Conexant, QLogic Report High Earnings

Riding high on booming sales in the fast-paced technology industry, two of Orange County’s hottest computer firms posted strong quarterly earnings Wednesday and predicted continued growth throughout the year.

Newport Beach computer-chip maker Conexant Systems Inc. announced its best financial results, including record sales, and also said it acquired a small British technology company to bolster its digital wireless product line.

And QLogic Corp., the Costa Mesa maker of integrated circuits and adapter boards for computers, said its net income jumped 118% for its fiscal third quarter, blasting past analysts’ expectations.

Conexant, which moved into the black much earlier than anticipated after being shed by Rockwell International Corp. in 1998, also flew by earnings projections in its fiscal first quarter as revenue surged 73%.

The company’s net income for the three months ended Dec. 31 shot to $51.8 million, or 24 cents a share. The earnings marked a major turnaround from the loss of $57.1 million, or 30 cents a share, in the same quarter a year earlier.

Analysts had expected the company to report earnings of 20 cents, according to a survey by First Call/Thomson Financial.

“Overall, the semiconductor industry is in the early stages of a cyclical upturn,” said Dave Powers, a financial analyst with Edward Jones & Co. “Conexant is benefiting from this. They’re also in the right place, at the right time, with the right products.”

Conexant’s quarterly revenue hit $510 million, up from $294.7 million in the year-earlier quarter. The results reflect the company’s 2-for-1 stock split, which went into effect Oct. 29.

Dwight Decker, Conexant’s chief executive, told analysts the company expects a 40% increase in its revenue for the current fiscal year.

“If you look at the foundations for our growth going forward, it’s computer networking, wireless communications and digital infotainment,” Decker said. “These are the markets that are growing, and where we’re putting the largest percentage of our research and development.”

Decker said the company’s strong growth came from a combination of increasing sales, flat operating expenses and diversification of its product line through internal developments and key acquisitions.

Conexant, moving to bolster its position in the fast-growing high-speed Internet market, said it bought the wireless broadband business unit of Oak Technology Inc. for $25 million in a combination of cash and stock. The 25-person research team is based in Bristol, England.

Industry watchers note that Conexant, which already has a strong presence in the cellular telephone industry, will meld the unit’s technology into chips for digital televisions and interactive set-top boxes, which allow customers to access digital entertainment and the Internet through TV sets.

The deal marks the second U.K. acquisition Conexant has made this month. Earlier, the company picked up privately held Microcosm Communications, also based in Bristol, for $128 million in stock. Microcosm makes networking chips for high-speed fiber-optic equipment.

Conexant officials say they will continue to look for key acquisitions throughout Europe.

The Oak Technology unit will begin rolling out products for the European market by midyear and a modified product for manufacturers in the U.S. by year’s end, Decker said.

“There [are] lots of good technology companies at attractive valuations in Europe,” Decker said. “We’re scouring all over for opportunities.”

Expansion and growth in key markets also meant good news for QLogic. The Costa Mesa developer of high-performance links between computer systems and data storage devices has enjoyed massive growth since it spun off from its parent company, Emulex Corp., four years ago.

QLogic said its fiscal third quarter net income was $15.6 million, or 40 cents a share, for the period ended Dec. 26. A year earlier, the company’s net income was $7.1 million, or 19 cents a share. Industry watchers had predicted the company would report earnings of 36 cents a share, according to Zacks Investment Research Inc.

“Generally, the markets in which we sell products are forecasted to do quite well, so we believe we have some great opportunities in front of us,” said Thomas Anderson, QLogic’s vice president and chief financial officer.

Revenue for the quarter rose 73% to $52.3 million from $30.3 million for the same quarter the year before. Company officials attributed the sales boom to a strong demand for its fibre channel products.

Fibre channel speeds the transmission of data among computer components. While microprocessors get much of the attention when it comes to measuring a computer’s speed, transmitting data between such devices as the disk drive and the processor can be critical as well.

QLogic also split its common shares 2 for 1, its third split since going public in 1997. It previously split shares 2 for 1 last February and August.

Both companies’ earnings were released after the market closed Wednesday. Conexant’s stock price fell 75 cents a share, closing at $80.56. QLogic’s stock fell $4.38 a share, closing at $171.13.