We can compare QLogic to Emulex Corporation (NYSE:ELX), Cisco Systems, Inc. (NASDAQ:CSCO), Intel Corporation (NASDAQ:INTC), and Broadcom Corporation (NASDAQ:BRCM). Emulex, possibly the closest peer, has also been experiencing falling earnings and now has cash representing a large share of its valuation. In forward earnings and cash flow terms it is slightly cheaper than QLogic though the business is smaller and potentially a riskier investment. Intel and Cisco both trade at 10 times forward earnings estimates, and have market capitalizations of over $100 billion. Intel has been struggling, with a small decline in revenue in the fourth quarter of 2012 versus a year earlier causing a 27% drop in earnings, but that stock also pays a dividend yield above 4%. Cisco continues to report growth numbers and we think it’s worth considering as a value stock. Broadcom’s performance has not been particularly good recently, and as a result the trailing P/E is above 20; however, the sell-side expects the company to recover and return to a higher level of earnings.
It’s interesting to see Citadel getting involved with the company, but from our perspective QLogic’s financials don’t make it attractive enough to be worth buying. The substantial cash of course prevents it from being a short as well, but value investors might be better off considering Cisco or possibly Intel.Disclosure: I own no shares of any stocks mentioned in this article.