Shares in data storage company QLogic
This lowered guidance for the quarter was fairly close to the range the company had spelled out in the third quarter conference call a few months ago, but the stock's still getting shellacked. The reason for this is simple: QLogic was priced for perfection, coming in at nearly eight times sales. So when, according to a Merrill Lynch analyst who downgraded the stock after the warning (and just in time, too...), QLogic suffered a decline in "host bus adapters from two of the company's OEMs at the end of the quarter," the only way that the stock could possibly react was to go south, fast.
Got that? A slightly lower sales result for a few weeks in March is worth $1 billion in market capitalization. That's nearly how much QLogic has lost. Who were these original equipment manufacturers (OEMs)? Merrill suggested that one of them is Sun Microsystems
What you have to wonder about, following this announcement, is whether QLogic's problem is endemic to the company, or whether the vaunted technology recovery isn't as strong as people have been led to believe. As we've seen, the fast replacement cycle and attractive economics of the tech sector attracts heavy competition -- note the rumors earlier this month that Applied Micro Circuits
Bill Mann owns none of the companies mentioned in this story. Please view his profile for a complete list of holdings.