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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the fiscal year ended March 28, 2004

Commission File No. 0-23298

(949) 389-6000

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of the voting stock held by non-affiliates of the Registrant was $4,450,460,071 (based on the closing price for shares of the Registrant’s common stock as reported by The Nasdaq National Market on September 26, 2003).

      As of May 21, 2004, 93,227,661 shares of the Registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s Proxy Statement relating to the Registrant’s 2004 Annual Meeting of Stockholders, to be held on August 24, 2004, are incorporated by reference into Part III of this Form 10-K where indicated.

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PART I

Introduction

      QLogic Corporation was organized as a Delaware corporation in 1992. Our principal executive offices are located at 26650 Aliso Viejo Parkway, Aliso Viejo, California 92656, and our telephone number at that location is (949) 389-6000. Our Internet address is www.qlogic.com. Our periodic and current reports, together with any amendments to these reports, are available free of charge on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

      Unless the context indicates otherwise, “we,” “our,” “us” and the “Company” each refer to the Registrant and its subsidiaries.

      All references to years refer to our fiscal years ended March 28, 2004, March 30, 2003 and March 31, 2002, as applicable, unless the calendar years are specified. All references to share and per share data have been restated to reflect our stock splits.

Overview

      We design and develop storage networking infrastructure components sold to original equipment manufacturers, or OEMs, distributors, resellers and system integrators. We produce the controller chips, management enclosure chips, host bus adapters, or HBAs, fabric switches and management software that provide the connectivity infrastructure for every size of storage network. We serve customers with solutions based on various storage area network, or SAN, technologies including Small Computer Systems Interface, or SCSI, Internet SCSI, or iSCSI, and Fibre Channel.

      Our products are sold directly to OEMs and through our authorized distributors and resellers. Our customers rely on our SAN infrastructure technology to deliver storage solutions to information technology professionals in virtually every business sector.

      Our technology is found primarily in server, workstation, storage subsystem and hard disk drive solutions targeted at:

	•	Storage-intensive enterprise applications such as data warehousing, data mining and online transaction processing;
	•	Media-rich environments such as film/video, broadcast, medical imaging and computer-aided design, or CAD, and computer-aided manufacturing, or CAM;
	•	Server clustering, high-speed backup and data replication.

      Our products are incorporated in a large number of solutions from OEM customers, including Cisco Systems, Inc., Dell Computer Corporation, EMC Corporation, Fujitsu Limited, Hitachi, Ltd., Hewlett-Packard Company, International Business Machines Corporation, Network Appliance, Inc., Quantum Corporation, Storage Technology Corporation, Sun Microsystems, Inc. and many others. For information regarding our major customers and their impact on our revenues, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

      To ensure interoperability within the SAN, we work closely with independent hardware vendors and software vendors, as well as developers and integrators who create, test, and evaluate complementary storage networking products. We have key alliance relationships with Cisco Systems, Inc., Microsoft

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Storage Industry

      In late 2003, the University of California, Berkeley published a follow-up to their 2000 report entitled “How Much Information?” This report measures how much digital information is generated in the world each year. The 2003 report confirmed original growth estimates made in the 2000 report, which 2000 report concluded that the world was generating over 1.6 million terabytes (1 terabyte equals roughly 1 million books) of magnetically recorded information per year and that this volume is doubling every year. In addition, the 2003 report tracked the growth of various storage mediums over the period between 1999 and 2003. Of particular interest was the growth in storage utilized in enterprise and departmental business environments. The report shows that storage capacity in these environments grew at an annual rate of 75% during the period. The ability to access, share and, most importantly, manage this amount of information represents a large market opportunity.

      The storage industry took its first steps in helping corporations to access corporate data in the mid-1980s when the need to distribute information quickly and efficiently drove client access from a mainframe environment to a local area network, or LAN, environment. More recently, the need to access growing volumes of information led to a rapid adoption of storage area networking environments. As indicated in the University of California, Berkeley study, the explosive expansion of the Internet and the growing use of digital information servers were driving the need to go to network storage for accessibility, maintainability and simplicity of management.

      IBM first introduced storage area networking in the early 1990s with the Enterprise System Connection, or ESCON, an effective solution for IBM mainframe environments. Fibre Channel, which was introduced in 1994, promised superior connectivity, distance and access benefits over ESCON in a standard protocol. Fibre Channel gradually moved into networked environments. At first, SANs used hubs to connect networked servers and storage subsystems. Then, switches replaced hubs to represent the current majority of network deployments.

      SANs followed much the same adoption path as LANs, with storage manufacturers, OEMs and third parties all developing and delivering SAN management solutions. Today, there are many SAN management solutions available, from relatively basic solutions for small environments to extensive software packages capable of managing thousands of SAN nodes.

      During 2003, SANs continued to be the fastest growing method for connecting external Redundant Array of Independent Disks, or RAID, storage. According to an IDC August 2003 report, Worldwide Disk Storage Systems Market Forecast and Analysis, 2000 to 2007, Fibre Channel SAN storage accounted for over 38% of all storage revenue during 2002. In addition, IDC forecasts that Fibre Channel and iSCSI SANs will account for nearly 56% of all externally attached RAID storage subsystems by 2007. This report also indicated that Fibre Channel is expected to be the dominant technology employed for SAN connectivity during the forecast period. This conclusion is further demonstrated in the report, which indicated that Fibre Channel technology will represent 44% of the SAN market compared to 12% for iSCSI.

      During the past few years, iSCSI has emerged as a new additional SAN technology, which allows standard SCSI commands to be transported over standard Ethernet infrastructure. This technology provides an excellent entry point for small and medium-sized businesses to incorporate the benefits of SANs. By utilizing an Ethernet infrastructure that already exists in almost every business environment, small and medium-sized businesses can implement SANs without needing to train new people on the deployment or management of the network.

Our SAN Solutions

      Our ability to serve the storage industry stems from our highly leveraged product line that addresses virtually every connection point in a SAN infrastructure solution. On the server side of the SAN, we provide

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      One of our key strategies has been to provide our customers with solutions that simplify their product design requirements. Complete storage networking solutions that are pre-tested and easy to install significantly reduce the critical implementation and time-to-market effort for OEMs. Today, our SAN infrastructure components are found in solutions from most major server and storage OEMs worldwide.

Product Overview

      We design and supply storage network infrastructure components and software for the world’s largest server and storage subsystem manufacturers that ultimately are used by small to medium-sized enterprises, and companies that have large information technology environments.

      Our products include our SANblade^TM HBAs, SANbox^TM Fibre Channel Switches and SANsurfer Management Suite^TM HBA and Switch management software. Our Fibre Channel HBAs support SCSI protocol, Internet Protocol, or IP, Virtual Interface, or VI, and FICON protocol. In addition, we design and supply controller chips used in hard drives and tape drives as well as enclosure management and baseboard management chip solutions that monitor the health of the physical environment within a server or storage enclosure.

Sales and Marketing

      We market and distribute our products through OEMs, system integrators, value-added resellers, or VARs, and our direct sales organization supported by field sales and systems engineering personnel. In addition, we utilize a network of independent manufacturers’ representatives and regional and international distributors.

      In national and in certain international markets, we maintain both a direct sales force to serve our large OEM customers and multiple outside representatives that are focused on medium-sized and emerging accounts. National distributors carrying our products serve the VAR market. We maintain a focused business development and outbound marketing organization to assist, train, equip and augment the sales organizations of our major OEM customers and their respective reseller organizations and partners. Recently, in order to expand into the Asia-Pacific region, we opened a sales office in Taiwan to support both customers and partners in that region. For information regarding revenue from independent customers by geographic area, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

      We work with our large peripheral and computer system manufacturer customers during their design cycles. We support these customers with extensive applications and system design support and services, as well as training classes and seminars conducted both in the field and from our offices in Aliso Viejo and Roseville, California, Eden Prairie, Minnesota, and Austin, Texas. We also maintain customer support and service through technical support call centers and web-based or Internet communications.

      Our sales efforts are focused on establishing and developing long-term relationships with our OEM customers. The sales cycle typically begins with one of our product designs being selected as a component in a potential customer’s computer system or data storage peripheral. Then, we work closely with the customer to integrate our components with the customer’s current and next generation products or platforms. The time to product shipment can typically range from six to eighteen months.

      In addition to sales and marketing efforts, we actively participate with industry organizations relating to the development and acceptance of industry standards. We collaborate with peer companies through co-marketing activities, collateral development, joint training, road tours and cooperative testing and certifica-

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Engineering and Development

      Our industry is subject to rapid and regular technological change. Our ability to compete depends upon our ability to continually design, develop and introduce new products that take advantage of market opportunities and address emerging standards. Our strategy is to leverage our substantial base of architectural and systems expertise to address a broad range of input/output, or I/O, and SAN solutions.

      We are engaged in the design and development of integrated circuits for Fibre Channel switches; switch components; and SCSI, iSCSI and Fibre Channel I/O controllers and HBAs. We also design and develop SCSI and Fibre Channel hard disk drive controllers and management controller semiconductors used in storage peripherals, server enclosures and circuit boards.

      We continue to invest heavily in research and development to expand our capabilities to address the emerging technologies in the rapid evolution of the storage networking industry. During fiscal 2004, 2003 and 2002, we incurred engineering and development expenses of $87.8 million, $81.3 million and $69.7 million, respectively.

      As of March 28, 2004, we had 434 employees engaged in the development of new products and the improvement of existing products, including engineers, technicians and support personnel.

Backlog

      Our sales are made primarily pursuant to standard purchase orders for the delivery of products. Because industry practice allows customers to cancel or change orders with limited advance notice, we believe that backlog at any particular date is not a reliable indicator of our future revenue levels.

Competition

      The markets for SAN infrastructure components are highly competitive and characterized by short product life cycles, price erosion, rapidly changing technology, frequent product performance improvements and evolving industry standards. We believe the principal competitive factors in our industry include:

	•	time-to-market;
	•	product quality, reliability and performance;
	•	new product innovation;
	•	customer relationships;
	•	price;
	•	design capabilities;
	•	customer service and technical support; and
	•	interoperability of SAN components.

      We believe that we compete favorably with respect to each of these factors

      Due to the broad array of components required in the SAN infrastructure, we compete with several companies. In the Fibre Channel HBA market, our primary competitors are Emulex Corporation, LSI Logic Corporation and Applied Micro Circuits Corporation. In the SCSI sector of the I/ O market, we compete primarily with Adaptec, Inc. and LSI Logic Corporation. Our switch products compete primarily with Brocade Communications Systems, Inc., Cisco Systems, Inc., McData Corporation and Emulex Corporation.

      There are two markets in the Fibre Channel semiconductor controller business. The first market is associated with server and storage controller interfaces. In this market our primary competitors are Agilent

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      Finally, our enclosure and baseboard management semiconductor controllers compete primarily with Vitesse Semiconductor Corporation and Hitachi, Ltd.

Manufacturing

      We subcontract the manufacturing of our semiconductor chips and HBA boards and switches to independent foundries and subcontractors, which allows us to avoid the high costs of owning, operating and constantly upgrading wafer fabrication and assembly facilities. As a result, we focus our resources on product design and development, quality assurance, sales and marketing and customer support. Prior to the sale of our semiconductors, switches and HBA products, final tests are performed on the products, including tests required under our ISO 9001 Certification. We also provide fabrication process reliability tests and conduct failure analysis to confirm the integrity of our quality assurance procedures.

      Our semiconductors are currently manufactured by a number of domestic and offshore foundries. Our major semiconductor suppliers are LSI Logic Corporation, Samsung Semiconductor, Inc. and Taiwan Semiconductor Manufacturing Company. Most of our products are manufactured using 0.18 or 0.25 micron process technology.

      We depend on our foundries to allocate a portion of their foundry capacity sufficient to meet our needs and to produce products of acceptable quality and with satisfactory manufacturing yields in a timely manner. These foundries fabricate products for other companies and, in certain cases, manufacture products of their own design. We do not have long-term agreements with any of our foundries; we purchase both wafers and finished chips on a purchase order basis. Therefore, the foundries generally are not obligated to supply products to us for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order. We work with our existing foundries, and intend to qualify new foundries, as needed, to obtain additional manufacturing capacity. However, there can be no assurance that we will be able to maintain our current foundry relationships or obtain additional capacity.

      We currently purchase our semiconductor products from our foundries either in finished form or wafer form. We use subcontractors to assemble our semiconductor products purchased in wafer form, and to assemble our switches and HBA products. In the assembly process for our semiconductor products, the silicon wafers are separated into individual die, which are then assembled into packages and tested. For our HBA products, we outsource the material procurement and assembly in a turnkey model. Following the assembly of our semiconductor and HBA products, we further test and inspect the products prior to shipment to our customers. For our switch products, we subcontract the material procurement, management, assembly and test processes.

      Most component parts used in our HBA products are standard off-the-shelf items, which are, or can be, dual-sourced. We select suppliers on the basis of technology, manufacturing capacity, quality and cost. Whenever possible and practicable, we strive to have at least two manufacturing locations for each HBA, switch and chip product. Nevertheless, our 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 our suppliers to deliver products of acceptable quality and in a timely manner or our inability to procure adequate supplies of our products could have a material adverse effect on our business, financial condition and results of operations.

Intellectual Property

      Although we have several patents issued and many additional patent applications pending in the United States, Canada, Europe and Asia, we rely primarily on our trade secrets, trademarks and copyrights to protect our intellectual property. We attempt to protect our proprietary information through confidentiality agreements and contractual provisions with our customers, suppliers, employees and consultants, and through other

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      While our ability to compete may be affected by our ability to protect our intellectual property, we believe our technical expertise and ability to introduce new products on a timely basis at competitive prices will be more important in maintaining our competitive position than protection of our intellectual property.

      We have received notices of claimed infringement of intellectual property rights in the past. In addition, we are currently engaged in litigation with parties who claim we have infringed on their intellectual property rights. There can be no assurance that third parties will not assert additional claims of infringement of intellectual property rights against us with respect to existing and future products. In the event of a patent or other intellectual property dispute, we may be required to expend significant resources to defend such claims, develop non-infringing technology or to obtain licenses to the technology which is the subject of the claim. There can be no assurance that we 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 us, and divert the efforts of our technical and management personnel, whether or not such litigation is determined in our favor.

Employees

      We had 819 employees as of March 28, 2004. We believe our future prospects will depend, in part, on our ability to continue to attract, train, motivate, retain and manage skilled engineering, sales, marketing and executive personnel. Our employees are not represented by a labor union. We believe that our relations with our employees are good.

      Our principal product development, operations, sales and corporate offices are currently located in three buildings comprising approximately 165,000 square feet in Aliso Viejo, California. We own these three buildings without encumbrance. We have recently entered into a lease for additional facilities in Aliso Viejo, California, which comprise approximately 37,000 square feet. We also lease design centers in Eden Prairie, Minnesota, Roseville, California and Austin, Texas comprising approximately 50,000 square feet, 15,000 square feet and 15,000 square feet, respectively.

      In January 2003, Raytheon Company filed suit in the United States District Court for the Eastern District of Texas, alleging that we, along with seven other defendants, infringe a Raytheon patent directed to a mass data storage system. The suit sought injunctive relief and damages in an unspecified amount. We filed an answer to the complaint in March 2003 and trial was scheduled to begin in September 2004. In February 2004, we settled the lawsuit. Under the terms of the settlement, the lawsuit was dismissed, Raytheon licensed three patents to us (including the patent in dispute), and we paid Raytheon a one-time license fee (which was not material to our financial condition or results of operations).

      In February 2003, Vixel Corporation filed suit in the United States District Court for the District of Delaware (the “First Delaware Action”) alleging infringement of a Vixel patent directed to a method and apparatus for Fibre Channel interconnection of private loop devices. In March 2003, Vixel amended its complaint to add two additional Vixel patents. These additional patents are directed to substantially the same technology as the original Vixel patent. The suit seeks injunctive relief and damages in an unspecified amount. We filed an answer to the complaint in April 2003 denying all allegations. The suit is in its very early stages and discovery has commenced. We dispute the plaintiff’s claims in the First Delaware Action and intend to defend this lawsuit vigorously.

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      In December 2003, we filed suit against Emulex (the new parent company of Vixel) in the United States District Court for the Central District of California (the “California Action”) alleging that Emulex infringes one of the our patents related to a digital switch element used in Fibre Channel systems. The suit seeks unspecified monetary damages as well as injunctive relief.

      During December 2003, we engaged with Emulex in negotiations to settle the First Delaware Action and the California Action. As a result of those discussions, the parties signed a document entitled “terms of agreement” which the parties intended would outline the basis for a settlement agreement. During January and February 2004, the parties attempted to negotiate a settlement agreement based on the previously discussed outline and to date have not been successful in such efforts. In late February 2004, Emulex filed suit in the United States District Court for the District of Delaware (the “Second Delaware Action”) asking the Delaware court for declaratory relief that: (i) the patent in dispute in the California Action is invalid and, if the patent is valid, then Emulex does not infringe the patent; and (ii) the “terms of agreement” is a final and binding settlement of the First Delaware Action and the California Action. This suit is in the very early stages. We dispute the plaintiff’s claims in the Second Delaware Action and intend to defend this lawsuit vigorously.

      Various lawsuits, claims and proceedings have been or may be instituted against us, including the matters discussed above. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims and proceedings may be disposed of unfavorably to us. Many intellectual property disputes have a risk of injunctive relief and there can be no assurance that a license will be granted. Injunctive relief could have a material adverse effect on our financial condition or results of operations. Based on an evaluation of matters which are pending or asserted, we believe the disposition of such matters will not have a material adverse effect on our financial condition or results of operations.

      No matter was submitted to a vote of security holders during the fourth quarter of fiscal 2004.

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PART II

Principal Market and Prices

      Shares of our common stock are traded and quoted on The Nasdaq National Market under the symbol QLGC. The following table sets forth the range of high and low sales prices per share of our common stock for each quarterly period of the two most recent years as reported on The Nasdaq National Market.

Number of Common Stockholders

      The approximate number of record holders of our common stock was 632 as of May 21, 2004.

Dividends

      We have never paid cash dividends on our common stock and currently have no intention to do so. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our operating results, financial condition and other factors as the board of directors, in its discretion, deems relevant.

Recent Sales of Unregistered Securities

      In January 2004, in connection with our prior acquisition of Little Mountain Group, Inc. (LMG), we issued approximately 131,000 shares of common stock to the former stockholders of LMG. These shares were issued in connection with the achievement of certain future performance milestones that were specified at the date of the acquisition. This transaction was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended. For information regarding the issuance of these shares of common stock, see Note 2 to the Consolidated Financial Statements, included in Part II, Item 8 of this report.

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Issuer Purchases of Equity Securities

      On October 16, 2002, we announced a stock repurchase program covering repurchases of up to $100 million of our common stock. The stock repurchase program expires October 14, 2004. Set forth below is information regarding our stock repurchases made during the fourth quarter of fiscal year 2004 under our stock repurchase program.

      The Company had previously purchased 475,200 shares at an average price of $47.40 per share under the program.

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      The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto appearing elsewhere in this report.

      This Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and related notes. This Discussion and Analysis of Financial Condition and Results of Operations also contains descriptions of our expectations regarding future trends affecting our business. These forward-looking statements and other forward-looking statements made elsewhere in this report are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, descriptions of our expectations regarding future trends affecting our business and other statements regarding future events or our objectives, goals, strategies, beliefs and underlying assumptions that are other than statements of historical

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Overview

      We design and supply storage network infrastructure components and software for many of the world’s largest server and storage subsystem manufacturers that ultimately are used by small to medium-sized enterprises, and companies that have large information technology environments. We serve customers with solutions based on various storage area network, or SAN, technologies. Our products are currently based on Fibre Channel, Small Computer Systems Interface, or SCSI, and Internet SCSI, or iSCSI standards, and we expect that future products may also be based on technology standards such as Serial Attached SCSI. We produce the controller chips, management enclosure chips, host bus adapters, or HBAs, fabric switches and management software that provide the connectivity infrastructure for every size of storage network.

      Our ability to serve the storage industry stems from our highly leveraged product line that addresses virtually every connection point in a SAN infrastructure solution. On the server side of the SAN, we provide enclosure management products, HBA technology on the motherboard (“Fibre Down” technology), baseboard management solutions and Fibre Channel HBAs. Connecting servers to storage, we provide the network infrastructure with a full suite of Fibre Channel switches. On the storage side of the network, we provide controller chips for Redundant Array of Independent Disks, or RAID, storage systems. These include Fibre Channel host port connections and RAID controller to Fibre Channel and SCSI disk drive port connections.

      Our products are sold to original equipment manufacturers, or OEMs, and through our authorized distributors and resellers. These connectivity solutions are incorporated into a variety of products from OEM customers, including Cisco Systems, Inc., Dell Computer Corporation, EMC Corporation, Fujitsu Limited, Hitachi, Ltd., Hewlett-Packard Company, International Business Machines Corporation, Network Appliance, Inc., Quantum Corporation, Storage Technology Corporation, Sun Microsystems, Inc. and many others.

     Fiscal Year and Fourth Quarter Financial Highlights and Other Information

      During fiscal 2004, we established new records for annual net revenues and net income. Net revenues during fiscal 2004 of $523.9 million were up 19% from last year; net income of $133.7 million in fiscal 2004 increased 29% from the prior year. The results for fiscal 2004 were highlighted by a 32% increase in Fibre Channel sales and an improvement in gross profit percentage of 450 basis points to 68.3% in fiscal 2004.

      During the fourth quarter of fiscal 2004, we experienced a sequential decline of 6% in our total net revenues from the third quarter of fiscal 2004. Fibre Channel revenues during the fourth quarter declined 4% sequentially primarily due to weaker than expected demand at the end of the quarter for our host bus adapters from two OEMs. Revenues derived from SCSI products declined 15% sequentially during the fourth quarter due to the continued technology transition in our hard disk drive controller product line from SCSI to Fibre Channel technology.

      Overall, sales of our hard disk drive controller chips declined during the fourth quarter of fiscal 2004 due to an expected product transition by one of our hard disk drive manufacturer customers. We expect this transition to begin to ramp in the first quarter of fiscal 2005 with full production expected during the successive two quarters.

      Our long-term outlook for our core Fibre Channel business remains favorable. Based on a foundation of design wins in existing markets, as well as emerging markets such as the small-to-medium business market,

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      A summary of the key factors and significant events, which impacted our financial performance during the fourth quarter of fiscal 2004 are as follows:

	•	Net revenues of $128.3 million for the fourth quarter of fiscal 2004 decreased sequentially $8.8 million, or 6%, from the $137.1 million reported in the third quarter of fiscal 2004.
	•	Gross profit as a percentage of net revenues was 69.6% for the fourth quarter of fiscal 2004, increasing 90 basis points from 68.7% in the third quarter of fiscal 2004. The improvement in our gross profit margin was attributable to a favorable change in product mix and technology mix, and manufacturing related efficiencies. Although we have experienced increases in our gross profit margin during fiscal 2004, there can be no assurance that we will be able to maintain our gross profit margin consistent with historical trends and it may decline in the future.
	•	Operating income as a percentage of net revenues was 37.9% for the fourth quarter of fiscal 2004 compared to 38.6% in the third quarter of fiscal 2004, primarily due to the sequential decline in net revenues.
	•	Net income of $32.9 million, or $0.34 per diluted share, decreased sequentially 6% from the $35.0 million, or $0.36 per diluted share, in the third quarter of fiscal 2004.
	•	During the fourth quarter of fiscal 2004, we repurchased $37.5 million of our common stock in the open market under our corporate stock repurchase program.
	•	Cash and cash equivalents and short-term investments of $743.0 million at March 28, 2004 increased $3.9 million (net of the $37.5 million of cash used to repurchase our common stock) during the fourth quarter, due primarily to our net income and the related cash generated from operations.
	•	Working capital of $792.8 million at March 28, 2004 increased $1.5 million during the fourth quarter primarily due to our net income and the related cash generated from operations, partially offset by the $37.5 million of cash used to repurchase our common stock.
	•	Accounts receivable was $67.4 million as of March 28, 2004, compared to $75.9 million at December 28, 2003. Days sales outstanding (DSO) in receivables as of March 28, 2004 decreased to 48 days from 51 days as of December 28, 2003. Our accounts receivable and DSO are primarily affected by shipment linearity within the quarter and collections performance. The decrease in our accounts receivable and DSO during the fourth quarter of fiscal 2004 was primarily caused by the decline in revenues during the quarter and improved collections in the March quarter. Based on changes in our customers’ procurement models and our current customer mix, we expect that DSO will continue to be in the 45 to 55 day range during fiscal 2005. However, there can be no assurance that we will be able to maintain our DSO consistent with historical trends and it may increase in the future.
	•	Inventories were $20.9 million as of March 28, 2004, compared to $17.9 million at December 28, 2003. Our annualized inventory turns in the fourth quarter of fiscal 2004 of 7.5 turns declined from the 9.6 turns in the third quarter of fiscal 2004, principally due to the increase in inventories related to the buildup to satisfy the expected level of customer purchases at the end of the fourth quarter.

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RESULTS OF OPERATIONS

Net Revenues

      A summary of our net revenues grouped by technology standard is as follows: