Q LOGIC CORP, 424B4, 1997-08-11

Q LOGIC CORP
424B4, 1997-08-11
SEMICONDUCTORS & RELATED DEVICES

Previous: KELLSTROM INDUSTRIES INC, 10QSB, 1997-08-11

Next: SMITH CHARLES E RESIDENTIAL REALTY INC, 10-Q, 1997-08-11

<PAGE> 1
This filing is made pursuant
to Rule 424(b)(4) under
the Securities Act of
1933 in connection with
Registration No. 333-25881

PROSPECTUS

2,300,000 Shares

[QLOGIC LOGO]

Common Stock

------------------------------

All of the 2,300,000 shares of Common Stock (the "Common Stock") offered
hereby are being issued and sold by QLogic Corporation ("QLogic" or the
"Company"). The Common Stock is quoted on the Nasdaq National Market under the
symbol "QLGC." The last sale price for the Common Stock on August 7, 1997, as
reported on the Nasdaq National Market, was $31.75 per share. See "Price Range
of Common Stock."

------------------------------

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF.

------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=====================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $31.25 $1.72 $29.53
Total (3)................................ $71,875,000 $3,956,000 $67,919,000
=====================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses, estimated to be $525,000, payable by the Company.

(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to 345,000
additional shares at the Price to Public less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such shares are
purchased, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $82,656,250, $4,549,400 and $78,106,850,
respectively. See "Underwriting."

------------------------------

The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Cowen &
Company, New York, New York, on or about August 13, 1997.

COWEN & COMPANY
PRUDENTIAL SECURITIES INCORPORATED
MORGAN KEEGAN & COMPANY, INC.

August 8, 1997

<PAGE> 2

[DIAGRAM DEPICTING THE COMPANY'S SEMICONDUCTOR PRODUCTS APPLICATIONS IN A
COMPUTER MOTHERBOARD AND VARIOUS DATA STORAGE PERIPHERALS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET AND MAY
IMPOSE PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus. The discussion in
this Prospectus contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve risks and uncertainties, such as statements of the
Company's strategies, plans, objectives, expectations and intentions. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors discussed elsewhere in
this Prospectus. Except as otherwise indicated, the information contained in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
Certain technical terms are defined in the Glossary on page 41 of this
Prospectus.

THE COMPANY

QLogic Corporation is a leading designer and supplier of semiconductor and
board level I/O products. The Company's products provide a high performance
interface between computer systems and their attached data storage peripherals,
such as hard disk drives, tape drives, removable disk drives, CD-ROM drives and
RAID subsystems. QLogic provides complete I/O technology solutions by designing
and marketing single chip controller and adapter board products for both sides
of the computer/peripheral device interlink, or "bus." Historically, the Company
has targeted the high performance sector of the I/O market, focusing primarily
on the SCSI industry standard. The Company is utilizing its I/O expertise to
develop products for emerging I/O standards, such as Fibre Channel. Fibre
Channel is experiencing early industry acceptance as a higher performance
solution that maintains signal integrity while allowing for increased
connectivity between a computer system and its data storage peripherals.

QLogic's products utilize various I/O standards to service the needs of
manufacturers and end users of various types of computer systems and components,
such as workstations, servers and data storage peripherals. The Company believes
that the increasing processing power of computers, the proliferation of
networks, the rapid growth in the usage of the Internet and intranets, the wider
application of computers in multimedia and telecommunications applications and
the availability of higher performance data storage peripherals have driven the
demand for increased data throughput among servers, workstations and data
storage peripherals. To address this demand for increased I/O system
performance, the Company provides high performance SCSI-based solutions and new
I/O solutions based on the emerging Fibre Channel standard. In addition, the
Company is leveraging its technological expertise to provide I/O solutions based
on the IDE standard, a cost effective solution for the personal computer market.

The Company believes that its technological leadership, extensive
involvement in its customers' product development process and the ease of
migration of its SCSI-based products to its new I/O products position QLogic to
provide additional I/O solutions to its existing customer base. The Company
believes that these attributes also provide it with competitive advantages in
establishing new relationships with additional OEMs for both computer systems
and data storage peripherals. QLogic markets and distributes its products
through a direct sales organization supported by field application engineers, as
well as through a network of independent manufacturers' representatives and
regional and international distributors. The Company's primary OEM customers are
major domestic and international suppliers and manufacturers of servers,
workstations and data storage peripherals, such as Sun Microsystems, Inc.,
Fujitsu Limited and Digital Equipment Corporation.

The Company is the successor to the Emulex Micro Devices division of Emulex
Corporation. The Company was incorporated in Delaware in 1992, as Emulex Micro
Devices Corporation, a wholly-owned subsidiary of Emulex Corporation, and, in
1993, substantially all of the assets of the Emulex Micro Devices division were
transferred to the Company. In February 1994, pursuant to its spinoff from
Emulex Corporation, the Company became a separate publicly held corporation. The
terms "QLogic" and "Company" refer to QLogic Corporation and, for periods prior
to January 1993, the Emulex Micro Devices division of Emulex Corporation. The
Company's principal executive offices are located at 3545 Harbor Boulevard,
Costa Mesa, California 92626, and its telephone number is (714) 438-2200. FAS,
QLogic and the QLogic logo are trademarks of the Company.

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.............. 2,300,000 shares
Common Stock to be outstanding after the
offering....................................... 8,164,070 shares (1)
Use of proceeds.................................. For working capital and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market symbol.................... QLGC
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
APR. 2, MAR. 31, MAR. 30,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.................................................... $ 57,675 $ 53,779 $ 68,927
Gross profit.................................................... 23,390 19,366 30,776
Operating income................................................ 3,379 1,184 9,354
Net income...................................................... $ 1,965 $ 666 $ 5,848
Net income per common and common equivalent share............... $ 0.35 $ 0.12 $ 0.93
Weighted average common and common equivalent shares............ 5,567 5,737 6,315
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------
JULY 2, OCT. 1, DEC. 31, MAR. 31, JUNE 30, SEPT. 29, DEC. 29, MAR. 30,
1995 1995 1995 1996 1996 1996 1996 1997
------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SELECTED QUARTERLY DATA (2):
Net revenues.................... $ 9,570 $13,105 $14,886 $16,218 $15,740 $ 16,725 $17,431 $19,031
Gross profit.................... 3,575 4,629 5,436 5,726 6,155 7,103 8,040 9,478
Operating income (loss)......... (1,162) 375 695 1,276 1,592 1,872 2,656 3,234
Net income (loss)............... $ (724) $ 214 $ 444 $ 732 $ 967 $ 1,178 $ 1,677 $ 2,026
Net income (loss) per common and
common equivalent share....... $ (0.13) $ 0.04 $ 0.08 $ 0.13 $ 0.16 $ 0.20 $ 0.26 $ 0.32
</TABLE>

RECENT FINANCIAL RESULTS:

<TABLE>
<CAPTION>
MARCH 30, 1997
---------------------------
ACTUAL AS ADJUSTED (3)
------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................................... $19,811 $ 87,205
Total assets...................................................... 36,963 104,357
Long term obligations............................................. 1,276 1,276
Total stockholders' equity........................................ 24,353 91,747
</TABLE>

- ---------------
(1) Based on the number of shares outstanding as of June 29, 1997. Excludes
838,755 shares subject to options outstanding as of March 30, 1997 under the
Company's stock option plans at a weighted average exercise price of $9.00
per share.

(2) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Selected Quarterly Results of Operations."

(3) Adjusted to reflect the sale by the Company of the 2,300,000 shares of
Common Stock offered hereby at a public offering price of $31.25 per share
and the receipt of the estimated net proceeds therefrom. See "Use of
Proceeds."

4
<PAGE> 5

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating an
investment in the Company and its business before purchasing any shares of the
Common Stock offered hereby.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company has experienced, and expects to continue to experience,
fluctuations in sales and operating results from quarter to quarter. As a
result, the Company believes that period to period comparisons of its operating
results are not necessarily meaningful, and that such comparisons cannot be
relied upon as indicators of future performance. In addition, there can be no
assurance that the Company will maintain its current profitability in the
future. A significant portion of the Company's net revenues in each fiscal
quarter results from orders booked in that quarter. In the past, a significant
percentage of the Company's quarterly bookings and sales to major customers
occurred during the last month of the quarter, and there can be no assurance
that this trend will not return in the future. Orders placed by major customers
are typically based on their forecasted sales and inventory levels for the
Company's products. Changes in purchasing patterns by one or more of the
Company's major customers, customer order changes or rescheduling, gain or loss
of significant customers, customer policies pertaining to desired inventory
levels of the Company's products, negotiations of rebates and extended payment
terms, as well as changes in the ability of the Company to anticipate in advance
the mix of customer orders, could result in material fluctuations in quarterly
operating results. Certain large OEM customers may require the Company to
maintain higher levels of inventory as such customers attempt to minimize their
own inventories. In addition, the Company must order its products and build
inventory substantially in advance of product shipments, and because the markets
for the Company's products are subject to rapid technological and price changes,
there is a risk the Company will forecast incorrectly and produce excess or
insufficient inventory of particular products. To the extent the Company
produces excess or insufficient inventory or is required to hold excess
inventory, the Company's operating results could be adversely affected. Other
factors that could cause the Company's sales and operating results to vary
significantly from period to period include: the time, availability and sale of
new products; seasonal OEM customer demand, such as the decline experienced in
the fiscal quarter ended June 30, 1996; changes in the mix of products having
differing gross margins; variations in manufacturing capacities, efficiencies
and costs; the availability and cost of components, including silicon wafers;
warranty expenses; variations in product development and other operating
expenses; and general economic and other conditions affecting the timing of
customer orders and capital spending. The Company's quarterly results of
operations are also influenced by competitive factors, including pricing and
availability of the Company's and its competitors' products. Although the
Company does not maintain its own wafer manufacturing facility, a large portion
of the Company's expenses are fixed and difficult to reduce in a short period of
time. If net revenues do not meet the Company's expectations, the Company's
fixed expenses would exacerbate the effect on net income of such shortfall in
net revenues. Furthermore, announcements by the Company, its competitors or
others regarding new products and technologies could cause customers to defer
purchases of the Company's products. Order deferrals by the Company's customers,
delays in the Company's introduction of new products and longer than anticipated
design-in cycles for the Company's products have in the past adversely affected
the Company's quarterly results of operations. Due to all of the foregoing
factors, as well as other unanticipated factors, it is likely that in some
future quarter or quarters the Company's operating results will be below the
expectations of public market analysts or investors. In such event, the price of
the Company's Common Stock would likely be materially and adversely affected.
See "-- Reliance on High Performance Computer and Computer Peripheral Market,"
"-- Volatility of Stock Price" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON SMALL NUMBER OF CUSTOMERS

5
<PAGE> 6

1995, respectively. For fiscal 1997, Sun Microsystems, Inc., Tokyo Electron
Limited and Fujitsu Limited accounted for approximately 20%, 19% and 16% of the
Company's net revenues, respectively. For fiscal 1996, Tokyo Electron Limited,
Sun Microsystems, Inc. and Avex Electronics, Inc. accounted for approximately
42%, 13% and 11% of the Company's net revenues, respectively. For fiscal 1995,
Tokyo Electron Limited, Micropolis Corporation and Digital Equipment Corporation
accounted for approximately 24%, 14% and 11% of the Company's net revenues,
respectively. There can be no assurance that sales to such customers will
continue or remain at comparable levels. In particular, in connection with the
Company's transition to a more direct sales strategy in Japan, the Company has
terminated its relationship with Tokyo Electron Limited. The Company's operating
results have been, and may continue to be, adversely affected by the development
of alternative input/output ("I/O") solutions including the internal development
by the Company's customers of products competitive with those of the Company.
For example, the Company's results of operations during fiscal year ended March
31, 1996 were adversely affected as a result of the loss of a large OEM customer
as such customer transitioned to a more vertically integrated manufacturing
policy, and industry consolidation that resulted in the acquisitions of other
large customers. The loss of any of the Company's major customers would have a
material adverse effect on its business, financial condition and results of
operations. In addition, a majority of the Company's customers order the
Company's products through written purchase orders as opposed to long term
supply contracts and, therefore, such customers are generally not obligated to
purchase products from the Company for any specified period. Major customers
also have significant leverage over the Company and may attempt to change the
terms, including pricing, upon which the Company and such customers do business,
which could materially adversely affect the Company's business, financial
condition and results of operations. As the Company's OEM customers are
pressured to reduce prices as a result of competitive factors, the Company may
be required to contractually commit to price reductions for its products before
it knows how, or if, cost reductions can be obtained. If the Company is unable
to achieve such cost reductions, the Company's gross margins could decline and
such decline could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company provides
its major distributors and certain volume purchasers with price protection in
the event that the Company reduces the prices of its products. While the Company
maintains reserves for such price protection, there can be no assurance that the
impact of future price reductions by the Company will not exceed the Company's
reserves in any specific fiscal period. Any price protection in excess of
recorded reserves could have a material adverse effect on the Company's
business, financial condition and results of operations. See "-- Fluctuations in
Quarterly Operating Results," "-- Volatility of Stock Price" and
"Business -- Customers."

COMPETITION

The markets for both peripheral and host computer products are highly
competitive and are characterized by short product life cycles, price erosion,
rapidly changing technology, frequent product performance improvements and
evolving industry standards. Competition typically occurs at the design stage,
where the customer evaluates alternative design approaches. Because of shortened
product life cycles and even shorter design-in cycles, the Company's competitors
have increasingly frequent opportunities to achieve design wins in next
generation systems. A design win usually ensures a customer will purchase the
product until a higher performance standard is available or a competitor can
demonstrate a significant price/performance advantage. All of the Company's
products compete with products available from several companies, many of which
have substantially greater research and development, long term guaranteed supply
capacity, marketing and financial resources, manufacturing capability and
customer support organizations than those of the Company. The Company believes
that its future operating results will depend, in part, upon its ability to
continue to improve product and process technologies and develop new
technologies in order to maintain the performance advantages of products and
processes relative to competitors, to adapt products and processes to
technological changes, and to identify and adopt emerging industry standards.
Because of the complexity of its products, the Company has experienced delays
from time to time in completing products on a timely basis. If the Company is
unable to design, develop and introduce competitive new products on a timely
basis, its future operating results would be adversely affected.

6
<PAGE> 7

Inc. and Hewlett-Packard Company. In the Integrated Drive Electronics ("IDE")
sector, the Company expects to compete with Adaptec, Inc. and Cirrus Logic, Inc.
The Company may compete with some of its larger disk drive and computer systems
customers, some of which have the capability to develop I/O controller
integrated circuits for use in their products. At least one large OEM customer
in the past decided to vertically integrate and therefore ceased purchases from
the Company.

The Company will have to continue to develop products appropriate to its
markets to remain competitive as its competitors continue to introduce products
with improved performance characteristics. While the Company continues to devote
significant resources to research and development, there can be no assurance
that such efforts will be successful or that the Company will develop and
introduce new technology and products in a timely manner. In addition, while
relatively few competitors offer a full range of Small Computer System Interface
("SCSI") and other I/O products, additional domestic and foreign manufacturers
may increase their presence in, and resources devoted to, these markets. There
can be no assurance that the Company will compete successfully in the future.
See "-- Rapid Technological Change; Dependence on New Products; Industry
Standards" and "Business -- Competition."

DEPENDENCE ON WAFER SUPPLIERS AND OTHER SUBCONTRACTORS

The Company currently relies on several independent foundries to
manufacture its semiconductor products either in finished form or wafer form.
The Company conducts business with its foundries through written purchase orders
as opposed to long term supply contracts and, therefore, such foundries are
generally not obligated to supply products to the Company for any specific
period, in any specific quantity or at any specified price, except as may be
provided in a particular purchase order. To the extent a foundry terminates its
relationship with the Company or should the Company's supply from a foundry be
interrupted or terminated for any other reason, the Company may not have a
sufficient amount of time to replace the supply of products manufactured by that
foundry. Until recently, there has been a worldwide shortage of advanced process
technology foundry capacity. The manufacture of semiconductor devices is subject
to a wide variety of factors, including the availability of raw materials, the
level of contaminants in the manufacturing environment, impurities in the
materials used, and the performance of personnel and equipment. The Company is
continuously evaluating potential new sources of supply. However, the
qualification process and the production ramp-up for additional foundries has in
the past taken, and could in the future take, longer than anticipated. There can
be no assurance that new supply sources will be able or willing to satisfy the
Company's wafer requirements on a timely basis or at acceptable quality or per
unit prices. While the quality, yield and timeliness of wafer deliveries to date
have been acceptable, there can be no assurance that manufacturing yield
problems will not occur in the future.

The Company is using multiple sources of supply for certain of its
products, which may require the Company's customers to perform separate product
qualifications. The Company has not, however, developed alternate sources of
supply for certain other products and its newly introduced products are
typically produced initially by a single foundry until alternate sources can be
qualified. In particular, the Company's integrated single chip Fibre Channel
controller is manufactured by LSI Logic Corporation ("LSI Logic") and integrates
LSI Logic's transceiver technology. In the event that LSI Logic is unable or
unwilling to satisfy the Company's requirements for this technology, the
Company's attempt to market Fibre Channel products would be delayed and, as
such, its results of operations could be materially and adversely affected. The
requirement that a customer perform separate product qualifications or a
customer's inability to obtain a sufficient supply of products from the Company
may cause that customer to satisfy its product requirements from the Company's
competitors, which would adversely affect the Company's results of operations.
See "-- Rapid Technological Change; Dependence on New Products; Industry
Standards."

The Company's ability to obtain satisfactory wafer and other supplies is
subject to a number of other risks. The Company's suppliers may be subject to
injunctions arising from alleged violations of third party intellectual property
rights. The enforcement of such an injunction could impede a supplier's ability
to provide wafers, components or packaging services to the Company. In addition,
the Company's flexibility to move production of any particular product from one
foundry to another can be limited in that such a move can require significant
re-engineering, which may take several quarters. These efforts also divert
engineering resources which otherwise could be dedicated to new product
development and adversely affect new product development schedules. Accordingly,
production may be constrained even though capacity is available at one or more
foundries. In

7
<PAGE> 8

addition, the Company could encounter supply shortages if sales grow
substantially. The Company uses domestic and offshore subcontractors for die
assembly of its semiconductor products purchased in wafer form, and for assembly
of its host adapter board products. The Company's reliance on independent
subcontractors to provide these services involves a number of risks, including
the absence of guaranteed capacity and reduced control over delivery schedules,
quality assurance and costs. The Company is also subject to the risks of
shortages and increases in the cost of raw materials used in the manufacture or
assembly of the Company's products. In addition, the Company may receive orders
for large volumes of products to be shipped within short periods, and the
Company may not have sufficient testing capacity to fill such orders.
Constraints or delays in the supply of the Company's products, whether because
of capacity constraints, unexpected disruptions at the Company's foundries or
subcontractors, delays in obtaining additional production at the existing
foundries or in obtaining production from new foundries, shortages of raw
materials, or other reasons, could result in the loss of customers and other
material adverse effects on the Company's operating results, including effects
that may result should the Company be forced to purchase products from higher
cost foundries or pay expediting charges to obtain additional supply. See
"Business -- Manufacturing."

TRANSACTIONS TO OBTAIN MANUFACTURING CAPACITY; FUTURE CAPITAL NEEDS

Although the Company is currently not experiencing any difficulties in
obtaining sufficient foundry capacity due to the current abundance of worldwide
semiconductor fabrication capacity, the Company and the semiconductor industry
have in the past experienced shortages of available foundry capacity.
Accordingly, in order to secure an adequate supply of wafers, especially wafers
manufactured using advanced process technologies, the Company may consider
various possible transactions, including the use of "take or pay" contracts that
commit the Company to purchase specified quantities of wafers over extended
periods or equity investments in or advances to wafer manufacturing companies in
exchange for guaranteed production capacity, or the formation of joint ventures
to own and operate or construct foundries or to develop certain products. Any of
these transactions would involve financial risk to the Company and could require
the Company to commit substantial capital or provide technology licenses in
return for guaranteed production capacity. The need to commit substantial
capital may require the Company to seek additional equity or debt financing. The
sale or issuance of additional equity or convertible debt securities could
result in dilution to the Company's stockholders. There can be no assurance that
such additional financing, if required, will be available when needed or, if
available, will be on terms acceptable to the Company. See "Use of Proceeds."

RELIANCE ON HIGH PERFORMANCE COMPUTER AND COMPUTER PERIPHERAL MARKET

A significant portion of the Company's host adapter board products are
currently used in high-performance file servers, workstations and other office
automation products. The Company's growth has been supported by increasing
demand for sophisticated I/O solutions which support database systems, servers,
workstations, Internet/intranet applications, multimedia and telecommunications.
Should there be a slowing in the growth of demand for such systems, the
Company's business, financial condition and results of operations could be
materially and adversely affected.

As a supplier of controller products to manufacturers of computer
peripherals such as disk drives and other data storage devices, a portion of the
Company's business is dependent on the overall market for computer peripherals.
This market, which itself is dependent on the market for computers, has
historically been characterized by periods of rapid growth followed by periods
of oversupply and contraction. As a result, suppliers to the computer
peripherals industry from time to time experience large and sudden fluctuations
in demand for their products as their customers adjust to changing conditions in
their markets. If these fluctuations are not accurately anticipated, such
suppliers, including the Company, could produce excessive or insufficient
inventories of various components which could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"-- Fluctuations in Quarterly Operating Results."

RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS; INDUSTRY STANDARDS

The markets in which the Company and its competitors compete are
characterized by rapidly changing technology, evolving industry standards and
continuing improvements in products and services. The Company's

8
<PAGE> 9

future success depends on its ability to enhance its current products and to
develop and introduce in a timely manner new products that keep pace with
technological developments and industry standards, compete effectively on the
basis of price and performance, adequately address OEM customer and end-user
customer requirements and achieve market acceptance. The Company believes that
to remain competitive in the future it will need to continue to develop new
products, which will require the investment of significant financial resources
in new product development. In anticipation of the implementation of Fibre
Channel data transfer interface technologies, the Company has invested and will
continue to invest significant resources in developing its integrated circuit
single chip PCI to Fibre Channel controllers. There can be no assurance that
Fibre Channel will be adopted as a predominant industry standard. The Company is
aware of products for alternative I/O standards and enabling technologies being
developed by its competitors. The Company believes that certain competitors,
including Symbios Logic, Inc., have extensive development efforts related to
products based on the Low Voltage Differential ("LVD") technology. There can be
no assurance that such technology will not be adopted as an industry standard
and if an alternative standard is adopted, there can be no assurance the Company
will timely develop products for such standard. Further, even if Fibre Channel
is adopted, there can be no assurance that the Company's integrated PCI to Fibre
Channel controller will be fully developed in time to be accepted for use in
Fibre Channel technology or that, if developed, will achieve market acceptance,
or be capable of being manufactured at competitive prices in sufficient volumes.
In the event that Fibre Channel is not adopted as an industry standard, or that
the Company's integrated circuit PCI to Fibre Channel controllers are not timely
developed or do not gain market acceptance, the Company's business, financial
condition and results of operations could be materially and adversely affected.

The computer industry is characterized by various standards and protocols
that evolve with time. The Company's current products are designed to conform to
certain industry standards and protocols such as IDE, SCSI, Ultra SCSI and PCI.
In addition, the Company's Fibre Channel products have been designed to conform
with a standard that has yet to be uniformly adopted. The Company's products
must be designed to operate effectively with a variety of hardware and software
products supplied by other manufacturers, including microprocessors, operating
system software and peripherals. The Company depends on significant cooperation
with these manufacturers in order to achieve its design objectives and produce
products that interoperate successfully. While the Company believes that it
generally has good relationships with leading microprocessor, systems and
peripheral suppliers, there can be no assurance that such suppliers will not
from time to time make it more difficult for the Company to design its products
for successful interoperability. If industry acceptance of these standards was
to decline or if they were replaced with new standards, and if the Company did
not anticipate these changes and develop new products, the Company's business,
financial condition and results of operations could be materially and adversely
affected.

The Company could experience delays in product development that are common
in the computer and semiconductor industry. Significant delays in product
development and release would adversely affect the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will respond effectively to technological changes or new product announcements
by other companies or that the Company's research and development efforts will
be successful. Furthermore, introduction of new products and moving production
of existing products to different suppliers involves substantial business risks
because of the possibility of product "bugs" or performance problems, in which
event the Company could experience significant product returns, warranty
expenses, expedite charges, in addition to lower sales and lower profits. See
"Business -- Engineering and Development."

IDENTIFICATION AND INTEGRATION OF ACQUISITIONS

The Company anticipates that its future growth may depend in part on its
ability to identify and acquire complementary businesses, technologies or
product lines that are compatible to those of the Company. The Company may, if
appropriate, use a portion of the net proceeds from this offering for such
acquisitions. Acquisitions involve numerous risks, including identifying and
pursuing acquisitions, difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns, risks associated with
entering markets or conducting operations with which the Company has no or
limited direct prior experience, and the potential loss of key

9
<PAGE> 10

employees of the acquired company. Moreover, there can be no assurance that the
anticipated benefits of an acquisition will be realized. There can be no
assurance that the Company will be effective in identifying and effecting
attractive acquisitions, assimilating acquisitions or managing future growth.
Future acquisitions by the Company could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, all of which could materially adversely affect the Company's business,
financial condition, results of operations or stock price. With respect to the
possible amortization of goodwill, the Financial Accounting Standards Board
("FASB") has announced that it may make pooling of interests accounting
treatment for merger transactions more difficult to attain, or may abolish such
treatment altogether. If the FASB does limit or eliminate pooling of interests
accounting treatment, the Company's ability to consummate merger transactions
without incurring goodwill would be materially and adversely affected. See "Use
of Proceeds."

DEPENDENCE ON KEY PERSONNEL

The Company's future success is highly dependent on the continued services
of its key engineering, sales, marketing and executive personnel, including
highly skilled semiconductor design personnel and software developers, and its
ability to identify and hire additional personnel. The loss of the services of
key personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company believes that the
market for key personnel in the industries in which it competes is highly
competitive. In particular, the Company has experienced difficulty in attracting
and retaining qualified engineers and other technical personnel and anticipates
that competition for such personnel will increase in the future. There can be no
assurance that the Company will be able to attract and retain key personnel with
the skills and expertise necessary to develop new products in the future, or to
manage the Company's business, both in the United States and abroad. See
"Business -- Employees" and "Management."

RISKS OF DOING BUSINESS IN INTERNATIONAL MARKETS

Export revenues of the Company's products were approximately 45%, 55% and
62% of net revenues for fiscal 1997, 1996 and 1995, respectively. The Company
expects that export revenues will continue to account for a significant
percentage of the Company's net revenues for the foreseeable future. As a
result, the Company is subject to various risks, which include: a greater
difficulty of administering its business globally; compliance with multiple and
potentially conflicting regulatory requirements such as export requirements,
tariffs and other barriers; differences in intellectual property protections;
difficulties in staffing and managing foreign operations; potentially longer
accounts receivable cycles; currency fluctuations; export control restrictions;
overlapping or differing tax structures; political and economic instability; and
general trade restrictions. The Company's export sales are invoiced in U.S.
dollars and, accordingly, if the relative value of the U.S. dollar in comparison
to the currency of the Company's foreign customers should increase, the
resulting effective price increase of the Company's products to such foreign
customers could result in decreased sales. There can be no assurance that any of
the foregoing factors will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Sales
and Marketing" and "-- Customers."

LACK OF SIGNIFICANT PATENT PROTECTION; INFRINGEMENT RISKS

Although the Company has patent protection on certain aspects of its
technology, it relies primarily on trade secrets, copyrights and contractual
provisions to protect its proprietary rights. There can be no assurance that
these protections will be adequate to protect its proprietary rights, that
others will not independently develop or otherwise acquire equivalent or
superior technology or that the Company can maintain such technology as trade
secrets. There also can be no assurance that any patents the Company possesses
will not be invalidated, circumvented or challenged. In addition, the laws of
certain countries in which the Company's products are or may be developed,
manufactured or sold, including various countries in Asia, may not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States. The failure of the Company to protect its
intellectual property rights could have a material adverse effect on the
Company's business, financial condition and results of operations.

There can be no assurance that patent or other intellectual property
infringement claims will not be asserted against the Company in the future.
Although patent and intellectual property disputes may be settled through

10
<PAGE> 11

licensing or similar arrangements, costs associated with such arrangements may
be substantial and there can be no assurance that necessary licenses would be
available to the Company on satisfactory terms or at all. Accordingly, an
adverse determination in a judicial or administrative proceeding or failure to
obtain necessary licenses could prevent the Company from manufacturing and
selling certain of its products, which would have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, should the Company decide to, or be forced to, litigate such claims,
such litigation could be expensive and time consuming, could divert management's
attention from other matters or could otherwise have a material adverse effect
on the Company's business, financial condition and results of operations,
regardless of the outcome of the litigation. The Company's supply of wafers and
other components can also be interrupted by intellectual property infringement
claims against its suppliers. See "-- Dependence on Wafer Suppliers and Other
Subcontractors" and "Business -- Intellectual Property."

VOLATILITY OF STOCK PRICE

The market price of the Common Stock has fluctuated substantially, and
there can be no assurance that such volatility will not continue. Future
announcements concerning the Company or its competitors or customers, quarterly
variations in operating results, the introduction of new products or changes in
product pricing policies by the Company or its competitors, conditions in the
semiconductor industry, changes in earnings estimates by analysts, market
conditions for high technology stocks in general, or changes in accounting
policies, among other factors, could cause the market price of the Common Stock
to fluctuate substantially. In addition, stock markets have experienced extreme
price and volume volatility in recent years and the stock prices of technology
companies have been especially volatile. This volatility has had a substantial
effect on the market prices of securities of many smaller public companies for
reasons frequently unrelated to the operating performance of the specific
companies. These broad market fluctuations could adversely affect the market
price of the Common Stock. See "Price Range of Common Stock."

POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS

Pursuant to the Company's Restated Certificate of Incorporation, as
amended, the Board of Directors is authorized to approve the issuance of shares
of currently undesignated Preferred Stock, to determine the price, powers,
preferences and rights and the qualifications, limitations or restrictions
granted to or imposed on any unissued series of that Preferred Stock, and to fix
the number of shares constituting any such series and the designation of such
series, without any vote or future action by the stockholders. Pursuant to this
authority, the Board of Directors adopted a Shareholder Rights Plan and declared
a dividend of one preferred stock purchase right for each outstanding share of
the Company's Common Stock. The Shareholder Rights Plan, the undesignated
Preferred Stock and certain provisions of the Delaware law may have the effect
of delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock and may adversely affect the market price of the
Common Stock. See "Description of Capital Stock."

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact included in this Prospectus,
including, without limitation, the statements under "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" regarding the Company's strategies, plans,
objectives and expectations; the Company's future operating results; the
Company's ability to design, develop, manufacture and market products; the
ability of the Company's products to achieve or maintain commercial acceptance;
the Company's ability to achieve new product commercialization; the acceptance
of new I/O standards and the continued acceptance of existing standards; and
other matters are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable at
this time, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are set
forth in these "Risk Factors," as well as elsewhere in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered hereby, at a public offering price of $31.25 per share
(after deducting estimated underwriting discounts and commissions and offering
expenses), are estimated to be approximately $67,394,000 (approximately
$77,582,000 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds of the offering for working capital
and general corporate purposes. The Company may use all or a portion of the net
proceeds to fund various possible transactions in order to secure additional
manufacturing capacity, such as the use of "take or pay" contracts that commit
the Company to purchase specified quantities of wafers over extended periods or
equity investments in or advances to wafer manufacturing companies in exchange
for guaranteed production capacity. Any such transaction could require the
Company to commit a significant amount of cash, including some or all of the net
proceeds of this offering. There can be no assurance that the Company will
consummate any such transaction. In addition, the Company may use a portion of
such net proceeds for acquisitions of complementary businesses, technologies or
products, although there are currently no commitments or agreements with respect
to any material acquisition. Pending such uses, the Company intends to invest
the net proceeds in short term, investment grade, interest-bearing obligations.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "QLGC." The following table sets forth the high and low sales prices
for the Common Stock on the Nasdaq National Market for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year 1996
Quarter ended July 2, 1995....................................... $ 5.13 $ 4.25
Quarter ended October 1, 1995.................................... 6.63 4.50
Quarter ended December 31, 1995.................................. 8.88 5.63
Quarter ended March 31, 1996..................................... 9.13 6.50

Fiscal Year 1997
Quarter ended June 30, 1996...................................... $12.00 $ 8.50
Quarter ended September 29, 1996................................. 13.00 9.00
Quarter ended December 29, 1996.................................. 28.38 12.50
Quarter ended March 30, 1997..................................... 30.13 18.50

Fiscal Year 1998
Quarter ended June 29, 1997...................................... $28.00 $18.75
Quarter ending September 28, 1997 (through August 7)............. 34.50 24.75
</TABLE>

The last sale price for the Common Stock on August 7, 1997, as reported on
the Nasdaq National Market, was $31.75 per share. As of June 30, 1997, there
were 407 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has never declared or paid a cash dividend on its Common Stock.
The Company presently intends to retain its earnings to fund the development and
growth of its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 30, 1997, on an actual basis, and as adjusted to reflect the issuance and
sale by the Company of the 2,300,000 shares of Common Stock offered hereby at a
public offering price of $31.25 per share and the receipt of the estimated net
proceeds therefrom. See "Use of Proceeds." The table should be read in
conjunction with the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 30, 1997
-------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capitalized lease obligations, excluding current installments....... $ 352 $ 352
------- -------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized
(200,000 shares designated as Series A Junior Participating
Preferred, $0.001 par value); none issued and outstanding...... -- --
Common stock, $0.10 par value, 12,500,000 shares authorized;
5,840,701 shares issued and outstanding, actual; 8,140,701
shares issued and outstanding, as adjusted (1)................. 584 814
Additional paid-in capital........................................ 19,001 86,165
Retained earnings................................................. 4,768 4,768
------- -------
Total stockholders' equity..................................... 24,353 91,747
------- -------
Total capitalization......................................... $24,705 $92,099
======= =======
</TABLE>

- ---------------

(1) Excludes 838,755 shares subject to options outstanding as of March 30, 1997
under the Company's stock option plans at a weighted average exercise price
of $9.00 per share.

13
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to
the Company's consolidated statements of operations for each of the years in the
three-year period ended March 30, 1997, and with respect to the Company's
consolidated balance sheet data as of March 31, 1996 and March 30, 1997, are
derived from financial statements of the Company which are included elsewhere in
this Prospectus and which have been audited by KPMG Peat Marwick LLP, the
Company's independent certified public accountants, as indicated in their
report, included elsewhere in this Prospectus. The selected consolidated
financial data set forth with respect to the Company's consolidated balance
sheet as of April 2, 1995 has been derived from audited financial statements not
included herein. The data set forth below should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and with the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------
MAR. MAR.
APR. 2, 31, 30,
1995 1996 1997
------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues................................................... $57,675 $53,779 $68,927
Cost of sales.................................................. 34,285 34,413 38,151
------- ------- -------
Gross profit................................................. 23,390 19,366 30,776
------- ------- -------
Operating expenses:
Engineering and development.................................. 7,598 7,191 10,422
Selling and marketing........................................ 7,541 6,490 6,372
General and administrative................................... 4,872 4,501 4,628
------- ------- -------
Total operating expenses.................................. 20,011 18,182 21,422
------- ------- -------
Operating income.......................................... 3,379 1,184 9,354
Interest expense............................................... 146 153 125
Interest and other income...................................... 93 172 602
------- ------- -------
Income before income taxes................................... 3,326 1,203 9,831
Income tax provision........................................... 1,361 537 3,983
------- ------- -------
Net income..................................................... $ 1,965 $ 666 $ 5,848
======= ======= =======
Net income per common and common equivalent share.............. $ 0.35 $ 0.12 $ 0.93
======= ======= =======
Weighted average common and common equivalent shares........... 5,567 5,737 6,315
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
MAR. MAR.
APR. 2, 31, 30,
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................................ $10,564 $13,334 $19,811
Total assets................................................... 24,592 28,539 36,963
Long term obligations.......................................... 2,234 2,592 1,276
Total stockholders' equity..................................... 15,581 16,277 24,353
</TABLE>

14
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements
that involve risk and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed hereunder,
in "Risk Factors" and "Business," as well as those discussed elsewhere in this
Prospectus.

OVERVIEW

The Company's products include semiconductors for computer peripheral
devices and semiconductors and adapter boards for computer systems. The
Company's peripheral products are comprised of the FAS and TEC product lines,
and its computer systems products are comprised of the ISP and Host Board
product lines. The Company's products have traditionally been based on the SCSI
standard, and the Company is currently developing products for the Fibre Channel
and IDE I/O standards. Net revenues from the Company's computer systems products
are relatively less subject to fluctuations than those from the Company's
peripheral device products due to generally longer product life cycles. In
addition, the Company's computer systems products are manufactured to meet the
specific solution needs of its OEM customers and, as a result, tend to carry
higher gross margins. The Company is attempting to increase its proportionate
sales of computer systems products. The Company is also identifying new sectors
of the peripheral device market with the goal of expanding its business. For
example, the Company is leveraging its I/O technological expertise to develop
high performance IDE-based peripheral controllers.

The Company recognizes revenue from the sale of products at the time of
shipment. The Company currently sells a majority of its products directly to
OEMs such as Sun Microsystems, Inc., Fujitsu Limited, Digital Equipment
Corporation and Silicon Graphics, Inc. The Company also sells its products
through a network of independent manufacturers' representatives and regional and
international distributors. The Company estimates and establishes allowances and
reserves for product returns, warranty obligations, doubtful accounts and price
adjustments. The Company believes that by establishing and developing direct
relationships with leading OEMs within the computer industry, the Company will
have greater opportunities to expand its SCSI-based sales and to leverage these
relationships into design wins for its Fibre Channel and IDE products. The
Company believes that sales to OEMs result in lower product return rates and
require a smaller customer support infrastructure. In addition, OEMs
historically have not required the Company to maintain excess inventory, though
this trend appears to be changing as OEMs attempt to minimize their own
inventories. However, there is a limited number of potential OEM customers. As a
result, the loss of a large OEM customer would have a material adverse effect on
the Company's business, results of operations and financial condition. Also, the
Company has historically experienced seasonality resulting in somewhat lower net
revenues in its first fiscal quarter as compared to the previous quarter, which
the Company believes is due to reduced spending by its OEM customers in advance
of scheduled production slowdowns in the forthcoming summer months. The Company
also generates revenues by licensing certain of its technology. Royalty revenue
is recognized when earned and receipt is assured.

The Company is the successor to the Emulex Micro Devices division of Emulex
Corporation ("Emulex"). On February 24, 1994, Emulex declared a special dividend
consisting of the distribution (the "Distribution") to its stockholders of all
outstanding shares of Common Stock of QLogic, pursuant to which the Company
became a separate publicly held corporation.

15
<PAGE> 16

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain income
and expense items expressed as a percentage of the Company's net revenues.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
APR. 2, MAR. 31, MAR. 30,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net revenues.................................................. 100% 100% 100%
Cost of sales................................................. 59 64 55
--- --- ---
Gross profit................................................ 41 36 45
--- --- ---
Operating expenses:
Engineering and development................................. 13 13 15
Selling and marketing....................................... 13 12 9
General and administrative.................................. 9 9 7
--- --- ---
Total operating expenses................................. 35 34 31
--- --- ---
Operating income......................................... 6 2 14
Interest expense.............................................. -- -- --
Interest and other income..................................... -- -- --
--- --- ---
Income before income taxes.................................. 6 2 14
Income tax provision.......................................... 3 1 6
--- --- ---
Net income.................................................... 3% 1% 8%
=== === ===
</TABLE>

NET REVENUES

The Company's net revenues are derived primarily from the sale of
SCSI-based I/O products. License fees also contribute to the Company's net
revenues. Net revenues for fiscal 1997 increased $15.1 million or 28% from
fiscal 1996 to $68.9 million. The increase was primarily the result of an
increase in sales of the TEC, Host Board and ISP product lines. A partially
offsetting decline in sales of $4.4 million occurred in the FAS product line.

Net revenues for fiscal 1996 decreased $3.9 million or 7% from fiscal 1995
to $53.8 million. The decrease was primarily due to decreases in sales of the
TEC, Host Board and other sources of revenue of $11.4 million, $1.5 million and
$700,000, respectively. The decreases were partially offset by an increase in
sales of the FAS and ISP product lines of $6.7 million and $4.3 million,
respectively. The overall decline was due to unfavorable market conditions, the
loss of a large OEM customer as such customer transitioned to a more vertically
integrated manufacturing policy and industry consolidation that resulted in the
acquisitions of other large customers.

Export revenues for fiscal 1997 increased $1.5 million or 5% from fiscal
1996, to approximately $31.3 million, primarily due to increased sales to
customers in Japan. Export revenues for fiscal 1996 decreased $6.0 million or
17% from fiscal 1995, to approximately $29.8 million. The decrease resulted
primarily from U.S. exports to Singapore declining $14.9 million. The decline in
revenues to Singapore was the result of a loss of the large OEM customer
discussed above and decreased sales to another large OEM customer. This decline
was partially offset by an increase in sales to Japan-based customers of $9.1
million.

A small number of customers account for a substantial portion of the
Company's net revenues, and the Company expects that a limited number of
customers will continue to represent a substantial portion of the Company's net
revenues for the foreseeable future. The Company's six largest customers in each
respective period accounted for approximately 71%, 81% and 71% of the Company's
net revenues for fiscal 1997, 1996 and 1995, respectively. For fiscal 1997, Sun
Microsystems, Inc., Tokyo Electron Limited and Fujitsu Limited accounted for
approximately 20%, 19% and 16% of the Company's net revenues, respectively. For
fiscal 1996, Tokyo Electron Limited, Sun Microsystems, Inc. and Avex
Electronics, Inc. accounted for approximately 42%, 13% and 11% of the Company's
net revenues, respectively. For fiscal 1995, Tokyo Electron Limited, Micropolis
Corporation and Digital Equipment Corporation accounted for approximately 24%,
14% and 11% of the Company's net revenues, respectively.

16
<PAGE> 17

The Company believes that its major customers continually evaluate whether
or not to purchase products from alternate or additional sources. Accordingly,
there can also be no assurance that a major customer will not reduce, delay or
eliminate its purchases from the Company. Any such reduction, delay or loss of
purchases could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors -- Dependence
on Small Number of Customers."

COST OF SALES

Cost of sales consists primarily of raw materials (including wafers and
completed chips from third-party manufacturers), assembly and test labor,
overhead and warranty costs. The cost of sales percentage for fiscal 1997 was
55%, a decrease of 9% over the prior fiscal year. The percentage decrease was
due to computer systems products accounting for a greater percentage of net
revenues. Computer system products contain higher levels of integration and
functionality and are generally associated with higher average selling prices
and gross margins. The Company continued to focus on reducing component costs as
well as implementing design efficiencies during fiscal 1997. The cost of sales
percentage for fiscal 1996 was 64%, an increase of 5% over fiscal 1995. The
increase in the cost of sales percentage was primarily due to inventory
write-down charges being higher in fiscal 1996 compared to the prior year. The
Company's ability to maintain its current gross margin can be significantly
affected by factors such as supply costs and, in particular, the cost of silicon
wafers, the mix of products shipped, competitive price pressures, the timeliness
of volume shipments of new products and the Company's ability to achieve
manufacturing cost reductions. The Company anticipates that it will be
increasingly more difficult to reduce manufacturing costs. In addition, the
Company believes the cost of sales percentage will be adversely impacted by
sales of IDE-based products, which carry lower margins. As a result, the Company
does not anticipate cost of sales to decrease at a rate consistent with historic
trends.

OPERATING EXPENSES

Engineering and Development. Engineering and development expenses consist
primarily of salaries and other personnel related expenses, development related
equipment, occupancy costs and depreciation. For fiscal 1997, engineering and
development expenditures increased by $3.2 million from fiscal 1996, primarily
due to increased salary and occupancy expenses related to increased headcount.
In particular, the Company significantly expanded its engineering staff in
fiscal 1997, in connection with its development of Fibre Channel products. In
fiscal 1996, engineering and development expenditures decreased by $407,000 from
the prior fiscal year, primarily due to reduced equipment repair, consulting and
depreciation expenses. The Company expects that engineering and development
expenses will increase in absolute dollars in fiscal 1998.

Selling and Marketing. Selling and marketing expenses consist primarily of
sales commissions, salaries and other expenses for selling and marketing
personnel, travel expenses and trade shows. During fiscal 1997, selling and
marketing expenses decreased by $118,000 compared to fiscal 1996, primarily as a
result of reduced advertising and trade show expenses, due to the Company's
shift away from selling to resellers, which typically requires more advertising
and other promotions. In fiscal 1996, selling and marketing expenses decreased
by $1.1 million compared to fiscal 1995, primarily due to a reduction in
advertising costs to support reseller marketing efforts. The Company expects
that selling and marketing expenses will increase in absolute dollars in fiscal
1998.

General and Administrative. General and administrative expenses consist
primarily of salaries and other expenses for corporate management, finance,
accounting and human resources. For fiscal 1997, general and administrative
expenses increased $127,000 from the prior year, primarily due to expenses
related to implementing a new computer system and salaries. For fiscal year
1996, general and administrative expenses decreased $371,000 compared to fiscal
1995, primarily due to decreased bad debt expense.

INTEREST EXPENSE

Interest expense decreased $28,000 during fiscal 1997 from fiscal 1996,
primarily due to lower capital lease commitments outstanding. Interest expense
increased $7,000 during fiscal 1996 from fiscal 1995, primarily due to increases
in capital lease obligations.

17
<PAGE> 18

INTEREST AND OTHER INCOME

Interest and other income increased $430,000 during fiscal 1997 from fiscal
1996, primarily due to larger balances of cash and cash equivalents. Interest
and other income increased in fiscal 1996 to $172,000 from $93,000 in fiscal
1995, primarily due to larger balances of cash and cash equivalents.

INCOME TAX PROVISION

The Company's effective tax rates were 41%, 45% and 41% for fiscal 1997,
1996 and 1995, respectively.

RECENT FINANCIAL RESULTS

The Company's net revenues, net income and net income per common and common
equivalent share for the three months ended June 29, 1997 were $18.2 million,
$2.2 million and $0.35, respectively, as compared to $15.7 million, $1.0
million, and $0.16 for the three months ended June 30, 1996. The increase in net
revenues was due primarily to an increase in sales of host computer I/O products
and the increase in net income resulted primarily from improvements in gross
margin resulting primarily from favorable product mix and manufacturing
efficiencies.

18
<PAGE> 19

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables present unaudited quarterly financial information for
the last eight quarters, and such data expressed as a percentage of the
Company's net revenues for the periods indicated. The information has been
presented by the Company on a basis consistent with the Company's audited
Consolidated Financial Statements included elsewhere in this Prospectus and
includes all necessary adjustments, consisting only of normal recurring
adjustments, that management considers necessary for a fair presentation of the
unaudited quarterly results when read in conjunction with the audited
Consolidated Financial Statements of the Company and the Notes thereto. These
operating results are not necessarily indicative of results that may be expected
for any subsequent periods.

<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED
------------------------------------- -------------------------------------
DEC. MAR. JUNE SEPT. DEC. MAR.
JULY 2, OCT. 1, 31, 31, 30, 29, 29, 30,
1995 1995 1995 1996 1996 1996 1996 1997
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenues...................... $ 9,570 $13,105 $14,886 $16,218 $15,740 $16,725 $17,431 $19,031
Cost of sales..................... 5,995 8,476 9,450 10,492 9,585 9,622 9,391 9,553
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................... 3,575 4,629 5,436 5,726 6,155 7,103 8,040 9,478
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Engineering and development..... 1,653 1,672 1,959 1,907 2,089 2,536 2,575 3,222
Selling and marketing........... 1,989 1,642 1,542 1,317 1,357 1,466 1,742 1,807
General and administrative...... 1,095 940 1,240 1,226 1,117 1,229 1,067 1,215
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 4,737 4,254 4,741 4,450 4,563 5,231 5,384 6,244
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)....... (1,162) 375 695 1,276 1,592 1,872 2,656 3,234
Interest income (expense)......... (18) (15) 27 25 59 92 138 188
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes......................... (1,180) 360 722 1,301 1,651 1,964 2,794 3,422
Income tax provision (benefit).... (456) 146 278 569 684 786 1,117 1,396
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ (724) $ 214 $ 444 $ 732 $ 967 $ 1,178 $ 1,677 $ 2,026
======= ======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF NET REVENUES:
Net revenues...................... 100% 100% 100% 100% 100% 100% 100% 100%
Cost of sales..................... 63 65 63 65 61 58 54 50
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................... 37 35 37 35 39 42 46 50
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Engineering and development..... 17 13 13 12 13 15 15 17
Selling and marketing........... 21 12 11 8 9 9 10 10
General and administrative...... 11 7 8 7 7 7 6 6
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 49 32 32 27 29 31 31 33
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)....... (12) 3 5 8 10 11 15 17
Interest income (expense)......... -- -- -- -- -- 1 1 1
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes......................... (12) 3 5 8 10 12 16 18
Income tax provision (benefit).... (5) 1 2 3 4 5 6 7
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. (7)% 2% 3% 5% 6% 7% 10% 11%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

The Company's operating results for the first quarter of fiscal 1996 were
adversely affected by the loss of a large OEM customer as such customer
transitioned to a more vertically integrated manufacturing policy, decreases in
revenues from other large OEM customers, and proportionately higher selling and
marketing expenses due to sales promotion, advertising and related marketing
expenses associated with the Company's reseller business.

The Company's net revenues declined in the first quarter of fiscal 1997
from the prior quarter, due to a seasonal slowdown in OEM demand. The Company
anticipates that its results of operations will continue to experience
seasonality in the future.

The Company's operating expense levels have fluctuated over time. For
example, engineering and development expenses increased substantially in the
second and fourth quarters of fiscal 1997, primarily as a

19
<PAGE> 20

result of increased headcount and associated development costs as the Company
staffed new I/O systems development projects, including Fibre Channel. In
addition, selling and marketing expenses decreased throughout fiscal 1996,
although from the first quarter of fiscal 1997, selling and marketing expenses
increased steadily. The substantial decrease in selling and marketing expenses
during fiscal 1996 was the result of a substantial restructuring of sales and
marketing away from resellers, and the reduced associated advertising and trade
show expenses. Selling and marketing expenses increased throughout fiscal 1997
due to the Company's expansion of its marketing efforts into new I/O technology
markets.

LIQUIDITY AND CAPITAL RESOURCES

QLogic has financed its recent working capital needs and capital
expenditure requirements primarily from internally generated funds and
facilities and equipment leases. Cash provided by operations was approximately
$12.6 million for fiscal 1997. Cash provided by operations was approximately
$8.8 million in fiscal 1996, compared to cash used in operations of $146,000 in
fiscal 1995. The growth in cash provided by operations is primarily attributable
to improved profitability, accounts receivable collection, cash management and
internal efficiency.

Cash used in investing activities was approximately $3.9 million, $1.2
million and $1.3 million for fiscal 1997, 1996 and 1995, respectively,
reflecting expenditures for property and equipment.

Cash provided by financing activities was approximately $2.0 million for
fiscal 1997, which reflected proceeds from the exercise of stock options, offset
in part by principal payments under capital leases. Cash used in financing
activities, reflecting primarily principal payments under capital leases, was
approximately $275,000 and $277,000 in fiscal 1996 and 1995, respectively.

Working capital at March 30, 1997 was $19.8 million, as compared to $13.3
million at March 31, 1996. At March 30, 1997, the Company's principal sources of
liquidity included cash and cash equivalents of $19.1 million. In addition, the
Company has a line of credit of up to $7.5 million with Silicon Valley Bank. The
line of credit allows the Company to borrow at the bank's prime rate. There were
no borrowings under the line of credit as of March 30, 1997.

The Company believes that the net proceeds of the offering, together with
existing cash balances, facilities and equipment leases and cash flows from
operating activities will provide the Company with sufficient funds to finance
its operations for at least the next 12 months. However, should the Company
experience any difficulty in obtaining sufficient foundry capacity in the
future, the Company may undertake certain transactions to secure its supply of
semiconductors. Such transactions could require the Company to commit
substantial capital and could require the Company to seek additional equity or
debt financing. See "Risk Factors -- Transactions to Obtain Manufacturing
Capacity; Future Capital Needs" and "Use of Proceeds."

Prior to the Distribution, QLogic and Emulex entered into a Tax Sharing
Agreement (the "Tax Sharing Agreement") for purposes of allocating
pre-Distribution tax liabilities between QLogic and Emulex and to implement the
Distribution as a tax free distribution. The total amount due Emulex pursuant to
the Tax Sharing Agreement at March 30, 1997 was $458,000 which was included in
other noncurrent liabilities. Amounts due Emulex under the Tax Sharing Agreement
are payable on December 30, 1999, and commenced bearing interest on January 1,
1996, at the rate applicable to underpayments of Federal income taxes, which was
9% at March 30, 1997. Interest due Emulex is payable quarterly and the Company
commenced interest payments in April 1996.

20
<PAGE> 21

BUSINESS

OVERVIEW

QLogic's products utilize various I/O standards to service the needs of
manufacturers and end users of various types of computer systems and components,
such as workstations, servers and data storage peripherals. The Company provides
high performance SCSI-based solutions and new I/O solutions based on the
emerging Fibre Channel standard, and is leveraging its technological
capabilities to provide solutions based on the IDE standard. The Company
believes that its technological leadership, extensive involvement in its
customers' product development process and the ease of migration of its
SCSI-based products to its new I/O products position the Company to provide
additional I/O solutions to its existing customer base. The Company believes
that these attributes also provide it with competitive advantages in
establishing new relationships with additional OEMs for both computer systems
and data storage peripherals. QLogic markets and distributes its products
through a direct sales organization supported by field application engineers, as
well as through a network of independent manufacturers' representatives and
regional and international distributors. The Company's primary OEM customers are
major domestic and international suppliers and manufacturers of servers,
workstations and data peripherals, such as Sun Microsystems, Inc., Fujitsu
Limited and Digital Equipment Corporation.

INDUSTRY BACKGROUND

The increasing processing power of computers, the proliferation of
networks, the rapid growth in the usage of the Internet and intranets, the wider
application of computers in multimedia and telecommunications applications and
the availability of higher performance data storage peripheral devices have
driven the demand for increased data throughput among servers, workstations and
data storage peripherals and, as a result, for increased I/O system performance.
The I/O system is the electronic link between the host CPU and the computer's
data storage peripheral devices, such as hard disk drives, tape drives,
removable disk drives, CD-ROM drives and RAID subsystems. The I/O system must
utilize industry standard hardware and software interfaces to manage and direct
the flow of large volumes of data at high speeds between the CPU and multiple
data storage peripherals, and, at the same time, minimize the consumption of CPU
processing power and maintain peripheral data storage integrity. As
microprocessors run at higher speeds and levels of performance, they require I/O
systems which support faster and more autonomous data transmission and other
advanced capabilities in order to function optimally.

21
<PAGE> 22

The following diagram illustrates the use of the I/O system in a computer
system using multiple data storage peripherals.

GRAPHIC DISPLAYING I/O INTERFACE BETWEEN HOST COMPUTER AND MULTIPLE DATA STORAGE
PERIPHERALS

IDE was an early standard for data interchange for personal computers.
Historically, IDE-based I/O systems managed and directed the flow of data
between personal computers and up to two hard disk drives. As PC-based servers
became increasingly sophisticated, the relatively low data throughput and
minimal connectivity of IDE became a limiting factor for system performance. As
a result, high performance systems, such as servers and workstations, migrated
to faster standards. Nevertheless, it is anticipated that IDE will remain an
important and cost-effective solution to the I/O needs of the personal computer
market due to the large installed base of personal computers and due to the
increasing performance capabilities of new IDE standards, such as EIDE and Ultra
IDE, which operate at higher data transfer rates and support up to four data
storage peripheral devices. International Data Corporation ("IDC"), an
independent market research firm, estimates that the overall market for IDE hard
disk controller devices will increase from approximately 95 million units in
1996 to over 197 million units in 2000. In 1996, approximately 23% of this
market, or approximately 22 million unit sales, was available to independent
silicon suppliers.

In response to the increased data throughput and connectivity required by
networks and workstations, SCSI was adopted as the industry high performance I/O
interface standard. The overall growth of the SCSI marketplace has been driven
by rapid technological change and the evolving dynamics of high performance
computer and computer data storage peripheral devices, including, the greater
variety of higher performance peripheral devices; the continual shift toward
higher capacity and higher data rate disk drives; the need to support greater
numbers and types of attached peripherals; the movement toward more distributed
network architectures across greater distances; the need for greater volumes of
data transfer; and the demand for increased data throughput. Additionally, SCSI
is also benefiting from the emerging "plug and play" standard, that is supported
by Windows operating systems and Intel microprocessor-based systems, which
simplifies the installation process, and from the growing usage of
multi-tasking, multi-threading operating systems for which the prevailing IDE
technology is less suited. For the computer systems products market, IDC
projects shipments of workstations, servers and other high performance systems
to exceed 8.5 million units in the year 2000, up from approximately 3.7 million
units in 1996, representing a 23% compound annual growth rate. For the overall
peripheral controller market, IDC projects the shipments of peripheral products,
such as hard disk drives, tape drives, removable disk drives and CD-ROM/DVD
drives to grow from approximately 166 million units shipped in 1996 to over 390
million units projected to be shipped in the year 2000, representing a 23%
compound annual growth rate.

22
<PAGE> 23

The continuing evolution towards higher performance computer systems has
led to the development of new connectivity solutions that provide even greater
levels of data interchange between computer systems and data storage peripheral
devices. Fibre Channel is emerging as a new industry standard to meet the demand
for increased connectivity and data transfer rates. Fibre Channel is an advanced
I/O standard which provides data transmission speeds up to approximately two and
one-half times the rate currently provided by the fastest SCSI-based solutions.
In addition, Fibre Channel is designed to maintain signal integrity while
allowing for data interchange between a computer system and up to eight times
more peripherals than SCSI. Furthermore, Fibre Channel is designed to support
the use of either a fibre optic connection or a more compact, cost-effective
version of the copper cable traditionally used for SCSI solutions. Fibre optic
connection allows the distance between a computer system and its data storage
peripheral devices to extend up to 10 kilometers. The Company believes Fibre
Channel will likely be the I/O technology of choice for larger, higher
performance data and network applications while SCSI-based products will
continue to be used in applications requiring lower functionality and
performance.

Computer system and peripheral device manufacturers select I/O technologies
for incorporation into their products primarily on the basis of application,
performance and connectivity needs. The I/O products selected must be
specifically tailored to the manufacturer's requirements, in order to be
compatible with the manufacturer's system or peripherals either on a turn-key
basis or with minimal developmental effort. In addition to being compatible with
the present system or peripherals, I/O products ideally must be both "forward"
and "backward" compatible with future and past computers and peripherals. That
is, there must be a ready migration path between the I/O product and other
products currently sold or under development by the manufacturer. Also, it is
critical that the I/O product be available at a reasonable cost and in a timely
manner, so as not to delay the manufacturer's time to market, which has become
increasingly important in an era of short product life cycles. In order to
achieve these goals, manufacturers increasingly seek to involve I/O product
suppliers in their product planning, validation and development cycles. By
including the I/O system providers in their planning and development process,
manufacturers not only ensure compatibility between product lines but also
reduce the average time to market for their products.

THE QLOGIC SOLUTION

QLogic is a leading designer and supplier of semiconductor and board level
I/O products. The Company has been designing and marketing SCSI-based products
for over 10 years and is a leading supplier of connectivity solutions to this
market sector. The Company is leveraging its technological expertise in SCSI
into higher and lower end hardware and software solutions for its OEM customer
base. In 1996, the Company introduced the industry's first fully integrated
single chip PCI to Fibre Channel controller. The Company also recently has
introduced devices based on IDE standards to address additional I/O needs of its
OEM customer base.

The Company works closely with its customers in order to anticipate and
help identify their needs. Even after a product is identified and validated, the
Company continues to work with the customer in a joint product development
process to ensure compatibility with the customer's future product designs. As a
result of this partnership oriented approach, the Company believes that its
customers benefit from significant time to market advantages. By gaining insight
into the customers' system needs, the Company believes that it is in a better
position to deliver I/O products with an easier migration path, thus reducing
the customers' firmware and software development costs and associated
implementation risks. In addition, by utilizing selected wafer fabrication
suppliers, the Company seeks to ensure that it has ready access to the latest
developments in wafer fabrication, while avoiding the fixed costs associated
with foundry ownership.

The Company's products are designed to reduce board space requirements on
plug-in cards, computer motherboards and peripheral controller boards by
integrating multiple I/O controller functions on a single chip. The Company
believes its products offer superior compatibility and ease of migration across
multiple I/O standards due to their use of common software or firmware. The
Company believes that its experience and focus on the SCSI market sector, the
ease of migration of its products, its current development efforts into I/O
standards such as IDE and Fibre Channel and its close customer relationships
with leading server, workstation and peripheral manufacturers provide the
Company with competitive advantages in the I/O product market.

23
<PAGE> 24

STRATEGY

QLogic's objective is to be a leading provider of high performance I/O
solutions to the IDE, SCSI and Fibre Channel sectors of the I/O market. Key
elements of the Company's strategy to achieve this objective include the
following:

Maintain Technological Leadership. The Company conducts active engineering
and development programs, in concert with its customers, to remain at the
forefront of I/O technology. The Company has traditionally been a leader in I/O
technologies, from the early developments in the SCSI standard to modern
developments in Fibre Channel connectivity. In 1985 the Company's predecessor
developed the first board level product for the SCSI standard, in 1990 the
Company's predecessor developed the industry's first fast SCSI solution and in
1996 QLogic introduced the industry's first fully integrated single chip PCI to
Fibre Channel controller. The Company recently has significantly expanded its
design and engineering resources to support its growing engineering and
development programs.

Facilitate Migration to New I/O Technologies. The Company intends to
broaden its product lines to allow its customers to quickly transition to Fibre
Channel and other new I/O technologies. The Company has designed its existing
I/O chip architecture to support new higher performance I/O technologies,
including Fibre Channel. By providing a more flexible chip architecture, the
Company seeks to minimize its customers' firmware and software migration
expenses and associated risks of implementation. The Company believes that OEMs
and end users will increasingly demand new I/O technologies with a ready
migration path from current products.

Increase Penetration of Existing Customer Base. The Company seeks to serve
a broad range of the I/O needs of its installed base of SCSI product customers.
The Company seeks to leverage its technological expertise in SCSI products, in
addition to its long standing vendor and product development relationships with
its customers, to successfully market its Fibre Channel, IDE and new SCSI
solutions to its existing customers. The Company believes that its existing
relationships, demonstrated commitment to customer support and the ease of
migration between its various product lines will provide it with a competitive
advantage over other I/O providers.

Broaden Customer Base and Sales Channels. As the Company enters into new
sectors of the I/O market, it intends to market its products to a variety of
customers that traditionally have not been candidates for sales of the Company's
SCSI-based products. The Company believes that the proliferation of Intel
microprocessor-based servers and workstations, as opposed to those based on
traditional RISC architectures, represents a significant new market opportunity.
The Company will attempt to serve this market initially through its existing
direct sales channel and distributors. The Company additionally intends to
identify new independent manufacturers' representatives and regional and
international distributors to facilitate its marketing efforts.

Improve Time to Market. The Company continually seeks to improve the time
to market of its products in order to improve the time to market of its
customers' products and thereby enhance their competitiveness. The Company is
significantly involved in many of its customers' product identification and
development processes. By maintaining this partnership approach to the product
development cycle, the Company's products are tailored for, and designed into,
its customers' products. The Company's IDE, SCSI and Fibre Channel products are
designed to preserve a substantial portion of a customer's existing firmware
investment and operate on substantially similar software, thus minimizing the
design time necessary during customers' product and technology migration.
Additionally, the Company believes that using selected third-party foundries
provides it with the flexibility to adopt new technologies and obtain increased
capacity, thereby allowing the Company to bring its products to market more
quickly.

TECHNOLOGY

The Company develops and markets I/O products for both the host and
peripheral connections of the I/O bus. For the host interface, the Company's
products include a variety of adapters, in both board and single chip integrated
circuit form, which address the server and workstation segments of the computer
market. For peripheral applications, the Company provides single chip
controllers for data storage peripheral devices, including hard disk drives,
tape drives, removable disk drives, CD-ROM drives and RAID subsystems. The

24
<PAGE> 25

Company's I/O products are currently based on the three most prevalent interface
standards: IDE, SCSI and Fibre Channel.

The Company has historically focused on the SCSI standard interface for its
I/O product development. The Company's initial design wins for SCSI-based host
products came from manufacturers of workstations and servers using RISC
processors. The Company developed an embedded RISC-based controller, which is
supplied with executable firmware capable of being custom tailored. The
Company's leading peripheral technological developments include a broad range of
Very Large Scale Integration ("VLSI") SCSI and IDE controllers, which
incorporate intelligent I/O controllers with powerful data error correction
capability, in order to ensure data integrity between the CPU and its
peripherals. After accumulating significant architectural and systems expertise
in designing SCSI devices over successive generations of the products, the
Company expanded its SCSI-based host adapter board and peripheral controller
product lines to address additional computer systems and data storage peripheral
market segments, such as IDE and Fibre Channel.

In 1996, the Company introduced the industry's first fully integrated
single chip PCI to Fibre Channel controller. Fibre Channel is a scalable data
transfer interface technology (currently implemented at 100 megabytes per
second) that maps multiple standard transport protocols, and utilizes compact
copper cables, or fiber optics to transmit data at distances up to 10
kilometers, while supporting various topologies for data transfer. The Company's
single chip design with an embedded transceiver provides certain advantages over
existing multi-chip solutions, including a smaller footprint, increased
reliability and a more cost-effective solution. The Company believes Fibre
Channel will become an important I/O interface for high performance peripherals
and networks over the next several years.

The Company's host adapter chip product line incorporates its Intelligent
SCSI Processor ("ISP"), which integrates certain controller functions, such as a
proprietary RISC processor, a host interface (PCI or SBus) and a protocol
processor (SCSI or Fibre Channel). By incorporating an I/O processor to control
SCSI or Fibre Channel operations and by including a proprietary RISC processor
to control and direct memory and software activities, the Company's ISP
architecture facilitates faster throughput and is designed to minimize customer
resource requirements as I/O standards evolve. Furthermore, the Company's
product architecture is designed to facilitate both upward and downward
compatibility. Customers' significant software investments can be preserved
during transition from Fast SCSI to Ultra SCSI, with only minimal additional
software design necessary to complete the upward migration to the Company's
Fibre Channel solutions.

For the peripherals market, the Company's triple embedded controller
("TEC") architecture integrates certain control functions such as buffer
controller, powerful data error correction and disk formatting, microprocessor
interface and I/O interface (SCSI, IDE or Fibre Channel). The Company's products
are designed to facilitate backward migration from SCSI to IDE and forward
migration from SCSI to Fibre Channel by ensuring that a substantial portion of a
customer's firmware investments can be preserved during the transition. The
Company's common architecture modules for ISP and TEC products are designed to
benefit the Company's customers by providing faster time to market, reduced
support costs, simplified technology transitions and increased performance.

The markets in which the Company competes are characterized by rapidly
changing technology, evolving industry standards and continuing improvements in
products and services. There can be no assurance that the Company will respond
effectively to technological changes or that the Company's products will conform
to evolving industry standards and protocols. The Company has invested and will
continue to invest significant resources in the development of its Fibre Channel
based products; there can be no assurance that Fibre Channel will be adopted as
a predominant industry standard, or that the Company's Fibre Channel products
will conform to an industry standard which has yet to be uniformly adopted. The
failure of the Company's products to gain acceptance within industry standards
and protocols would adversely affect the Company's business, financial condition
and results of operations. See "Risk Factors -- Rapid Technological Change;
Dependence on New Products; Industry Standards."

25
<PAGE> 26

PRODUCTS

QLogic designs and supplies semiconductor and board level I/O solutions for
peripheral and computer systems products. The Company's products have
traditionally been based on the SCSI standard, and the Company has recently
introduced products for the Fibre Channel and IDE standards.

<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------

PRODUCT DESCRIPTION
- ----------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERIPHERAL PRODUCTS
- ----------------------------------------------------------------------------------------------
Fast Architecture SCSI - First introduced in 1991
(FAS) - Supports latest SCSI standards
- Supports Fast and Ultra SCSI transfer rates (up to 40 MB/sec.)
- Supports 8- or 16-bit data handling
- May be used in host or peripheral applications
- ----------------------------------------------------------------------------------------------
Triple Embedded - First introduced in 1991
Controllers (TEC) - Single chip disk controllers
- Integrated buffer controller, formatter and SCSI processor
- Powerful on-chip data error correction
- Supports Fast and Ultra SCSI transfer rates (up to 40 MB/sec.)
- Supports 8- or 16-bit data handling
- ----------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS PRODUCTS
- ----------------------------------------------------------------------------------------------
Intelligent SCSI - First introduced in 1992
Processor (ISP) - - Embedded RISC single chip solution
Host Adapter Chips - Supports latest SCSI standards
- Supports transfer rates up to 40 MB/sec.
- Supports 8- or 16-bit data handling
- Supports direct PCI or SBus connection
- Recently shipped Fibre Channel evaluation units which operate at
transfer rates up to 100 MB/sec.
- ----------------------------------------------------------------------------------------------
QLA Product Family - - First introduced in 1993
Host Adapter Boards - Full line of host adapter cards with direct PCI or SBus connection
- Supports latest SCSI standards
- Incorporates the Company's ISP host adapter chips
- Provides a fully integrated, high performance board level I/O
interface solution
- Recently shipped Fibre Channel evaluation units which operate at
transfer rates up to 100 MB/sec.
- ----------------------------------------------------------------------------------------------
</TABLE>

SALES AND MARKETING

QLogic markets and distributes its products through a direct sales
organization supported by field application engineers, as well as through a
network of independent manufacturers' representatives and regional and
international distributors. In North America, the Company uses a tiered sales
and marketing approach, with a direct sales force to serve large and strategic
OEM accounts, OEM representatives that are focused on specific medium sized
accounts, and regional distributors and resellers that serve smaller accounts.
In the Pacific Rim, the Company sells directly as well as through a distributor.
In Europe, the Company sells its products through distributors and through a
representative. The Company believes that it is important to work closely with
its large peripheral and computer system manufacturer OEMs during their design
cycles. The Company supports these customers with extensive applications and
system design support, as well as training classes and seminars both in

26
<PAGE> 27

the field and from its offices in Costa Mesa, California. The Company also
maintains a high level of customer support through technical hotlines and
Internet communications.

The Company's manufacturers' representatives and distributors are not
subject to minimum purchase requirements and can discontinue marketing any of
the Company's products at any time. The Company's distributors are permitted to
return to the Company a portion of the products purchased by them. In addition,
the Company provides its distributors with price protection in the event that
the Company reduces the prices of its products. The loss of one or more
manufacturers' representatives or distributors could have an adverse effect on
the Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Small Number of Customers."

The Company's sales efforts are focused on establishing and developing long
term relationships with OEMs and other potential customers. The sales cycle
typically begins with a design win, which entails a product of the Company being
selected to be incorporated into a potential customer's computer system or data
storage peripherals. Once the Company secures a design win with a given
customer, the time to production shipment can range between six and 18 months.
After winning a design with a potential customer, QLogic works closely with the
customer to integrate its product with the customer's current and next
generation products. Due to the extensive amounts of resources required for each
customer design, typically only one I/O solution is designed into any given
customer product. After being designed into a customer's product, sales are
typically made through purchase orders which are subject to cancellation,
postponement or other types of delays.

Export revenues of the Company's products accounted for approximately 45%,
55% and 62% of net revenues for fiscal 1997, 1996 and 1995, respectively.
International sales are denominated in U.S. dollars. Due to its international
sales, the Company is subject to a number of risks, including restrictions
related to export regulations as well as those related to political upheaval and
economic downturns in foreign nations. See "Risk Factors--Risks of Doing
Business in International Markets."

CUSTOMERS

The Company's primary customers are regional and international distributors
and major domestic and international suppliers and manufacturers of servers,
workstations and data storage peripherals. The following is a representative
list of the Company's leading customers during fiscal 1997:

<TABLE>
<S> <C>
Atto Technology, Inc. Jabil Circuit, Inc.
Avex Electronics, Inc. Micropolis Corporation
Axis Components, Inc. NewTek Incorporated
Digital Equipment Corporation Silicon Graphics, Inc.
Distributed Processing Technology Sun Microsystems, Inc.
Fujitsu Limited Tokyo Electron Limited
GDL Corporation, Ltd. Vela Research, Inc.
Hitachi Computer Products (America),
Inc.
</TABLE>

27
<PAGE> 28

customer base so that total sales to any one customer or any small number of
customers are not a significant percentage of overall sales. The Company has
recently established new channels of distribution in the Pacific Rim and, as a
result, has terminated its relationship with Tokyo Electron Limited. There can
be no assurance that the Company will be successful in further diversifying its
customer base. The Company believes that its major customers continually
evaluate whether or not to purchase products from alternate or additional
sources. Accordingly, there can also be no assurance that a major customer will
not reduce, delay or eliminate its purchases from the Company. Any such
reduction, delay or loss of purchases could have a material adverse effect on
the Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Small Number of Customers."

ENGINEERING AND DEVELOPMENT

In order to compete successfully, the Company believes that it must
continually design, develop and introduce new products that take advantage of
market opportunities and address emerging standards. The Company's strategy is
to leverage its substantial base of architectural and systems expertise and
product innovation capabilities to address a broad range of I/O solutions as
well as to develop products for its core SCSI business. The Company is currently
engaged in the development of integrated circuit I/O controllers for additional
I/O standards and enabling technologies, such as Fibre Channel, Ultra SCSI, LVD,
Ultra IDE and 1394 (Firewire). The Company intends to broaden its product lines
while continuing to allow its customers to transition rapidly to Fibre Channel
and other emerging I/O standards.

At June 29, 1997, the Company employed approximately 93 engineers,
including technicians and support personnel engaged in the development of new
products and the improvement of existing products. There can be no assurance
that the Company will continue to be successful in attracting and retaining key
personnel with the skills and expertise necessary to develop new products in the
future. Engineering and development expenses were approximately $10.4 million,
$7.2 million and $7.6 million for fiscal 1997, 1996 and 1995, respectively.

The markets for the Company's products are characterized by rapid
technological change, evolving industry standards and product obsolescence. The
Company's success is highly dependent upon the timely completion and
introduction of new products at competitive prices and performance levels. There
can be no assurance that the Company will be able to identify new product
opportunities successfully and develop and bring to market new products in a
timely manner, or that the Company will be able to respond effectively to
technological advancements or new product announcements. See "Risk
Factors -- Rapid Technological Change; Dependence on New Products; Industry
Standards."

BACKLOG

The Company's backlog of orders was approximately $20.6 million at March
30, 1997, compared to approximately $15.5 million at March 31, 1996. All backlog
is scheduled for delivery within six months or less. Most orders are subject to
rescheduling and/or cancellation with little or no penalty. Purchase order
release lead times depend upon the scheduling practices of the individual
customer, and the rate of booking new orders fluctuates from month to month. The
Company's customers have in the past encountered uncertain and changing demand
for their products. Orders are typically placed based on customer forecasts. If
demand falls below customers' forecasts, or if customers do not control their
inventories effectively, they may cancel or reschedule shipments previously
ordered from the Company. In the past, the Company has experienced, and may at
any time and with minimal notice in the future experience, cancellations and
postponements of orders. Therefore, the level of backlog at any particular date
is not necessarily indicative of sales for any future period.

COMPETITION

28
<PAGE> 29

next generation systems. A design win usually ensures a customer will purchase
the product until a higher performance standard is available or a competitor can
demonstrate a significant price/performance advantage. All of the Company's
products compete with products available from several companies, many of whom
have research and development, long term guaranteed supply capacity, marketing
and financial resources, manufacturing capability and customer support
organizations that are substantially greater than those of the Company. The
Company believes that its future operating results will depend, in part, upon
its ability to continue to improve product and process technologies and develop
new technologies in order to maintain the performance advantages of products and
processes relative to competitors, to adapt products and processes to
technological changes, and to identify and adopt emerging industry standards.
Because of the complexity of its products, the Company has experienced delays
from time to time in completing products on a timely basis. If the Company is
unable to design, develop and introduce competitive new products on a timely
basis, its future operating results would be adversely affected.

The Company currently competes primarily with Adaptec, Inc. and Symbios
Logic, Inc. In the Fibre Channel sector of the I/O market, the Company expects
to compete primarily with Adaptec, Inc., Symbios Logic, Inc. and Hewlett-Packard
Company. In the IDE sector, the Company expects to compete with Adaptec, Inc.
and Cirrus Logic, Inc. The Company may compete with some of its larger disk
drive and computer systems customers, some of which have the capability to
develop I/O controller integrated circuits for use in their products. At least
one large OEM customer in the past has decided to vertically integrate and has
therefore ceased purchases from the Company.

The Company believes that one of its principal competitive strengths in the
integrated circuit I/O controller market is its ability to obtain major design
wins as the result of its systems level expertise, integrated circuit design
capability and substantial experience in I/O applications, particularly SCSI.
The Company believes competitive factors in design wins are time to market,
performance, product features, price, quality, technical support and ease of
migration path to other I/O standards. The Company will have to continue to
develop products appropriate to its markets to remain competitive, as its
competitors continue to introduce products with improved performance
characteristics. While the Company continues to devote significant resources to
research and development, there can be no assurance that such efforts will be
successful or that the Company will develop and introduce new technology and
products in a timely manner. In addition, while relatively few competitors offer
a full range of SCSI and other I/O products, additional domestic and foreign
manufacturers may increase their presence in, and resources devoted to, these
markets. There can be no assurance that the Company will compete successfully in
the future against its existing competitors or potential competitors. See "Risk
Factors -- Competition" and "-- Rapid Technological Change; Dependence on New
Products; Industry Standards."

MANUFACTURING

The Company subcontracts the manufacturing of its semiconductor chips and
its host adapter boards to independent foundries and subcontractors, which
allows the Company to avoid the high costs of owning, operating and constantly
upgrading a wafer fabrication facility and a host adapter board assembly
factory. As a result, the Company focuses its resources on product design and
development, quality assurance, sales and marketing and customer support. The
Company designs both its semiconductor and host adapter board products, and
performs final tests on products, including tests required under the Company's
ISO9001/TickIT Certification. The Company also provides fab process reliability
tests, conducts failure analysis and audits its finished goods inventory to
confirm the integrity of its quality assurance procedures.

The Company's semiconductor products are ASICs, currently manufactured for
the Company by a number of domestic and offshore foundries. The Company's major
semiconductor suppliers are Toshiba, NEC Electronics, LSI Logic and Samsung
Semiconductor, Inc. Most of the Company's products are manufactured using 0.8,
0.6 or 0.5 micron process technology.

The Company is dependent on its foundries to allocate to the Company a
portion of their foundry capacity sufficient to meet the Company's needs and to
produce products of acceptable quality and with acceptable manufacturing yields
in a timely manner. These foundries fabricate products for other companies and
manufacture products of their own design. The Company does not have long-term
agreements with any of its

29
<PAGE> 30

foundries, and purchases both wafers and finished chips on a purchase order
basis. Therefore, the foundries generally are not obligated to supply products
to the Company for any specific period, in any specific quantity or at any
specific price, except as may be provided in a particular purchase order. The
Company works with its existing foundries, and intends to qualify new foundries,
as needed, to obtain additional manufacturing capacity. There can be no
assurance, however, that the Company will be able to obtain additional capacity.

The Company currently purchases its semiconductor products from its
foundries either in finished form or wafer form. The Company uses subcontractors
for die assembly of its semiconductor products purchased in wafer form, and for
assembly of its host adapter board products. In the assembly process for the
Company's semiconductor products, the silicon wafers are separated into
individual die, which are then assembled into packages and tested. Following
assembly, the packaged devices are further tested and inspected by the Company
prior to shipment to customers. For its host adapter board products, the Company
purchases components and printed circuit boards as kits. The Company provides
these kits to contract manufacturing companies that work together with the
Company's component suppliers to assemble the boards to the Company's
specifications.

The Company believes most component parts used in its host adapter boards
are standard off-the-shelf items which are, or can be, purchased from two or
more sources. The Company selects suppliers on the basis of technology,
manufacturing capacity, quality and cost. Whenever possible and practicable, the
Company strives to have at least two manufacturing locations for each host
adapter board and chip product. Nevertheless, the Company's reliance on
third-party manufacturers involves risks, including possible limitations on
availability of products due to market abnormalities, unavailability of, or
delays in obtaining access to, certain product technologies and the absence of
complete control over delivery schedules, manufacturing yields, and total
production costs. The inability of the Company's suppliers to deliver products
of acceptable quality and in a timely manner or the inability of the Company to
procure adequate supplies of its products could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Risk Factors -- Dependence on Wafer Suppliers and Other Subcontractors."

INTELLECTUAL PROPERTY

Although the Company has eight patents issued and one additional patent
application pending in the United States, the Company relies primarily on its
trade secrets, trademarks and copyrights to protect its intellectual property.
The Company attempts to protect its proprietary information through agreements
with its customers, suppliers, employees and consultants, and through other
security measures. Although the Company intends to protect its rights
vigorously, there can be no assurance that these measures will be successful. In
addition, the laws of certain countries in which the Company's products are or
may be developed, manufactured or sold, including various countries in Asia, may
not protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.

While the Company's ability to compete may be affected by its ability to
protect its intellectual property, the Company believes that, because of the
rapid pace of technological change in the I/O solutions markets, its technical
expertise and ability to introduce new products on a timely basis will be more
important in maintaining its competitive position than protection of its
intellectual property. Although the Company continues to implement protective
measures and intends to defend vigorously its intellectual property rights,
there can be no assurance that these measures will be successful.

The Company has received notices of claimed infringement of trademark
rights in the past, and there can be no assurance that third parties will not
assert claims of infringement of trademarks or any other intellectual property
rights against the Company with respect to existing and future products. In the
event of a patent or other intellectual property dispute, the Company may be
required to expend significant resources to develop non-infringing technology or
to obtain licenses to the technology which is the subject of the claim. There
can be no assurance that the Company would be successful in such development or
that any such license would be available on commercially reasonable terms, if at
all. In the event of litigation to determine the validity of any third party's
claims, such litigation could result in significant expense to the Company, and
divert the efforts of the Company's technical and management personnel, whether
or not such litigation is determined in favor of the Company. See "Risk
Factors -- Lack of Significant Patent Protection; Infringement Risks."

30
<PAGE> 31

EMPLOYEES

The Company had 200 employees as of June 29, 1997. The Company believes
that its future prospects will depend, in part, on its ability to continue to
attract, train, motivate, retain and manage skilled engineering, sales,
marketing and executive personnel. None of QLogic's employees is represented by
a labor union. The Company believes that its relations with its employees are
good. See "Risk Factors -- Dependence on Key Personnel."

PROPERTIES

The Company's corporate offices and principal product development, sales
and operational facilities are currently located in one, approximately 70,000
square foot building in Costa Mesa, California. The Company occupies the
facility pursuant to a lease that expires in 1999. The Company believes that its
current facilities are adequate for its present level of operations.

LEGAL PROCEEDINGS

From time to time, the Company is a party to ordinary disputes arising in
the normal course of business. The Company does not believe that the outcome of
these matters will have a material adverse effect on the Company's business,
financial condition or results of operations.

31
<PAGE> 32

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company, including their ages as of June
29, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Gary E. Liebl (1)............. 55 Chairman of the Board of Directors
H.K. Desai.................... 51 President, Chief Executive Officer and Director
Thomas R. Anderson............ 53 Vice President and Chief Financial Officer
Mark K. Edwards............... 38 Vice President -- Sales and Corporate Marketing
Lawrence F. Fortmuller, 48 Vice President and General Manager -- Computer Systems
Jr. ........................ Group
Michael R. Manning............ 43 Secretary and Treasurer
David Tovey................... 52 Vice President and General Manager -- Peripheral
Products Group
James A. Bixby (1)............ 50 Director
Carol L. Miltner (2).......... 54 Director
George D. Wells (2)........... 61 Director
</TABLE>

- ---------------

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

Mr. Liebl has been Chairman of the Board of Directors of the Company since
the Distribution in February 1994. Mr. Liebl currently serves as a director of
Smartflex Systems, Inc., a manufacturing services provider of sophisticated
electronic assemblies. Beginning in October 1985, Mr. Liebl held senior
management positions, including Chairman of the Board and Chief Executive
Officer, at Cipher Data Products, Inc., a manufacturer of tape and optical disk
drives to the computer industry, until such corporation was acquired by Archive
Corporation in April 1990.

Mr. Desai joined the Company in August 1995 as President and Chief
Technical Officer of QLogic and President of QLogic Foreign Sales Corporation.
He was subsequently promoted to President and Chief Executive Officer and became
a Director in January 1996. From May 1995 to August 1995, he was Vice President,
Engineering (Systems Products) at Western Digital Corporation, a manufacturer of
disk drives. From July 1990 until May 1995, he served as Director of
Engineering, and subsequently Vice President of Engineering at the Company. From
1980 until joining the Company in 1990, Mr. Desai was an Engineering Section
manager at Unisys Corporation, a computer system manufacturer.

Mr. Anderson joined the Company in July 1993 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. Anderson was Executive Vice
President, Chief Operating Officer and Chief Financial Officer of HIARC, a
software startup company. From October 1990 to January 1993, he was corporate
Senior Vice President and Chief Financial Officer of Distributed Logic
Corporation, a manufacturer of tape and disk controllers and computer
subsystems. From June 1982 to April 1990, he held various positions with Cipher
Data Products, Inc., including corporate Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary. Before joining Cipher, Mr. Anderson
held various financial positions with Dataproducts Corporation, Rockwell
International and Arthur Andersen LLP.

Mr. Edwards joined the Company in October 1996 as Vice President -- Sales
and Corporate Marketing. Prior to joining the Company, Mr. Edwards served as
Vice President -- Sales and Marketing for the Storage Systems Division of Unisys
Corporation, from August 1994 to September 1996, and as Director -- European
Channels from August 1993 through August 1994. Prior to joining Unisys, Mr.
Edwards served as Regional Sales Manager for Zitel Corporation from April 1991
through August 1993. Prior to joining Zitel, Mr. Edwards held a sales and
management position with Digital Equipment Corporation.

32
<PAGE> 33

Mr. Fortmuller joined the Company in October 1996 as Vice President and
General Manager -- Computer Systems Group. Prior to joining the Company, Mr.
Fortmuller held various positions with AST Research, Inc., a manufacturer of
microprocessor-based systems, for nine years, including Vice
President -- Americas Marketing from September 1995 to October 1996; Vice
President and General Manager -- Server Business Unit from August 1994 through
September 1995; Director of Product Marketing from 1990 through August 1994; and
various product marketing positions. Prior to joining AST Research, Inc., Mr.
Fortmuller held various product marketing positions with Data Card Corporation,
MSI Data Corporation and Litton Industries, Inc.

Mr. Manning joined the Company in June 1993 as Treasurer and Secretary.
Previously, Mr. Manning held various positions at Emulex, including Senior
Director and Treasurer from April 1991 with the additional role of Secretary in
1992. Mr. Manning joined Emulex in July 1983 as Tax Director. Prior to joining
Emulex, Mr. Manning was a Tax Manager at KPMG Peat Marwick LLP, independent
certified public accountants.

Mr. Tovey has served as Vice President and General Manager -- Peripheral
Products Group since October 1996. From April 1994 to October 1996, Mr. Tovey
served as Vice President -- Marketing of the Company. From March 1985 to April
1994, he held various positions in the Disk Products Division of Toshiba America
Information Systems, a computer system and disk drive manufacturer, including
Director of Technology Planning and Vice President -- HDD Marketing. Prior to
1985, Mr. Tovey held various marketing and sales management positions with
Unisys Corporation and engineering positions with Ferranti, Ltd. in the U.K.

Mr. Bixby became a director of the Company in February 1994. He is Vice
President -- Business Development of Rockwell Semiconductor Systems, a producer
of high-performance, mixed-signal integrated circuits. Since 1996, Mr. Bixby has
been an officer of Rockwell Semiconductor. Previously, Mr. Bixby served as an
officer of Brooktree Corporation, most recently as Chairman, President and Chief
Executive Officer, from 1983 until its acquisition by Rockwell Semiconductor in
1996. Before joining Brooktree, Mr. Bixby was Director of Engineering at Spin
Physics, a division of Eastman Kodak Company.

Ms. Miltner became a director of the Company in February 1994. She is
President of Miltner & Associates, a management consultant and seminar firm. Ms.
Miltner also serves as a director of Multiple Zones International. From December
1993 until March 1995, she served as Executive Vice President of Sales and
Marketing of AmeriQuest Technologies, Inc., a subassembler of storage products
and distributor of microcomputer products. From July 1991 to December 1993 she
was President of Motivation by Miltner. From April 1989 to July 1991, she was
Senior Vice President -- Sales of Merisel, a distributor of microcomputer
products. For the previous four years, she was Senior Vice President -- Sales of
Ingram Micro, Inc. a distributor of computer products.

Mr. Wells became a director of the Company in February 1994. He also
currently serves as a member of the Boards of Directors of Exar Corporation, a
manufacturer of analog and mixed-signal integrated circuits, and Align Rite
Corporation, a manufacturer of photomasks. He was President and Chief Executive
Officer of Exar Corporation, from June 1992 until October 1996. Before joining
Exar, he served as President and Chief Operating Officer of LSI Logic, a
manufacturer of HCMOS and BiCMOS application specific integrated circuits, for
seven years.

33
<PAGE> 34

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of June 25, 1997, information regarding
beneficial ownership of the Company's Common Stock by each director and each
executive officer and by all directors and executive officers of the Company as
a group. As of June 25, 1997, there were no persons known by the Company to own
beneficially more than 5% of the Company's Common Stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
-------------------------------------------
PERCENT PRIOR PERCENT AFTER
NUMBER TO OFFERING OFFERING
------- ------------- -------------
<S> <C> <C> <C>
Gary E. Liebl (2)....................................... 15,500 * *
H.K. Desai (3).......................................... 67,938 1.1% *
Thomas R. Anderson (4).................................. 35,516 * *
Mark K. Edwards......................................... -- * *
Lawrence F. Fortmuller, Jr.............................. 1,500 * *
Michael R. Manning (5).................................. 37,569 * *
David Tovey (6)......................................... 32,049 * *
James A. Bixby (7)...................................... 12,500 * *
Carol L. Miltner (8).................................... 5,491 * *
George D. Wells......................................... 5,500 * *
All Directors and Executive Officers 3.5% 2.6%
as a group (10 Persons)............................... 213,563
</TABLE>

- ---------------

* Less than 1% of the outstanding shares of Common Stock.

(1) Based upon 5,864,070 shares of Common Stock outstanding prior to the
Offering and 8,164,070 shares of Common Stock outstanding after the
offering. Each named person and all directors and executive officers as a
group are deemed to be the beneficial owners of shares of Common Stock that
may be acquired within 60 days upon exercise of stock options. Accordingly,
the number of shares and percentages set forth next to the name of such
person and all directors and executive officers as a group include the
shares of Common Stock issuable upon stock options exercisable within 60
days. However, the shares of Common Stock so issuable upon such exercise by
any such person are not included in calculating the percentage of Common
Stock beneficially owned by any other stockholder.

(2) Includes 12,500 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(3) Includes 60,938 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(4) Includes 31,016 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(5) Includes 3,400 shares held for the benefit of Mr. Manning's minor children.
Also includes 20,718 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(6) Includes 23,749 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(7) Consists entirely of shares which may purchased pursuant to stock options
which are currently, or within the next 60 days, will be, exercisable.

(8) Includes 4,166 shares which may be purchased pursuant to stock options which
are currently, or within the next 60 days, will be, exercisable.

34
<PAGE> 35

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 12,500,000 shares of common stock, $0.10
par value ("Common Stock"), of which 5,864,070 shares were issued and
outstanding at June 29, 1997, and 1,000,000 shares of Preferred Stock, $0.10 par
value ("Preferred Stock"), of which 200,000 shares have been designated as
Series A Junior Participating Preferred Stock, $0.001 par value (the "Series A
Preferred Stock"), none of which was issued and outstanding at June 29, 1997.

COMMON STOCK

Each stockholder is entitled to one vote for each share of Common Stock
held of record on all matters to be voted on by stockholders, and stockholders
are not entitled to cumulate votes for the election of directors. Stockholders
have no preemptive rights or other subscription rights. There are no conversion
rights or redemption rights with respect to shares of Common Stock. All
outstanding shares of Common Stock are, and those offered hereby will be, when
issued, validly issued, fully paid and nonassessable. Holders of Common Stock
are entitled to such dividends as may be declared by the Board of Directors out
of funds legally available therefor. On liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive pro rata the
net assets of the Company remaining after the payment of debts, expenses and the
liquidation preference of any outstanding shares of Preferred Stock.

PREFERRED STOCK

The Company's Board of Directors, pursuant to the Company's Restated
Certificate of Incorporation, as amended, is authorized to issue the Preferred
Stock in one or more series and to fix the voting rights, liquidation
preferences, dividend rights, conversion rights, redemption rights and terms,
including sinking fund provisions, and certain other rights and preferences of
the Preferred Stock. The Board of Directors, without stockholder approval, can
therefore, issue Preferred Stock with voting, conversion and other rights which
could adversely affect the voting power and other rights of, and amounts payable
with respect to, the Common Stock. This may be deemed to have a potential
anti-takeover effect because the issuance of Preferred Stock in accordance with
such provision may delay, defer or prevent a change of control of the Company
and could adversely affect the price of the Company's Common Stock. In
connection with the Company's Shareholder Rights Plan, the Board of Directors
designated rights, preferences and privileges of the Series A Preferred Stock
with the purpose of preventing hostile takeovers of the Company that are unfair
to the holders of Common Stock.

SHAREHOLDER RIGHTS PLAN

On June 4, 1996 the Company's Board of Directors adopted the Shareholder
Rights Plan, pursuant to which preferred stock rights (the "Rights") were
distributed in the form of a dividend to stockholders of record on the close of
business on June 20, 1996 (the "Dividend Date") on the basis of one Right for
each share of Common Stock held. One Right will also attach to each share of
Common Stock issued by the Company subsequent to the Dividend Date and prior to
the Distribution Date (as defined below).

In general, the Rights become exercisable or transferable only upon the
occurrence of certain events related to changes in ownership of the Common
Stock. Once exercisable, each Right entitles its holder to purchase from the
Company one one-hundredth of a share ("Unit") of Series A Preferred Stock at a
purchase price of $45.00 per Unit, subject to adjustment. The Rights will
separate from the Common Stock and become exercisable or transferable on a
distribution date (the "Distribution Date"), which will occur on the earlier of
(i) 10 days following a public announcement that a person or group of affiliated
or associated persons (an "Acquiring Person") has acquired beneficial ownership
of securities representing 15% or more of the Common Stock or (ii) 10 business
days following the commencement of a tender or exchange offer that would result
in a person or group of related persons becoming an Acquiring Person. Upon the
occurrence of certain other events related to changes in the ownership of the
Common Stock, each holder of a Right would be entitled to purchase shares of the
Common Stock, or an acquiring corporation's common stock, having a market value
equal to two times the exercise value of the Right.

35
<PAGE> 36

The Rights expire on the earliest of (i) June 4, 2006, (ii) consummation of
a merger transaction with a person or group who acquires Common Stock pursuant
to a transaction approved by a majority of the disinterested members of the
Company's Board of Directors, and (iii) redemption of the Rights. Subject to
certain conditions, the Rights may be redeemed by the Company's Board of
Directors at any time at a price of $0.001 per Right. The Rights are not
currently exercisable and trade together with the shares of Common Stock
associated therewith.

The Rights, if exercised, will cause a substantial dilution to the equity
interest in QLogic to a person's or group's ownership interest in the Company's
Common Stock that attempts to acquire the Company on terms not approved by the
Company's Board of Directors. See "Risk Factors -- Potential Effect of
Anti-Takeover Provisions" and "Description of Capital Stock-- Delaware Law."

DELAWARE LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
either (i) prior to the date at which the person becomes an interested
stockholder, the Board of Directors approves such transaction or business
combination, (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of such
transaction, or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent). A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to such
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own) 15%
or more of the corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is Harris
Trust Company of California.

36
<PAGE> 37

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, for whom
Cowen & Company, Prudential Securities Incorporated and Morgan Keegan & Company,
Inc. are acting as representatives (the "Representatives"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of Common Stock set forth opposite the name of such
Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Cowen & Company........................................................... 598,000
Prudential Securities Incorporated........................................ 598,000
Morgan Keegan & Company, Inc. ............................................ 299,000
Bear, Stearns & Co. Inc. ................................................. 45,000
Donaldson, Lufkin & Jenrette Securities Corporation....................... 45,000
A.G. Edwards & Sons, Inc. ................................................ 45,000
Hambrecht & Quist LLC..................................................... 45,000
Lehman Brothers Inc. ..................................................... 45,000
Morgan Stanley & Co. Incorporated......................................... 45,000
Oppenheimer & Co., Inc. .................................................. 45,000
PaineWebber Incorporated.................................................. 45,000
Robertson, Stephens & Company LLC......................................... 45,000
Burnham Securities Inc. .................................................. 25,000
Crowell, Weedon & Co. .................................................... 25,000
Cruttenden Roth Incorporated.............................................. 25,000
Gerard Klauer Mattison & Co., Inc. ....................................... 25,000
Janney Montgomery Scott Inc. ............................................. 25,000
C.L. King & Associates, Inc. ............................................. 25,000
Nesbitt Burns Securities Inc. ............................................ 25,000
Pennsylvania Merchant Group Ltd........................................... 25,000
Piper Jaffray Inc. ....................................................... 25,000
Rauscher Pierce Refsnes, Inc. ............................................ 25,000
Raymond James & Associates, Inc. ......................................... 25,000
Rodman & Renshaw, Inc. ................................................... 25,000
Soundview Financial Group, Inc. .......................................... 25,000
Tucker Anthony Incorporated............................................... 25,000
Unterberg Harris.......................................................... 25,000
Wessels, Arnold & Henderson, L.L.C. ...................................... 25,000
---------
Total........................................................... 2,300,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below),
if any of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public initially at the public offering price set forth on the cover page of
this Prospectus and in part to certain dealers at such price less a concession
not in excess of $0.96 per share. The Underwriters may allow, and such dealers
may re-allow, a concession not in excess of $0.10 per share to certain brokers
and dealers. After the shares of Common Stock are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Representatives.

37
<PAGE> 38

The Company has granted the Underwriters an option, exercisable for up to
30 days after the date of this Prospectus, to purchase up to an aggregate of
345,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them as shown in the foregoing table bears to the 2,300,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the 2,300,000 shares of
Common Stock offered hereby.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act and to
contribute to payments that the Underwriters may be required to make in respect
thereof.

The Company and the Company's officers and directors have agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock or any right to acquire Common Stock for a period of 90 days after the
date of this Prospectus without the prior written consent (which consent may be
given without notice to the Company's stockholders or other public announcement)
of Cowen & Company, on behalf of the Underwriters. Cowen & Company has advised
the Company that it has no present intention of releasing any of the Company's
stockholders or option holders from such lock-up agreements until the expiration
of such 90-day period.

In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act or any successor
rule or regulation thereto. Passive market making consists of displaying bids on
the Nasdaq National Market limited by the highest independent bid for the
security and effecting purchases limited by such prices and in response to order
flow. Net purchases by a passive market maker on each day are generally limited
in amount to 30% of the passive market maker's average daily trading volume in
Common Stock during a specified prior period and must be discontinued when such
limit is reached. Passive market making may stabilize the market price of Common
Stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.

In order to facilitate this offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with this offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
the Common Stock in the open market. The Underwriters may also reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the offering, if the Underwriters repurchase previously distributed
Common Stock in transactions to cover their short positions, in stabilization
transactions or otherwise. Finally, the Underwriters may bid for, and purchase,
shares of the Common Stock in market making transactions and impose penalty
bids. These activities may stabilize or maintain the market price of the Common
Stock above market levels that may otherwise prevail. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

Cowen & Company has in the past and may in the future provide certain
financial advisory services to the Company for which it has received and may
receive customary fees and reimbursement of expenses.

LEGAL MATTERS

The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Newport Beach, California. Pillsbury Madison & Sutro LLP, Menlo
Park and San Francisco, California, is acting as counsel for the Underwriters in
connection with certain legal matters relating to the shares of Common Stock
offered hereby.

38
<PAGE> 39

EXPERTS

The consolidated financial statements as of March 31, 1996 and March 30,
1997 and for each of the years in the three-year period ended March 30, 1997,
have been included herein and in the Registration Statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

This Prospectus, which constitutes a part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies may be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office in Washington, D.C. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith, files reports, proxy or information statements,
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W. Washington, D.C. 20549, as well as at the following Regional Offices: 7
World Trade Center, 13th Floor, New York, New York 10048, and 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can
be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, by mail at
prescribed rates. In addition, the Commission has a Web site on the World Wide
Web at http://www.sec.gov, containing registration statements, reports, proxy
and information statements and other information that registrants, such as the
Company, file electronically with the Commission.

39
<PAGE> 40

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated herein by reference:

(i) The description of the Common Stock contained in the Company's
Registration Statement on Form 10 (Commission file number 0-23298), filed
on February 15, 1994;

(ii) The description of the Rights contained in the Company's
Registration Statement on Form 8-A, filed on June 19, 1996;

(iii) The Company's Annual Report on Form 10-K for the fiscal year
ended March 30, 1997, as amended on July 28, 1997 by Form 10-K/A;

(iv) The Company's Current Report on Form 8-K, filed on July 21, 1997;
and

(v) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 29, 1997.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be part hereof from the date of filing such documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated herein by reference, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference herein (other than exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated by
reference into the information this Prospectus incorporates). Such requests
should be directed to QLogic Corporation, Attention: Thomas R. Anderson, Vice
President and Chief Financial Officer, 3545 Harbor Boulevard, Costa Mesa,
California 92626, telephone number (714) 438-2200.

40
<PAGE> 41

GLOSSARY

Bus. Any of the internal control paths which travel from the central
processing unit to any of the adapters, the I/O ports, or to the random access
memory of a computer. The bus is the primary means of communications between
components in a personal computer, workstation or server.

Controller. A functional unit that controls one or more I/O channels.
Peripheral controllers receive data from the host computer, arrange and store
the data in a manner suitable for the storage media, retrieve data, correct data
for errors and return the data to the host computer. Host controllers receive
commands from the host computer, execute data transfers to and from the
peripheral device and supervise the placement of the data in the host computer
memory.

Fibre Channel. An interface standard for connecting peripheral devices to
computer systems and networks. Fibre Channel was developed and standardized in
order to provide increased data transfer speed, reduced wiring complexity,
greater connectivity and to enable greater distances between the connected
devices.

IDE. Integrated Drive Electronics. A basic interface between the computer
and a limited number of data storage devices. Enhanced IDE and Ultra IDE refer
to newer technology that offers improved performance, higher capacity support
and increased options. IDE is the I/O interface commonly associated with
personal computers.

ISP. Intelligent SCSI Processor. The Company's integrated circuit I/O
architecture which integrates an I/O processor and a proprietary RISC-based
processor on a single chip, facilitating faster host I/O transfers, software
transparency across multiple I/O standards and greater I/O transfer autonomy
from the host CPU.

LVD. Low Voltage Differential. A proposed signaling standard which
increases SCSI cable length and speed. LVD is used to implement I/O products
based on Ultra2 SCSI, which can operate at speeds up to 80 megabytes per second,
and is significantly, but not completely, backward compatible with the current
Ultra SCSI standard.

PCI. Peripheral Component Interconnect. Introduced in 1993, PCI is a local
bus architecture designed to support peripherals on a dedicated electronic
pathway closer to the central processing unit in order to improve system
performance.

RAID. Redundant Array of Independent Disks. In order to prevent system
data loss due to hard drive failure, RAID devices share data across multiple
lower capacity hard drives. By adding some redundancy, the system can tolerate
the failure of a single disk without shutdown or data loss. In addition, the
system can obtain significant improvements in data transfer rates and time to
data, as compared to a single disk solution.

RISC. Reduced Instruction Set Computing. A microprocessor architecture
designed to reduce the number of instructions and accelerate processing power
for workstations, servers and, more recently, personal computers.

SCSI. Small Computer System Interface. An interface standard for
connecting peripheral devices to a computer system. SCSI defines a special bus
cable dedicated to data transfer between the computer and up to 15 peripherals,
each with its own controller. The original standard has an 8-bit wide bus and a
transfer rate of five megabytes (MB) per second. Fast SCSI has an 8-bit wide bus
and a maximum data transfer rate of 10 MB/sec. Fast Wide SCSI has a 16-bit wide
bus and a maximum data transfer rate of 20 MB/sec. Ultra SCSI has an 8- or
16-bit wide bus and a maximum data transfer rate of 40 MB/sec. Ultra2 SCSI,
which has not yet been deployed, has an 8- or 16-bit wide bus and a maximum data
transfer rate of 80 MB/sec.

41
<PAGE> 42

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of March 31, 1996 and March 30, 1997................... F-3
Consolidated Statements of Income for the years ended April 2, 1995, March 31, 1996
and
March 30, 1997...................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended April 2, 1995,
March 31, 1996 and March 30, 1997................................................... F-5
Consolidated Statements of Cash Flows for the years ended April 2, 1995, March 31,
1996 and March 30, 1997............................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 43

INDEPENDENT AUDITORS' REPORT

The Board of Directors
QLogic Corporation:

We have audited the accompanying consolidated balance sheets of QLogic
Corporation and subsidiary as of March 31, 1996 and March 30, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended March 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of QLogic
Corporation and subsidiary as of March 31, 1996 and March 30, 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 30, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Orange County, California
May 9, 1997

F-2
<PAGE> 44

QLOGIC CORPORATION

CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Cash and cash equivalents................................................ $ 8,414 $19,091
Accounts and notes receivable, less allowance for doubtful accounts of
$506 and $636 in 1996 and 1997, respectively........................... 7,033 5,720
Inventories.............................................................. 6,670 4,794
Deferred income taxes.................................................... 648 1,149
Prepaid expenses and other current assets................................ 239 391
------- -------
Total current assets................................................... 23,004 31,145
Property and equipment, net.............................................. 5,520 5,043
Other assets............................................................. 15 775
------- -------
$28,539 $36,963
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................................... $ 6,177 $ 3,994
Accrued expenses......................................................... 3,218 7,115
Current installments of capitalized lease obligations.................... 275 225
------- -------
Total current liabilities.............................................. 9,670 11,334
Capitalized lease obligations, excluding current installments............ 576 352
Other noncurrent liabilities............................................. 2,016 924
------- -------
Total liabilities...................................................... 12,262 12,610
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.10 par value; 1,000,000 shares authorized (200,000
shares designated as Series A Junior Participating Preferred, $0.001
par value); none issued and outstanding............................. -- --
Common stock, $0.10 par value; 12,500,000 shares authorized; 5,557,598
and 5,840,701 shares issued and outstanding in 1996 and 1997,
respectively........................................................ 556 584
Additional paid-in capital............................................. 16,801 19,001
Retained earnings (accumulated deficit)................................ (1,080) 4,768
------- -------
Total stockholders' equity..................................... 16,277 24,353
------- -------
$28,539 $36,963
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 45

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net revenues.................................................. $57,675 $53,779 $68,927
Cost of sales................................................. 34,285 34,413 38,151
------- ------- -------
Gross profit................................................ 23,390 19,366 30,776
------- ------- -------
Operating expenses:
Engineering and development................................. 7,598 7,191 10,422
Selling and marketing....................................... 7,541 6,490 6,372
General and administrative.................................. 4,872 4,501 4,628
------- ------- -------
Total operating expenses................................. 20,011 18,182 21,422
------- ------- -------
Operating income......................................... 3,379 1,184 9,354
Interest expense.............................................. 146 153 125
Interest and other income..................................... 93 172 602
------- ------- -------
Income before income taxes.................................. 3,326 1,203 9,831
Income tax provision.......................................... 1,361 537 3,983
------- ------- -------
Net income.................................................... $ 1,965 $ 666 $ 5,848
======= ======= =======
Net income per common and common equivalent share............. $ 0.35 $ 0.12 $ 0.93
======= ======= =======
Weighted average common and common equivalent shares.......... 5,567 5,737 6,315
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 46

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
----------------- PAID-IN (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance as of April 3, 1994........... 5,551 $555 $ 16,771 $ (3,711) $13,615
Net income............................ -- -- -- 1,965 1,965
Issuance of common stock.............. 1 -- 1 -- 1
----- ---- -------- -------- -------
Balance as of April 2, 1995........... 5,552 555 16,772 (1,746) 15,581
Net income............................ -- -- -- 666 666
Issuance of common stock.............. 6 1 29 -- 30
----- ---- -------- -------- -------
Balance as of March 31, 1996.......... 5,558 556 16,801 (1,080) 16,277
Net income............................ -- -- -- 5,848 5,848
Issuance of common stock.............. 283 28 2,200 -- 2,228
----- ---- -------- -------- -------
Balance as of March 30, 1997.......... 5,841 $584 $ 19,001 $ 4,768 $24,353
===== ==== ======== ======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 47

QLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 1,965 $ 666 $ 5,848
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 2,445 2,452 3,023
Provision for doubtful accounts......................... 625 23 129
Loss on disposals of property and equipment............. 34 11 1,338
Benefit from deferred income taxes...................... (87) (561) (1,273)
Change in assets and liabilities:
Decrease (increase) in accounts receivable............ (3,976) 2,302 1,184
Decrease (increase) in inventories.................... (1,372) (123) 1,876
Decrease (increase) in prepaid expenses and other 30 (39) (152)
current assets.....................................
Decrease (increase) in other assets................... (101) 463 (6)
Increase (decrease) in accounts payable............... (990) 1,240 (2,183)
Increase (decrease) in accrued expenses............... (100) 1,681 3,897
Increase (decrease) in other noncurrent liabilities... 1,381 635 (1,092)
------- ------- -------
Net cash provided by (used in) operating (146) 8,750 12,589
activities.......................................
------- ------- -------
Cash flows from investing activities - purchases of property (1,282) (1,210) (3,866)
and equipment..............................................
------- ------- -------
Cash flows from financing activities:
Principal payments under capital leases.................... (278) (305) (274)
Proceeds from exercise of stock options.................... 1 30 2,228
------- ------- -------
Net cash provided by (used in) financing (277) (275) 1,954
activities.......................................
------- ------- -------
Net increase (decrease) in cash and cash (1,705) 7,265 10,677
equivalents......................................
Cash and cash equivalents at beginning of year............... 2,854 1,149 8,414
------- ------- -------
Cash and cash equivalents at end of year..................... $ 1,149 $ 8,414 $19,091
======= ======= =======

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 121 $ 101 $ 133
======= ======= =======
Income taxes............................................ $ 252 $ 404 $ 3,881
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 48

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL BUSINESS INFORMATION

QLogic Corporation ("QLogic" or the "Company") designs and supplies
semiconductor and board level I/O products. The Company's products provide a
high performance interface between computer systems and their attached data
storage peripherals, such as hard disk drives, tape drives, removable disk
drives, CD-ROM drives and RAID subsystems. QLogic provides complete input/output
("I/O") technology solutions by designing and marketing single chip controller
and adapter board products for both sides of the computer/peripheral device
interlink or "bus." The Company has targeted the high performance sector of the
I/O market, focusing primarily on the SCSI industry standard. The Company is
utilizing its I/O expertise to develop products for emerging I/O standards, such
as Fibre Channel. QLogic's products utilize various I/O standards to service the
needs of manufacturers and end users of various types of computer systems and
components, such as workstations, servers and data storage peripherals. The
Company provides high performance SCSI-based solutions and new I/O solutions
based on the emerging Fibre Channel standard, and is leveraging its
technological capabilities to provide solutions based on the IDE standard.
QLogic markets and distributes its products through a direct sales organization
supported by field application engineers, as well as through a network of
independent manufacturers' representatives and regional and international
distributors. The Company's primary OEM customers are major domestic and
international suppliers and manufacturers of servers, workstations and data
storage peripherals.

The Company is the successor to the Emulex Micro Devices division of Emulex
Corporation ("Emulex"). The Company was incorporated in Delaware in 1992 as
Emulex Micro Devices Corporation, a wholly owned subsidiary of Emulex, and, in
1993, substantially all of the assets of the Emulex Micro Devices division were
transferred to the Company. In February 1994, pursuant to its spinoff from
Emulex, the Company became a separate publicly-held corporation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the financial statements of
QLogic Corporation and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.

Fiscal Year

QLogic's fiscal year ends on the Sunday nearest March 31. The fiscal years
ended April 2, 1995 ("fiscal 1995"), March 31, 1996 ("fiscal 1996") and March
30, 1997 ("fiscal 1997") each comprised 52 weeks.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with original maturities of
three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net
realizable value.

Property and Equipment

Property and equipment are stated at cost. Property and equipment held
under capital leases are stated at the present value of minimum lease payments.
Depreciation is calculated using the straight-line method over

F-7
<PAGE> 49

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

estimated useful lives of two to seven years. Property and equipment held under
capital leases and leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or the estimated useful life of the related
asset.

Stock Option Plan

Prior to April 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
April 1, 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma net income per share disclosures for employee
stock option grants made in fiscal 1996 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.

Use of Estimates

Company management has made a number of estimates and assumptions relating
to the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.

Revenue Recognition

Revenue is recognized upon product shipment. Royalty revenue is recognized
when earned and receipt is assured.

The customer's obligation to pay the Company, and the payment terms, are
set at the time of shipment and are not dependent on subsequent resale of the
Company's product. However, certain of the Company's sales were made to
distributors under agreements allowing limited right of return and/or price
protection. The Company warrants its products, on a limited basis, to be free
from defects for periods of one to five years from date of shipment. The Company
estimates and establishes allowances and reserves, by a current charge to
income, for product returns, warranty obligations, doubtful accounts and price
adjustments.

Research and Development

Research and development costs, including costs related to the development
of new products and process technology, are expensed as incurred.

Capitalized Software Costs

SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," provides for the capitalization of certain
software development costs once technological feasibility is established. The
cost so capitalized is then amortized on a straight-line basis over the
estimated product life, or the ratio of current revenues to total projected
product revenues, whichever is greater. No internal costs have been capitalized
as the impact on the consolidated financial statements for all periods presented
is immaterial.

F-8
<PAGE> 50

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Net Income per Share

Net income per common and common equivalent share for the years ended April
2, 1995, March 31, 1996 and March 30, 1997, was computed based on the weighted
average number of common and common equivalent shares outstanding. The Company
has granted certain stock options (see note 10) which have been treated as
common stock equivalents in computing both primary and fully diluted income per
share. Primary income per share approximates fully diluted income per share for
the years ended April 2, 1995, March 31, 1996 and March 30, 1997.

In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies new standards
designed to improve the earnings per share ("EPS") information provided in
financial statements by simplifying the existing computational guidelines,
revising the disclosure requirements and increasing the comparability of EPS
data on an international basis. Some of the changes made to simplify the EPS
computations include: (a) eliminating the presentation of primary EPS and
replacing it with basic EPS, with the principal difference being that common
stock equivalents are not considered in computing basic EPS, (b) eliminating the
modified treasury stock method and the three percent materiality provision and
(c) revising the contingent share provisions and the supplemental EPS data
requirements. SFAS No. 128 also makes a number of changes to existing disclosure
requirements. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. The Company
does not believe the implementation of SFAS No. 128 will have a material effect
on net income per share.

Fair Value of Financial Instruments

In December 1991, the FASB issued SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." SFAS No. 107 requires all entities to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to estimate
fair value. SFAS No. 107 defines fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties. As of March 30, 1997, the fair value of all financial
instruments approximated carrying value.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in
fiscal 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of

F-9
<PAGE> 51

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

SFAS No. 121 did not have a material impact on the Company's financial position,
results of operations or liquidity.

Reclassifications

Certain reclassifications have been made to the 1995 and 1996 consolidated
financial statements to conform to the 1997 presentation.

NOTE (2) INVENTORIES

Components of inventories are as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Raw materials............................................ $ 2,122 $ 2,931
Work in progress......................................... 1,455 1,117
Finished goods........................................... 3,093 746
------- -------
$ 6,670 $ 4,794
======= =======
</TABLE>

NOTE (3) PROPERTY AND EQUIPMENT

Components of property and equipment, net, are as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Product and test equipment............................... $ 9,285 $10,970
Furniture and fixtures................................... 1,086 1,219
Semiconductor designs.................................... 2,552 1,802
Leasehold improvements................................... 842 447
Land and buildings....................................... 358 358
------- -------
14,123 14,796
Less accumulated depreciation and amortization........... 8,603 9,753
------- -------
$ 5,520 $ 5,043
======= =======
</TABLE>

NOTE (4) ACCRUED EXPENSES

Components of accrued expenses are as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Compensation............................................. $ 1,850 $ 3,027
Taxes.................................................... 53 1,443
Deferred revenue......................................... 753 999
Other.................................................... 562 1,646
------- -------
$ 3,218 $ 7,115
======= =======
</TABLE>

F-10
<PAGE> 52

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE (5) INCOME TAXES

The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Federal:
Current..................................... $1,216 $ 872 $ 4,479
Deferred.................................... (64) (453) (1,059)
State:
Current..................................... 232 226 777
Deferred.................................... (23) (108) (214)
------ ----- -------
$1,361 $ 537 $ 3,983
====== ===== =======
</TABLE>

The effective income tax on income before income taxes differs from
expected Federal income tax for the following reasons:

<TABLE>
<CAPTION>
1995 1996 1997
------ ----- ------
<S> <C> <C> <C>
Expected income tax provision at 34%............ $1,130 $ 409 $3,343
State income tax, net of Federal tax benefit.... 138 74 370
Tax benefit of net operating loss............... (84) (26) (13)
Tax benefit of research and development and (729) (391)
other credits................................. --
Increase (decrease) in valuation allowance...... 813 312 (14)
Nondeductible permanent differences............. 27 39 20
Other, net...................................... 66 120 277
------ ----- ------
$1,361 $ 537 $3,983
====== ===== ======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit........................... $ 92 $ 92
Reserves not currently deductible........................ 1,555 2,504
Depreciation............................................. 940 980
Research and development credit.......................... 1,085 1,085
Other.................................................... 101 85
------ ------
Total gross deferred tax assets....................... 3,773 4,746
Less valuation allowance................................. 1,918 1,904
------ ------
1,855 2,842
------ ------
Deferred tax liabilities:
Research and development expenditures.................... 875 516
State tax expense........................................ 332 405
------ ------
Total gross deferred tax liabilities.................. 1,207 921
------ ------
Net deferred tax assets.................................... $ 648 $1,921
====== ======
</TABLE>

F-11
<PAGE> 53

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Company has approximately $1,085 of research and development credit
carryovers as of March 30, 1997. If unused, these credits will expire in the
years 2008 to 2011. In addition, the Company has approximately $92 of
alternative minimum tax credits which may be carried over indefinitely.

The Company also has approximately $150 of net operating loss carryovers at
March 30, 1997. Utilization of these carryovers will be limited to approximately
$50 a year over the next three fiscal years, as a result of the Company filing
short period tax returns in 1994. Any unused carryover at the end of this period
will be fully utilizable in any future year until 2009, after which any unused
carryover will expire.

Based on the Company's current and historical pretax earnings, management
believes it is more likely than not that the Company will realize the benefit of
the existing net deferred tax assets as of March 30, 1997. Management believes
the existing net deductible temporary differences will reverse during periods in
which the Company generates net taxable income; however, there can be no
assurance that the Company will generate any earnings or any specific level of
continuing earnings in future years.

During fiscal year 1994, QLogic and Emulex entered into a Tax Sharing
Agreement for purposes of allocating pre-Distribution tax liabilities between
QLogic and Emulex. Under the Tax Sharing Agreement, Emulex generally will be
liable for and will indemnify QLogic against (a) pre-Distribution Federal, state
and local tax liabilities of Emulex and its subsidiaries (including QLogic), (b)
taxes or liabilities resulting from a breach of any covenant or representation
by Emulex contained in the Tax Sharing Agreement, (c) taxes imposed on QLogic or
its stockholders in the event that the Distribution is taxable due to any reason
other than a breach of certain covenants or representations by QLogic and (d)
taxes relating to the recapture or restoration of certain pre-Distribution tax
items (such as depreciation recapture) of Emulex or its subsidiaries. QLogic
will be liable for and will indemnify Emulex and its subsidiaries against (i)
post-Distribution Federal, state and local tax liabilities of QLogic, (ii) taxes
or liabilities resulting from a breach of any covenant or representation by
QLogic contained in the Tax Sharing Agreement, and (iii) taxes imposed on Emulex
in the event that the Distribution is taxable due to a breach of certain
covenants and representations by QLogic in the Tax Sharing Agreement unless,
prior to the breach, there is obtained, on the basis of valid representations,
(1) a ruling from the Internal Revenue Service reasonably satisfactory to
Emulex, or (2) an opinion acceptable to Emulex from counsel (such acceptance not
to be unreasonably withheld, provided that, if counsel for Emulex does not
concur with such opinion, Emulex's refusal to accept such opinion will not be
considered unreasonable), in each case to the effect that the breach will not
cause the Distribution to become subject to Federal income tax. In any event, if
QLogic becomes liable to indemnify Emulex pursuant to these provisions, it is
likely that the liability will be material to QLogic.

The Tax Sharing Agreement provides that the party having responsibility for
a tax liability under the Tax Sharing Agreement generally will be primarily
responsible for, and bear the fees, costs and expenses (including attorneys' and
accountants' fees) of, the defense of an audit or other proceeding arising out
of or related to such tax liability.

The Tax Sharing Agreement also generally provides that, subject to certain
limitations, Emulex will pay to QLogic the net benefit realized by Emulex from
the carryback to tax years before the Distribution of certain tax attributes of
QLogic arising in tax years after the Distribution and QLogic will pay to Emulex
the net benefit realized by QLogic from the use after the Distribution Date of
certain tax attributes of Emulex arising in pre-Distribution tax years.
Accordingly, QLogic has recognized no deferred tax assets with respect to such
tax attributes.

The total amount due Emulex pursuant to the Tax Sharing Agreement at March
31, 1996 and March 30, 1997 totaled $1,760 and $458, respectively, and is
included in other noncurrent liabilities. Amounts due Emulex under the Tax
Sharing Agreement are payable on December 30, 1999, and bear interest,
commencing January 1, 1996, at the rate applicable to underpayments of Federal
income taxes, which was 9% as of March 30, 1997.

F-12
<PAGE> 54

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Interest due Emulex is payable quarterly. The total amount of accrued interest
payable to Emulex as of March 31, 1996 was $28, which is included in accounts
payable in the accompanying balance sheets. There is no accrued interest payable
to Emulex as of March 30, 1997.

NOTE (6) CONSOLIDATION CHARGES AND DISTRIBUTION EXPENSES

QLogic incurred significant nonrecurring charges related to the
restructuring of QLogic's operations during the third quarter of fiscal 1994.
The charges included employee termination expenses for 13 employees of
approximately $250, an accrual for facilities and manufacturing consolidation of
approximately $207, and other provisions of approximately $50. Of the total $507
of consolidation charges, $403 of costs and payments had been charged against
the related accruals as of April 2, 1995, representing severance and other
related expense of $300 and lease obligations of $103. During the year ended
March 31, 1996 costs and payments were charged against the remaining accrual
representing lease obligations of $104. As of March 31, 1996, the balance of the
accrual was zero.

NOTE (7) EXPORT REVENUES AND SIGNIFICANT CUSTOMERS

QLogic's export revenues (primarily to Pacific Rim countries) were
approximately $35,765, $29,800 and $31,301, representing 62%, 55% and 45% of net
revenues for 1995, 1996 and 1997, respectively. The following table represents
sales to customers accounting for greater than 10% of Company net revenues, or
customer accounts receivable accounting for greater than 10% of Company accounts
receivable.

<TABLE>
<CAPTION>
ACCOUNTS
NET REVENUES RECEIVABLE
---------------------- -------------
1995 1996 1997 1996 1997
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer 1...................................... N/A 13% 20% 15% 30%
Customer 2...................................... 24% 42% 19% 34% N/A
Customer 3...................................... N/A N/A 16% N/A N/A
Customer 4...................................... N/A 11% 10% 17% 19%
</TABLE>

With the exception of these customers, management of QLogic believes that
the loss of any one customer would not have a material adverse effect on its
business.

NOTE (8) COMMITMENTS AND CONTINGENCIES

Line of Credit

On July 25, 1996, the Company obtained an unsecured line of credit from a
bank. Maximum borrowings under the line of credit are $7,500 subject to a
borrowing base based on accounts receivable, with a $3,000 sublimit for letters
of credit. Interest on outstanding advances is payable monthly at the bank's
prime rate plus 0.5%. The line of credit expires on July 5, 1997. The line of
credit contains certain restrictive covenants that, among other things, require
the maintenance of certain financial ratios and restrict the Company's ability
to incur additional indebtedness. The Company was in compliance with all such
covenants as of March 30, 1997. In the event of a default under the line of
credit, amounts outstanding would become secured by substantially all of the
assets of the Company. There were no borrowings under the line of credit as of
March 30, 1997. The Company expects to extend the line of credit through the end
of fiscal 1998.

Leases

The Company leases certain equipment under long-term noncancelable capital
lease agreements which expire at various dates through the year 2000. The
required lease payments and, accordingly, the capitalized lease

F-13
<PAGE> 55

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

obligations and related assets have been included in the accompanying financial
statements. The cost of equipment held under capital leases was $2,299 and
$1,993 as of March 31, 1996 and March 30, 1997, respectively. The related
accumulated amortization was $1,425 and $1,819 as of March 31, 1996 and March
30, 1997, respectively.

Future minimum noncancelable lease commitments are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Fiscal year:
1998............................................................ $ 270 $ 712
1999............................................................ 234 712
2000............................................................ 145 415
----- -------
Total minimum lease payments...................................... 649 $ 1,839
=======
Less amounts representing interest (at rates ranging from 4% to
9%)............................................................. 72
-----
Present value of future minimum capitalized lease obligations..... 577
Less current installments under capitalized lease obligations..... 225
-----
Capitalized lease obligations, excluding current installments..... $ 352
=====
</TABLE>

Rent expense for fiscal 1995, fiscal 1996 and fiscal 1997 totaled $689,
$653 and $712, respectively.

Contingencies

From time to time, the Company is a party to ordinary disputes arising in
the normal course of business. The Company does not believe that the outcome of
these matters will have a material adverse effect on the Company's financial
position, results of operations or liquidity.

NOTE (9) EMPLOYEE RETIREMENT SAVINGS PLAN

The Company has established a pretax savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code for substantially all domestic
employees. Under the plan, eligible employees are able to contribute up to 12%
of their compensation. The Company's contributions match up to 3% of a
participant's compensation. The Company's direct contributions on behalf of its
employees totaled $205, $193 and $218 in fiscal 1995, fiscal 1996 and fiscal
1997, respectively.

NOTE (10) STOCKHOLDERS' EQUITY

Shareholder Rights Plan

On June 4, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan, pursuant to which preferred stock rights (the "Rights") were
distributed in the form of a dividend to stockholders of record on the close of
business on June 20, 1996 (the "Dividend Date") on the basis of one Right for
each share of the Company's common stock (the "Common Stock") held. One Right
will also attach to each share of Common Stock issued subsequent to the Dividend
Date and prior to the Distribution Date (as defined below).

F-14
<PAGE> 56

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Common Stock and become exercisable or transferable on a distribution date (the
"Distribution Date"), which will occur on the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of securities
representing 15% or more of the Common Stock or (ii) 10 business days following
the commencement of a tender or exchange offer that would result in a person or
group of related persons becoming an Acquiring Person. Upon the occurrence of
certain other events related to changes in the ownership of the Common Stock,
each holder of a Right would be entitled to purchase shares of the Common Stock,
or an acquiring corporation's common stock, having a market value equal to two
times the exercise value of the Right.

Incentive Compensation Plans

On January 12, 1994, the Company's Board of Directors adopted the QLogic
Corporation Stock Awards Plan (the "Stock Awards Plan") and the QLogic
Corporation Non-Employee Director Stock Option Plan (the "Director Plan")
(collectively, the "Stock Option Plans"). Additionally, the Company issues
options on an ad hoc basis from time to time.

The Stock Awards Plan provides for the issuance of incentive and
nonqualified stock options, restricted stock and other stock-based incentive
awards for officers and key employees. The Stock Awards Plan permits the
Compensation Committee of the Board of Directors to select eligible employees to
receive awards and to determine the terms and conditions of awards. A total of
1,350,000 shares are reserved for issuance under the Stock Awards Plan. As of
March 30, 1997, no shares of restricted stock were issued, options to purchase
773,089 shares of Common Stock were outstanding, and there were 332,749 shares
available for future grants.

Options granted under the Company's Stock Awards Plan provide that an
employee holding a stock option may exchange stock which the employee already
owns as payment against the exercise of an option. This provision applies to all
options outstanding as of March 30, 1997. All stock options granted under the
Company's Stock Awards Plan have ten-year terms and vest ratably over four years
from the date of grant.

Under the terms of the Director Plan, new directors receive an option grant
at fair market value to purchase 8,000 shares of Common Stock upon election to
the Board, nonemployee directors (other than the Chairman of the Board) receive
annual grants of options to purchase 3,000 shares of Common Stock, and the
Chairman of the Board receives annual grants of options to purchase 5,000 shares
of Common Stock. A total of 200,000 shares have been reserved for issuance under
the Director Plan. As of March 30, 1997, options for a total of 55,666 shares
were outstanding and the remaining 98,500 shares were available for grant. All
stock options granted under the Director Plan have 10-year terms and vest
immediately upon grant.

As of March 30, 1997, options to purchase 10,000 shares of Common Stock
granted outside of the Stock Option Plans are outstanding.

F-15
<PAGE> 57

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Stock option activity in fiscal 1995, fiscal 1996 and fiscal 1997 under the
Company's Stock Option Plans was as follows:

<TABLE>
<CAPTION>
AVERAGE
OPTION PRICE
SHARES PER SHARE
-------- ------------
<S> <C> <C>
Options outstanding as of April 3, 1994............... 757,927 $ 8.31
Granted............................................. 193,900 5.27
Canceled............................................ (79,073) 8.40
Exercised........................................... (1,753) 1.16
-------- ------
Options outstanding as of April 2, 1995............... 871,001 7.66
Granted............................................. 395,983 5.66
Canceled............................................ (407,346) 7.35
Exercised........................................... (5,140) 5.72
-------- ------
Options outstanding as of March 31, 1996.............. 854,498 6.89
Granted............................................. 309,410 13.71
Canceled............................................ (42,800) 8.00
Exercised........................................... (282,353) 7.88
-------- ------
Options outstanding as of March 30, 1997.............. 838,755 $ 9.00
======== ======
</TABLE>

As of March 31, 1996 and March 30, 1997, the number of options exercisable
was 365,553 and 282,273, respectively, and the weighted-average exercise price
of those options was $7.89 and $6.63, respectively.

<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
OUTSTANDING AVERAGE EXERCISABLE AVERAGE
AS OF EXERCISE REMAINING AS OF EXERCISE
MARCH 30, PRICE CONTRACTUAL MARCH 30, PRICE
RANGE OF EXERCISE PRICES 1997 PER OPTION LIFE (YEARS) 1997 PER OPTION
---------------------------------------- ----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 4.50 to $ 5.00........................ 184,426 $ 4.83 7.90 84,604 $ 4.86
$ 5.01 to $ 7.56........................ 206,601 6.13 7.68 101,317 6.23
$ 7.57 to $11.13........................ 217,728 8.92 7.68 88,352 8.34
$11.14 to $24.38........................ 230,000 14.98 9.35 8,000 11.49
------- ------ ---- ------- ------
$ 4.50 to $24.38........................ 838,755 $ 9.00 8.19 282,273 $ 6.63
======= ====== ==== ======= ======
</TABLE>

The Company applies APB Opinion No. 25 in accounting for its Stock Option
Plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Net income as reported............................. $ 666 $ 5,848
Assumed stock compensation cost.................... 1,244 2,329
------ ------
Pro forma net income (loss)...................... $ (578) $ 3,519
====== ======
Net income per share as reported................... $ 0.12 $ 0.93
Pro forma net income (loss) per share.............. (.10) 0.56
====== ======
</TABLE>

Pro forma net income (loss) reflects only options granted in fiscal 1996
and fiscal 1997. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma

F-16
<PAGE> 58

QLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

net income (loss) amounts presented above because compensation cost is reflected
over the options' vesting period of four years and compensation cost for options
granted prior to April 3, 1995 is not considered.

The Company uses the Black-Scholes option-pricing model for estimating the
fair value of its compensation instruments. The following represents the
weighted-average fair value of options granted and the assumptions used for the
calculation:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Weighted-average fair value per option
granted....................................... $3.1214 $ 7.6416
Average exercise price per option granted....... 5.6802 13.7131
Stock volatility................................ 0.5644 0.5644
Risk-free interest rate......................... 6.11% 6.69%
Annual rate of forfeiture....................... 20% 20%
Expected life (in years)........................ 5.00 5.00
Stock dividend yield............................ 0.00% 0.00%
</TABLE>

The fair value of each option grant, as defined by SFAS No. 123, is
estimated on the date of grant using the Black-Scholes option-pricing model. The
Black-Scholes model, as well as other currently accepted option valuation
models, was developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require highly
subjective assumptions, including future stock price volatility and expected
time until exercise, which greatly affect the calculated fair value on the grant
date.

NOTE (11) CONDENSED QUARTERLY RESULTS (UNAUDITED)

The following summarizes certain unaudited quarterly financial information
for fiscal 1995, fiscal 1996 and fiscal 1997.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------
JUNE SEPTEMBER DECEMBER MARCH
------- --------- -------- -------
<S> <C> <C> <C> <C>
Fiscal 1995:
Net revenues.................................... $14,235 $15,349 $15,419 $12,672
Operating income................................ 948 1,117 1,246 68
Net income...................................... 534 651 745 35
Net income per share............................ 0.10 0.12 0.13 0.01
======= ======= ======= =======
Fiscal 1996:
Net revenues.................................... $ 9,570 $13,105 $14,886 $16,218
Operating income (loss)......................... (1,162) 375 695 1,276
Net income (loss)............................... (724) 214 444 732
Net income (loss) per share..................... (0.13) 0.04 0.08 0.13
======= ======= ======= =======
Fiscal 1997:
Net revenues.................................... $15,740 $16,725 $17,431 $19,031
Operating income................................ 1,592 1,872 2,656 3,234
Net income...................................... 967 1,178 1,677 2,026
Net income per share............................ 0.16 0.20 0.26 0.32
======= ======= ======= =======
</TABLE>

F-17
<PAGE> 59

[GRAPHIC DEPICTING COMPUTER SYSTEMS AND DATA STORAGE
PERIPHERAL PRODUCTS THAT UTILIZE THE COMPANY'S PRODUCTS FROM 1994 THROUGH 1997]
<PAGE> 60

============================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE
UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN
THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY,
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.

------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................... 3
Risk Factors................................ 5
Use of Proceeds............................. 12
Price Range of Common Stock................. 12
Dividend Policy............................. 12
Capitalization.............................. 13
Selected Consolidated Financial Data........ 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 15
Business.................................... 21
Management.................................. 32
Principal Stockholders...................... 34
Description of Capital Stock................ 35
Underwriting................................ 37
Legal Matters............................... 38
Experts..................................... 39
Additional Information...................... 39
Incorporation of Certain Documents by
Reference................................. 40
Glossary.................................... 41
Index to Consolidated Financial
Statements................................ F-1
</TABLE>

============================================================
============================================================

2,300,000 Shares

[QLOGIC LOGO]
Common Stock
------------------------------

PROSPECTUS
------------------------------
COWEN & COMPANY

PRUDENTIAL SECURITIES INCORPORATED

MORGAN KEEGAN & COMPANY, INC.

AUGUST 8, 1997

============================================================