 Months Ended
	Mar. 30, 2014	Sep. 28, 2014
Business Acquisition [Line Items]
Business acquisition, cash consideration	$ 147.8
Business combination adjustment to property and equipment		1.6
Business combination adjustment to goodwill		$ (1.6)
Developed Technology [Member]
Business Acquisition [Line Items]
Estimated useful life of purchased intangible assets	5 years

XML

Income Taxes - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Income Taxes [Line Items]
Provision for income taxes	$ 2,807	$ 2,234	$ 2,345	$ 2,982
Internal Revenue Service [Member] | Tax Year 2010 [Member]
Income Taxes [Line Items]
Income tax examination, year under examination			2010
Internal Revenue Service [Member] | Tax Year 2011 [Member]
Income Taxes [Line Items]
Income tax examination, year under examination			2011
Internal Revenue Service [Member] | Tax Year 2012 [Member]
Income Taxes [Line Items]
Income tax examination, year under examination			2012

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Marketable Securities

6 Months Ended

Sep. 28, 2014

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Note 3. Marketable 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)
September 28, 2014
U.S. government and agency securities	$	49,859	$	20	$	(43	)	$	49,836
Corporate debt obligations		72,863		133		(70	)		72,926
Mortgage-backed securities		33,503		176		(109	)		33,570
Municipal bonds		20,234		106		(9	)		20,331
Other debt securities		13,187		9		(20	)		13,176
	$	189,646	$	444	$	(251	)	$	189,839
March 30, 2014
U.S. government and agency securities	$	49,237	$	16	$	(55	)	$	49,198
Corporate debt obligations		74,386		200		(72	)		74,514
Mortgage-backed securities		32,778		191		(187	)		32,782
Municipal bonds		24,989		133		(9	)		25,113
Other debt securities		5,178		3		(5	)		5,176
	$	186,568	$	543	$	(328	)	$	186,783

The amortized cost and estimated fair value of debt securities as of September 28, 2014, 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	$	16,734	$	16,756
Due after one year through three years		131,683		131,778
Due after three years through five years		19,417		19,400
Due after five years		21,812		21,905
	$	189,646	$	189,839

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 September 28, 2014 and March 30, 2014.

	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)
September 28, 2014
U.S. government and agency securities	$	26,232	$	(40	)	$	677	$	(3	)	$	26,909	$	(43	)
Corporate debt obligations		28,999		(70	)		—		—			28,999		(70	)
Mortgage-backed securities		8,552		(34	)		6,705		(75	)		15,257		(109	)
Municipal bonds		2,899		(9	)		—		—			2,899		(9	)
Other debt securities		6,594		(20	)		—		—			6,594		(20	)
	$	73,276	$	(173	)	$	7,382	$	(78	)	$	80,658	$	(251	)
March 30, 2014
U.S. government and agency securities	$	26,879	$	(55	)	$	—	$	—		$	26,879	$	(55	)
Corporate debt obligations		19,906		(72	)		—		—			19,906		(72	)
Mortgage-backed securities		11,261		(145	)		2,838		(42	)		14,099		(187	)
Municipal bonds		3,322		(9	)		—		—			3,322		(9	)
Other debt securities		2,955		(5	)		—		—			2,955		(5	)
	$	64,323	$	(286	)	$	2,838	$	(42	)	$	67,161	$	(328	)

As of September 28, 2014 and March 30, 2014, the fair value of certain of the Company’s available-for-sale securities was less than their cost basis. Management reviewed various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition and near-term prospects of the issuer of the 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 time sufficient to allow for any anticipated recovery of market value. As of September 28, 2014 and March 30, 2014, the Company determined that the unrealized losses were temporary in nature and recorded them as a component of accumulated other comprehensive income.

XML

Marketable Securities - Schedule of Unrealized Losses by Investment Category (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	$ 73,276	$ 64,323
Unrealized Losses of Less Than 12 Months	(173)	(286)
Fair Value of 12 Months or Greater	7,382	2,838
Unrealized Losses of 12 Months or Greater	(78)	(42)
Fair Value, Total	80,658	67,161
Unrealized Losses, Total	(251)	(328)
U.S. Government and Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	26,232	26,879
Unrealized Losses of Less Than 12 Months	(40)	(55)
Fair Value of 12 Months or Greater	677
Unrealized Losses of 12 Months or Greater	(3)
Fair Value, Total	26,909	26,879
Unrealized Losses, Total	(43)	(55)
Corporate Debt Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	28,999	19,906
Unrealized Losses of Less Than 12 Months	(70)	(72)
Fair Value, Total	28,999	19,906
Unrealized Losses, Total	(70)	(72)
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	8,552	11,261
Unrealized Losses of Less Than 12 Months	(34)	(145)
Fair Value of 12 Months or Greater	6,705	2,838
Unrealized Losses of 12 Months or Greater	(75)	(42)
Fair Value, Total	15,257	14,099
Unrealized Losses, Total	(109)	(187)
Other Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	6,594	2,955
Unrealized Losses of Less Than 12 Months	(20)	(5)
Fair Value, Total	6,594	2,955
Unrealized Losses, Total	(20)	(5)
Municipal Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value of Less Than 12 Months	2,899	3,322
Unrealized Losses of Less Than 12 Months	(9)	(9)
Fair Value, Total	2,899	3,322
Unrealized Losses, Total	$ (9)	$ (9)

XML

Marketable Securities - Schedule of Amortized Cost and Estimated Fair Value of Debt Securities (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Due in one year or less, Amortized Cost	$ 16,734
Due after one year through three years, Amortized Cost	131,683
Due after three years through five years, Amortized Cost	19,417
Due after five years, Amortized Cost	21,812
Available-for-sale securities, Amortized Cost	189,646	186,568
Due in one year or less, Estimated Fair Value	16,756
Due after one year through three years, Estimated Fair Value	131,778
Due after three years through five years, Estimated Fair Value	19,400
Due after five years, Estimated Fair Value	21,905
Total estimated fair value of debt securities	$ 189,839	$ 186,783

XML

Fair Value of Financial Instruments - Schedule of Assets Measured at Fair Value on a Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 189,839	$ 186,783
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	86,930	91,258
Marketable securities	189,839	186,783
Total assets at fair value disclosure	276,769	278,041
Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	86,930	91,258
Marketable securities	49,836	49,198
Total assets at fair value disclosure	136,766	140,456
Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Marketable securities	140,003	137,585
Total assets at fair value disclosure	140,003	137,585
U.S. Government and Agency Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	49,836	49,198
U.S. Government and Agency Securities [Member] | Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	49,836	49,198
U.S. Government and Agency Securities [Member] | Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Corporate Debt Obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	72,926	74,514
Corporate Debt Obligations [Member] | Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Corporate Debt Obligations [Member] | Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	72,926	74,514
Mortgage-Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	33,570	32,782
Mortgage-Backed Securities [Member] | Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Mortgage-Backed Securities [Member] | Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	33,570	32,782
Other Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,176	5,176
Other Debt Securities [Member] | Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Other Debt Securities [Member] | Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,176	5,176
Municipal Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	20,331	25,113
Municipal Bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	20,331	25,113
Municipal Bonds [Member] | Fair Value Measurements Using, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Municipal Bonds [Member] | Fair Value Measurements Using, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 20,331	$ 25,113

XML

Inventories - Components of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Inventory Disclosure [Abstract]
Raw materials	$ 2,932	$ 2,041
Finished goods	27,210	15,995
Total Inventory	$ 30,142	$ 18,036

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Business Acquisition

6 Months Ended

Sep. 28, 2014

Business Combinations [Abstract]

Business Acquisition

Note 2. Business Acquisition

Broadcom Corporation

In March 2014, the Company acquired certain 10/40/100Gb Ethernet controller-related assets from Broadcom Corporation (Broadcom) primarily relating to the NetXtreme^® II Ethernet controller family and licensed certain related intellectual property under non-exclusive licenses for total cash consideration of $147.8 million and the assumption of certain liabilities.

The Company preliminarily estimated the fair value of the assets acquired and liabilities assumed and allocated a portion of the total purchase consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values at the acquisition date. During the six months ended September 28, 2014, the Company completed the identification and valuation of certain acquired property and equipment and also completed the transfer of property and equipment in a foreign jurisdiction that was subject to local compliance requirements, resulting in a total increase in property and equipment of $1.6 million with a corresponding decrease in goodwill. The excess of the total purchase consideration over the aggregate estimated fair value of the net assets acquired was recorded as goodwill. The goodwill associated with this acquisition is expected to be tax deductible. The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:

	(In thousands)
Inventories	$	2,880
Other current assets		307
Property and equipment		4,070
Goodwill		81,516
Purchased intangible asset		60,100
Accrued compensation		(987	)
Other current liabilities		(129	)
	$	147,757

Included in the preliminary purchase price allocation is a provisional amount related to a purchased intangible asset consisting of developed technology, which has an estimated useful life of five years. The preliminary fair value of this purchased intangible asset was based on estimates and assumptions made by management at the time of the acquisition. The Company is in the process of completing the identification and valuation of the intangible assets, which may result in adjustments to goodwill and the provisional amounts recorded for the purchased intangible asset, as well as recording the fair value of additional identifiable intangible assets. These adjustments may also result in changes to related amortization expense. The Company expects to finalize the purchase price allocation during fiscal 2015.

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Stock-Based Compensation - Additional Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Sep. 28, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Restricted stock units granted, shares	2.0
Weighted average grant date fair value per share, restricted stock units granted	$ 10.16

XML

Subsequent Event - Additional Information (Detail) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 27, 2014
Subsequent Event [Member]
Subsequent Event [Line Items]
Maximum value of outstanding common stock for repurchase	$ 100
Outstanding common stock repurchase, maximum period	18 months

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Current assets:
Cash and cash equivalents	$ 86,930	$ 91,258
Marketable securities	189,839	186,783
Accounts receivable, less allowance for doubtful accounts of $1,216 and $1,186 as of September 28, 2014 and March 30, 2014, respectively	85,469	65,213
Inventories	30,142	18,036
Deferred tax assets	13,997	15,080
Other current assets	18,841	16,590
Total current assets	425,218	392,960
Property and equipment, net	82,972	84,912
Goodwill	192,492	194,107
Purchased intangible assets, net	61,231	69,903
Deferred tax assets	29,818	32,827
Other assets	21,847	23,554
Total assets	813,578	798,263
Current liabilities:
Accounts payable	37,178	30,657
Accrued compensation	19,700	26,956
Accrued taxes	2,312	981
Deferred revenue	3,695	3,954
Other current liabilities	8,824	16,123
Total current liabilities	71,709	78,671
Accrued taxes	12,605	17,095
Other liabilities	8,699	9,071
Total liabilities	93,013	104,837
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; 214,758,000 and 213,786,000 shares issued as of September 28, 2014 and March 30, 2014, respectively	215	214
Additional paid-in capital	968,368	958,008
Retained earnings	1,689,081	1,672,071
Accumulated other comprehensive income	203	435
Treasury stock, at cost: 126,616,000 shares as of September 28, 2014 and March 30, 2014	(1,937,302)	(1,937,302)
Total stockholders' equity	720,565	693,426
Total liabilities and stockholders' equity	$ 813,578	$ 798,263

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013
Cash flows from operating activities:
Net income	$ 17,010	$ 7,927
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,855	15,730
Stock-based compensation	10,275	12,989
Deferred income taxes	4,077	3,632
Asset impairments	1,011	2,429
Other non-cash items	810	1,698
Changes in operating assets and liabilities:
Accounts receivable	(20,287)	(1,818)
Inventories	(12,106)	2,797
Other assets	(840)	180
Accounts payable	6,162	(102)
Accrued compensation	(7,256)	(7,141)
Accrued taxes, net	(3,012)	(905)
Other liabilities	(7,930)	3,249
Net cash provided by operating activities	11,769	40,665
Cash flows from investing activities:
Purchases of available-for-sale securities	(84,318)	(162,673)
Proceeds from sales and maturities of available-for-sale securities	80,376	172,629
Purchases of property and equipment	(12,068)	(15,389)
Net cash used in investing activities	(16,010)	(5,433)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards	3,536	4,565
Minimum tax withholding paid on behalf of employees for restricted stock units	(3,450)	(4,514)
Purchases of treasury stock		(44,212)
Other financing activities	(173)	(96)
Net cash used in financing activities	(87)	(44,257)
Net decrease in cash and cash equivalents	(4,328)	(9,025)
Cash and cash equivalents at beginning of period	91,258	95,532
Cash and cash equivalents at end of period	$ 86,930	$ 86,507

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Special Charges - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Restructuring Cost and Reserve [Line Items]
Special charges	$ 2,259,000	$ 4,349,000	$ 4,803,000	$ 16,382,000
Exit costs	2,259,000	4,349,000	3,292,000	13,953,000
Asset impairment charges			1,011,000	2,429,000
Unpaid exit costs included in current liabilities	2,100,000		2,100,000
Unpaid exit costs included in other liabilities	5,000,000		5,000,000
March 2014 Initiative [Member]
Restructuring Cost and Reserve [Line Items]
Date the company commenced the restructuring plan			Mar. 17, 2014
Special charges	2,000,000		3,700,000
Date the Company substantially completed the restructuring activities			Sep. 28, 2014
Exit costs	2,000,000		2,651,000
Asset impairment charges			1,011,000
Aggregate amount of exit costs	11,800,000		11,800,000
March 2014 Initiative [Member] | Workforce Reductions [Member]
Restructuring Cost and Reserve [Line Items]
Exit costs			2,724,000
Aggregate amount of exit costs	7,500,000		7,500,000
March 2014 Initiative [Member] | Contract Cancellation and Other [Member]
Restructuring Cost and Reserve [Line Items]
Exit costs			(73,000)
Aggregate amount of exit costs	4,300,000		4,300,000
June 2013 Initiative [Member]
Restructuring Cost and Reserve [Line Items]
Date the company commenced the restructuring plan			Jun. 03, 2013
Special charges	300,000		600,000
Exit costs	300,000		641,000
Aggregate amount of exit costs	18,000,000		18,000,000
Additional severance costs	1,000,000		1,000,000
June 2013 Initiative [Member] | Workforce Reductions [Member]
Restructuring Cost and Reserve [Line Items]
Exit costs			641,000
Aggregate amount of exit costs	14,500,000		14,500,000
June 2013 Initiative [Member] | Facilities and Other [Member]
Restructuring Cost and Reserve [Line Items]
Exit costs
Aggregate amount of exit costs	$ 3,500,000		$ 3,500,000

XML

Stock-Based Compensation (Tables)

6 Months Ended

Sep. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock-Based Compensation Expense

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Cost of revenues	$	258	$	239	$	613	$	823
Engineering and development		2,309		2,257		5,280		6,608
Sales and marketing		1,073		1,230		2,083		3,023
General and administrative		1,095		1,092		2,299		2,535
	$	4,735	$	4,818	$	10,275	$	12,989

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Special Charges - Activity and Liability Balances for Exit Costs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Restructuring Cost and Reserve [Line Items]
Charged to costs and expenses	$ 2,259	$ 4,349	$ 3,292	$ 13,953
March 2014 Initiative [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			7,488
Charged to costs and expenses	2,000		2,651
Payments			(9,805)
Ending Balance	334		334
March 2014 Initiative [Member] | Workforce Reductions [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			3,177
Charged to costs and expenses			2,724
Payments			(5,567)
Ending Balance	334		334
March 2014 Initiative [Member] | Contract Cancellation and Other [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			4,311
Charged to costs and expenses			(73)
Payments			(4,238)
Ending Balance
June 2013 Initiative [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			8,149
Charged to costs and expenses	300		641
Payments			(2,015)
Ending Balance	6,775		6,775
June 2013 Initiative [Member] | Workforce Reductions [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			3,528
Charged to costs and expenses			641
Payments			(1,404)
Ending Balance	2,765		2,765
June 2013 Initiative [Member] | Facilities and Other [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance			4,621
Charged to costs and expenses
Payments			(611)
Ending Balance	$ 4,010		$ 4,010

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Net Income Per Share (Tables)

6 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands, except per share amounts)
Net income	$	11,010	$	10,977	$	17,010	$	7,927
Shares:
Weighted-average shares outstanding — basic		87,914		87,430		87,654		88,288
Dilutive potential common shares, using treasury stock method		188		239		523		432
Weighted-average shares outstanding — diluted		88,102		87,669		88,177		88,720
Net income per share:
Basic	$	0.13	$	0.13	$	0.19	$	0.09
Diluted	$	0.12	$	0.13	$	0.19	$	0.09

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Basis of Presentation

6 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Basis of Presentation

Note 1. Basis of Presentation

In the opinion of management of QLogic Corporation (QLogic or the Company), the accompanying unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2014. The results of operations for the three and six months ended September 28, 2014 are not necessarily indicative of the results that may be expected for the entire fiscal year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Among the significant estimates affecting the consolidated financial statements are those related to revenue recognition, stock-based compensation, income taxes, marketable securities, inventories, goodwill and long-lived assets. The actual results experienced by the Company could differ materially from management’s estimates.

Recently Adopted Accounting Standards

In July 2013, the Financial Accounting Standards Board issued an accounting standard update that requires certain unrecognized tax benefits to be presented as a reduction to deferred tax assets rather than as liabilities when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The Company adopted this standard in the first quarter of fiscal 2015 on a prospective basis and the adoption did not have a material effect on the Company’s condensed consolidated balance sheet.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,216	$ 1,186
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	214,758,000	213,786,000
Treasury stock, shares	126,616,000	126,616,000

XML

Basis of Presentation (Policies)

6 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In July 2013, the Financial Accounting Standards Board issued an accounting standard update that requires certain unrecognized tax benefits to be presented as a reduction to deferred tax assets rather than as liabilities when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The Company adopted this standard in the first quarter of fiscal 2015 on a prospective basis and the adoption did not have a material effect on the Company’s condensed consolidated balance sheet.

XML

Document and Entity Information	6 Months Ended
	Sep. 28, 2014	Oct. 22, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 28, 2014
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	QLGC
Entity Registrant Name	QLOGIC CORP
Entity Central Index Key	0000918386
Current Fiscal Year End Date	--03-29
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		88,144,000

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Business Acquisition (Tables)

6 Months Ended

Sep. 28, 2014

Business Combinations [Abstract]

Summary of Purchase Price Allocation

The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:

	(In thousands)
Inventories	$	2,880
Other current assets		307
Property and equipment		4,070
Goodwill		81,516
Purchased intangible asset		60,100
Accrued compensation		(987	)
Other current liabilities		(129	)
	$	147,757

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Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Income Statement [Abstract]
Net revenues	$ 127,503	$ 112,622	$ 246,952	$ 225,738
Cost of revenues	52,093	36,313	100,847	72,932
Gross profit	75,410	76,309	146,105	152,806
Operating expenses:
Engineering and development	35,480	34,790	73,301	75,177
Sales and marketing	15,453	16,431	31,487	35,844
General and administrative	8,697	7,553	17,597	15,292
Special charges	2,259	4,349	4,803	16,382
Total operating expenses	61,889	63,123	127,188	142,695
Operating income	13,521	13,186	18,917	10,111
Interest and other income, net	296	25	438	798
Income before income taxes	13,817	13,211	19,355	10,909
Income taxes	2,807	2,234	2,345	2,982
Net income	$ 11,010	$ 10,977	$ 17,010	$ 7,927
Net income per share:
Basic	$ 0.13	$ 0.13	$ 0.19	$ 0.09
Diluted	$ 0.12	$ 0.13	$ 0.19	$ 0.09
Number of shares used in per share calculations:
Basic	87,914	87,430	87,654	88,288
Diluted	88,102	87,669	88,177	88,720

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Stock-Based Compensation

6 Months Ended

Sep. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note 6. Stock-Based Compensation

During the six months ended September 28, 2014, the Company granted 2.0 million restricted stock units with a weighted average grant date fair value of $10.16 per share.

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Cost of revenues	$	258	$	239	$	613	$	823
Engineering and development		2,309		2,257		5,280		6,608
Sales and marketing		1,073		1,230		2,083		3,023
General and administrative		1,095		1,092		2,299		2,535
	$	4,735	$	4,818	$	10,275	$	12,989

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Inventories

6 Months Ended

Sep. 28, 2014

Inventory Disclosure [Abstract]

Inventories

Note 5. Inventories

Components of inventories are as follows:

	September 28, 2014		March 30, 2014
	(In thousands)
Raw materials	$	2,932	$	2,041
Finished goods		27,210		15,995
	$	30,142	$	18,036

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Special Charges (Tables)

6 Months Ended

Sep. 28, 2014

Summary of Special Charges

A summary of the special charges recorded during the three and six months ended September 28, 2014 and September 29, 2013, respectively, is as follows:

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Exit costs	$	2,259	$	4,349	$	3,292	$	13,953
Asset impairments		—		—		1,011		2,429
Other charges		—		—		500		—
	$	2,259	$	4,349	$	4,803	$	16,382

March 2014 Initiative [Member]

Activity and Liability Balances for Exit Costs

Activity and liability balances for exit costs related to the March 2014 Initiative are as follows:

	Workforce Reduction			Contract Cancellation and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,177		$	4,311		$	7,488
Charged to costs and expenses		2,724			(73	)		2,651
Payments		(5,567	)		(4,238	)		(9,805	)
Balance as of September 28, 2014	$	334		$	—		$	334

June 2013 Initiative [Member]

Activity and Liability Balances for Exit Costs

Activity and liability balances for exit costs related to the June 2013 Initiative are as follows:

	Workforce Reduction			Facilities and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,528		$	4,621		$	8,149
Charged to costs and expenses		641			—			641
Payments		(1,404	)		(611	)		(2,015	)
Balance as of September 28, 2014	$	2,765		$	4,010		$	6,775

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Marketable Securities (Tables)

6 Months Ended

Sep. 28, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-Sale 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)
September 28, 2014
U.S. government and agency securities	$	49,859	$	20	$	(43	)	$	49,836
Corporate debt obligations		72,863		133		(70	)		72,926
Mortgage-backed securities		33,503		176		(109	)		33,570
Municipal bonds		20,234		106		(9	)		20,331
Other debt securities		13,187		9		(20	)		13,176
	$	189,646	$	444	$	(251	)	$	189,839
March 30, 2014
U.S. government and agency securities	$	49,237	$	16	$	(55	)	$	49,198
Corporate debt obligations		74,386		200		(72	)		74,514
Mortgage-backed securities		32,778		191		(187	)		32,782
Municipal bonds		24,989		133		(9	)		25,113
Other debt securities		5,178		3		(5	)		5,176
	$	186,568	$	543	$	(328	)	$	186,783

Schedule of Amortized Cost and Estimated Fair Value of Debt Securities

The amortized cost and estimated fair value of debt securities as of September 28, 2014, 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	$	16,734	$	16,756
Due after one year through three years		131,683		131,778
Due after three years through five years		19,417		19,400
Due after five years		21,812		21,905
	$	189,646	$	189,839

Schedule of Unrealized Losses by Investment Category

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 September 28, 2014 and March 30, 2014.

	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)
September 28, 2014
U.S. government and agency securities	$	26,232	$	(40	)	$	677	$	(3	)	$	26,909	$	(43	)
Corporate debt obligations		28,999		(70	)		—		—			28,999		(70	)
Mortgage-backed securities		8,552		(34	)		6,705		(75	)		15,257		(109	)
Municipal bonds		2,899		(9	)		—		—			2,899		(9	)
Other debt securities		6,594		(20	)		—		—			6,594		(20	)
	$	73,276	$	(173	)	$	7,382	$	(78	)	$	80,658	$	(251	)
March 30, 2014
U.S. government and agency securities	$	26,879	$	(55	)	$	—	$	—		$	26,879	$	(55	)
Corporate debt obligations		19,906		(72	)		—		—			19,906		(72	)
Mortgage-backed securities		11,261		(145	)		2,838		(42	)		14,099		(187	)
Municipal bonds		3,322		(9	)		—		—			3,322		(9	)
Other debt securities		2,955		(5	)		—		—			2,955		(5	)
	$	64,323	$	(286	)	$	2,838	$	(42	)	$	67,161	$	(328	)

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Net Income Per Share

6 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Net Income Per Share

Note 9. Net Income Per Share

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

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands, except per share amounts)
Net income	$	11,010	$	10,977	$	17,010	$	7,927
Shares:
Weighted-average shares outstanding — basic		87,914		87,430		87,654		88,288
Dilutive potential common shares, using treasury stock method		188		239		523		432
Weighted-average shares outstanding — diluted		88,102		87,669		88,177		88,720
Net income per share:
Basic	$	0.13	$	0.13	$	0.19	$	0.09
Diluted	$	0.12	$	0.13	$	0.19	$	0.09

Stock-based awards, including stock options and restricted stock units, representing 11.0 million and 11.5 million shares of common stock have been excluded from the diluted per share calculations for the three and six months ended September 28, 2014, respectively, and 15.0 million and 16.1 million shares of common stock have been excluded from the diluted per share calculations for the three and six months ended September 29, 2013, respectively. These stock-based awards have been excluded from the diluted per share calculations because their effect would have been antidilutive.

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Special Charges

6 Months Ended

Sep. 28, 2014

Restructuring and Related Activities [Abstract]

Special Charges

Note 7. Special Charges

A summary of the special charges recorded during the three and six months ended September 28, 2014 and September 29, 2013, respectively, is as follows:

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
	(In thousands)
Exit costs	$	2,259	$	4,349	$	3,292	$	13,953
Asset impairments		—		—		1,011		2,429
Other charges		—		—		500		—
	$	2,259	$	4,349	$	4,803	$	16,382

March 2014 Initiative

In March 2014, the Company commenced a restructuring plan (March 2014 Initiative) primarily designed to consolidate its Ethernet product roadmap following the acquisition of the Ethernet controller-related assets from Broadcom. This restructuring plan primarily includes a workforce reduction and the consolidation and elimination of certain engineering activities. The Company substantially completed these restructuring activities during the second quarter of fiscal 2015.

During the three and six months ended September 28, 2014, the Company recorded special charges of $2.0 million and $3.7 million, respectively, in connection with the March 2014 Initiative. Special charges for the three months ended September 28, 2014 consisted entirely of exit costs. Special charges for the six months ended September 28, 2014 consisted of $2.7 million of exit costs and $1.0 million of asset impairment charges related to abandoned property and equipment. The exit costs consist of severance and related costs associated with involuntarily terminated employees.

The aggregate amount of the exit costs recorded in connection with the March 2014 Initiative is $11.8 million and consisted of $7.5 million of workforce reduction costs and $4.3 million of contract cancellation and other costs.

Activity and liability balances for exit costs related to the March 2014 Initiative are as follows:

	Workforce Reduction			Contract Cancellation and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,177		$	4,311		$	7,488
Charged to costs and expenses		2,724			(73	)		2,651
Payments		(5,567	)		(4,238	)		(9,805	)
Balance as of September 28, 2014	$	334		$	—		$	334

June 2013 Initiative

In June 2013, the Company commenced a restructuring plan (June 2013 Initiative) designed to enhance product focus and streamline business operations. The restructuring plan includes a workforce reduction and the consolidation and elimination of certain engineering activities. In connection with this plan, the Company ceased development of future application-specific integrated circuits (ASICs) for switch products.

During the three and six months ended September 28, 2014, the Company recorded special charges of $0.3 million and $0.6 million in connection with the June 2013 Initiative, consisting of exit costs associated with severance and related costs for involuntarily terminated employees. Certain employees that were notified of their termination are required to provide future services for varying periods. Severance costs related to these services are recognized ratably over the estimated requisite service period. The Company expects to incur approximately $1 million of additional severance costs in connection with these employees over the requisite service period.

The aggregate amount of the exit costs recorded in connection with the June 2013 Initiative is $18.0 million and consisted of $14.5 million of workforce reduction costs and $3.5 million of facilities and other costs.

Activity and liability balances for exit costs related to the June 2013 Initiative are as follows:

	Workforce Reduction			Facilities and Other			Total
	(In thousands)
Balance as of March 30, 2014	$	3,528		$	4,621		$	8,149
Charged to costs and expenses		641			—			641
Payments		(1,404	)		(611	)		(2,015	)
Balance as of September 28, 2014	$	2,765		$	4,010		$	6,775

The total unpaid exit costs related to both initiatives are expected to be paid over the terms of the related agreements through fiscal 2018. As of September 28, 2014, unpaid exit costs totaling $2.1 million and $5.0 million are included in other current liabilities and other liabilities, respectively.

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Income Taxes

6 Months Ended

Sep. 28, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 8. Income Taxes

The Company’s provision for income taxes was $2.8 million and $2.3 million for the three and six months ended September 28, 2014, respectively, and $2.2 million and $3.0 million for the three and six months ended September 29, 2013, respectively. Income tax expense for the six months ended September 28, 2014 benefited from adjustments to previously recognized uncertain tax position liabilities as a result of additional information received during fiscal 2015 related to these tax positions and certain other discrete items. Income tax expense for the six months ended September 28, 2014 and September 29, 2013 was also impacted by the effect of a discrete tax related item associated with the difference between stock-based compensation expense and the deduction related to stock-based awards on income tax returns. The Company’s provision for income taxes is based on the estimated income for the year, the composition of the estimated income in different tax jurisdictions, and the tax effect, if any, in the applicable quarterly periods of newly enacted tax legislation, resolution of tax audits, changes in uncertain tax positions, and other discrete tax-related items. The allocation of taxable income to domestic and foreign tax jurisdictions impacts the effective tax rate, as the Company’s income tax rate in foreign jurisdictions is generally lower than its income tax rate in the United States.

The Company’s federal consolidated income tax returns for fiscal years 2010, 2011 and 2012 are currently under examination by the Internal Revenue Service. Management does not believe that the results of this examination will have a material impact on the Company’s financial condition or results of operations.

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Subsequent Event

6 Months Ended

Sep. 28, 2014

Subsequent Events [Abstract]

Subsequent Event

Note 10. Subsequent Event

In October 2014, the Company’s board of directors authorized a program to repurchase up to $100 million of its outstanding common stock over a period of up to 18 months.

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Special Charges - Summary of Special Charges (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Restructuring and Related Activities [Abstract]
Exit costs	$ 2,259	$ 4,349	$ 3,292	$ 13,953
Asset impairments			1,011	2,429
Other charges			500
Special charges	$ 2,259	$ 4,349	$ 4,803	$ 16,382

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Inventories (Tables)

6 Months Ended

Sep. 28, 2014

Inventory Disclosure [Abstract]

Components of Inventories

Components of inventories are as follows:

	September 28, 2014		March 30, 2014
	(In thousands)
Raw materials	$	2,932	$	2,041
Finished goods		27,210		15,995
	$	30,142	$	18,036

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Business Acquisition - Summary of Purchase Price Allocation (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Business Acquisition [Line Items]
Goodwill	$ 192,492	$ 194,107
Broadcom 10/40/100Gb Ethernet Business [Member]
Business Acquisition [Line Items]
Inventories		2,880
Other current assets		307
Property and equipment		4,070
Goodwill		81,516
Purchased intangible asset		60,100
Accrued compensation		(987)
Other current liabilities		(129)
Total purchase price		$ 147,757

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 11,010	$ 10,977	$ 17,010	$ 7,927
Changes in fair value of marketable securities:
Changes in unrealized gains	(347)	602	(148)	(1,319)
Net realized losses (gains) reclassified into earnings	64	135	127	(259)
Total changes in fair value of marketable securities	(283)	737	(21)	(1,578)
Foreign currency translation adjustments	(269)	252	(211)	(42)
Total other comprehensive income (loss)	(552)	989	(232)	(1,620)
Comprehensive income	$ 10,458	$ 11,966	$ 16,778	$ 6,307

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Fair Value of Financial Instruments

6 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 4. Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts receivable and accounts payable. The carrying value of accounts receivable and accounts payable approximates fair value.

A summary of the assets measured at fair value on a recurring basis as of September 28, 2014 and March 30, 2014 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Total
	(In thousands)
September 28, 2014
Cash and cash equivalents	$	86,930	$	—	$	86,930
Marketable securities:
U.S. government and agency securities		49,836		—		49,836
Corporate debt obligations		—		72,926		72,926
Mortgage-backed securities		—		33,570		33,570
Municipal bonds		—		20,331		20,331
Other debt securities		—		13,176		13,176
		49,836		140,003		189,839
	$	136,766	$	140,003	$	276,769
March 30, 2014
Cash and cash equivalents	$	91,258	$	—	$	91,258
Marketable securities:
U.S. government and agency securities		49,198		—		49,198
Corporate debt obligations		—		74,514		74,514
Mortgage-backed securities		—		32,782		32,782
Municipal bonds		—		25,113		25,113
Other debt securities		—		5,176		5,176
		49,198		137,585		186,783
	$	140,456	$	137,585	$	278,041

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.

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Marketable Securities - Schedule of Available-for-Sale Securities (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Mar. 30, 2014
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	$ 189,646	$ 186,568
Available-for-sale securities, Gross Unrealized Gains	444	543
Available-for-sale securities, Gross Unrealized Losses	(251)	(328)
Available-for-sale securities, Estimated Fair Value	189,839	186,783
U.S. Government and Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	49,859	49,237
Available-for-sale securities, Gross Unrealized Gains	20	16
Available-for-sale securities, Gross Unrealized Losses	(43)	(55)
Available-for-sale securities, Estimated Fair Value	49,836	49,198
Corporate Debt Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	72,863	74,386
Available-for-sale securities, Gross Unrealized Gains	133	200
Available-for-sale securities, Gross Unrealized Losses	(70)	(72)
Available-for-sale securities, Estimated Fair Value	72,926	74,514
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	33,503	32,778
Available-for-sale securities, Gross Unrealized Gains	176	191
Available-for-sale securities, Gross Unrealized Losses	(109)	(187)
Available-for-sale securities, Estimated Fair Value	33,570	32,782
Other Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	13,187	5,178
Available-for-sale securities, Gross Unrealized Gains	9	3
Available-for-sale securities, Gross Unrealized Losses	(20)	(5)
Available-for-sale securities, Estimated Fair Value	13,176	5,176
Municipal Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	20,234	24,989
Available-for-sale securities, Gross Unrealized Gains	106	133
Available-for-sale securities, Gross Unrealized Losses	(9)	(9)
Available-for-sale securities, Estimated Fair Value	$ 20,331	$ 25,113

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Net Income Per Share - Computation of Basic and Diluted Net Income Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Earnings Per Share [Abstract]
Net income	$ 11,010	$ 10,977	$ 17,010	$ 7,927
Shares:
Weighted-average shares outstanding - basic	87,914	87,430	87,654	88,288
Dilutive potential common shares, using treasury stock method	188	239	523	432
Weighted-average shares outstanding - diluted	88,102	87,669	88,177	88,720
Net income per share:
Basic	$ 0.13	$ 0.13	$ 0.19	$ 0.09
Diluted	$ 0.12	$ 0.13	$ 0.19	$ 0.09

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Schedule of Assets Measured at Fair Value on a Recurring Basis

A summary of the assets measured at fair value on a recurring basis as of September 28, 2014 and March 30, 2014 are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Total
	(In thousands)
September 28, 2014
Cash and cash equivalents	$	86,930	$	—	$	86,930
Marketable securities:
U.S. government and agency securities		49,836		—		49,836
Corporate debt obligations		—		72,926		72,926
Mortgage-backed securities		—		33,570		33,570
Municipal bonds		—		20,331		20,331
Other debt securities		—		13,176		13,176
		49,836		140,003		189,839
	$	136,766	$	140,003	$	276,769
March 30, 2014
Cash and cash equivalents	$	91,258	$	—	$	91,258
Marketable securities:
U.S. government and agency securities		49,198		—		49,198
Corporate debt obligations		—		74,514		74,514
Mortgage-backed securities		—		32,782		32,782
Municipal bonds		—		25,113		25,113
Other debt securities		—		5,176		5,176
		49,198		137,585		186,783
	$	140,456	$	137,585	$	278,041