"This could prove to be a good year for Fibre Channel HBAs," he said. "Even if IT spending doesn't come back, I think HBAs will see growth."
QLogic, along with Emulex Corp. (Nasdaq: ELX), has been steadily taking away market share in the HBA business, says Mark Kelleher, an analyst with First Albany Corp. Vendors on the losing side of this equation, he says, include Agilent Technologies Inc. (NYSE: A) and JNI Corp. (Nasdaq: JNIC).
"The HBA market is operating as a duopoly," Kelleher says. "They're seeing some pretty amazing gross margins for a hardware company... The competition between the two is very gentlemanly." QLogic said its gross margins were 64.2 percent for the quarter, up from 63.0 percent the previous period.
The upbeat news from QLogic bodes well for the whole sector, reinforced by the fact that several storage networking companies pre-announced better-than-expected results for the fourth quarter, including EMC Corp. (NYSE: EMC), McData Corp. (Nasdaq: MCDTA), and Storage Technology Corp. (StorageTek) (NYSE: STK). However, analysts have questioned whether this is simply end-of-the-year "budget flush," rather than real growth (see EMC Shares Surge, McData Blows Doors Off Q4, and StorageTek Sees Stronger Q4).
In contrast to its growth prospects for Fibre Channel, QLogic doesn't see iSCSI in play for at least another 12 months. Desai said QLogic will start sampling its iSCSI products in the first half of the year, with OEM qualifications in the second half of 2003 (see QLogic Does Storage Trois).
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