Rethink 50 outperforms Nasdaq, amid fears on storage OEM markets

Rethink IT, June, 2005

Finally, just to underline that VoIP message, Cisco said it had a definitive agreement to acquire privately held Sipura Technology, which specializes in consumer voice over IP technology, and a key technology provider for Linksys. Cisco's share value raised some 6.25%, or $7bn, on this report.

As if to underline the changing nature of the storage market, Qlogic has had almost as bad a time of it lately as Brocade. They don't do exactly the same thing, with Brocade battling it out at the top end of the Storage switch market with McData and now Cisco, while Qlogic makes Host Bus Adaptors and low end switching systems.

But there is a general feeling that since most of these point product companies are selling through OEM, when times get tough, they get squeezed by their major customers, such as IBM, Cisco, Dell, EMC, Fujitsu, Hitachi, and Hewlett Packard.

Qlogic dropped 17.7% in value after a quarter where it added 40% to its bottom line with a net income of $46m with revenue up 23% to $157m. Most of the reason was that Qlogic predicted a decline of 6% to 12% for the next quarter.

MCAFEE UPGRADES EXPECTATIONS

At the top of our shares growth for the month was virus protection firm McAfee up 16.7% to over $42bn in value. This brought a huge amount of analyst attention as it came in ahead of its numbers and upgraded its expectation for the year.

McAfee expects revenue for the second quarter to be between $220m and $230m and is raising its full year guidance to between $955m and $975m.

Revenue was up to $236m and although its net income was down on last year to $35.9m, that was compared with a quarter that had sales of asset revenues, when it sold off its Sniffer product lines, and when it had several litigation wins, and the company pointed out that at the operating level it was way ahead of this time last year.

McAfee reckoned that operating revenue grew by 36% year over year and that operating margins went up by 24%, as costs continued to fall due to the businesses it has sold.

IntruShield revenue grew in the quarter by 100% year over year and consumer revenue grew by even more to $100m and it ended the quarter with $980m in the bank.

McAfee says it has its first deal to put its virus scanner into a mobile phone, at DoCoMo, and that Hitachi will begin offering the McAfee online service security products, making it stronger in the Far East, and that its first anti spyware product is going well.

BROADCOM SHARES GO UP

Next in line is Broadcom, also up 16.7% over the month with revenue actually down 4% over this quarter last year to $550m, while net income rose 73% to $69m. But at the 'pro forma' level even Broadcom admits that this figure should be down. But the company has said for the past two quarters that it had inventory issues, and it is now saying that this inventory has cleared, and that's what's raising the share value.

Broadcom says it expanded market share in Bluetooth, which is used in cellular phones, PCs and peripherals, and wireless headsets and continues to surge ahead in Ethernet switches. Broadcom brought out the industry's first SAS/SATA Raid-on-chip device this quarter and brought out new reference designs for cable, satellite and IP set-top boxes.