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The major drivers of corporate purchases are trying to grow a business at a lower cost. Often that lower cost comes when the new, larger company is able to do more with less people. That appears to be the case at Aliso Viejo-based QLogic, a computer networking and storage provider.
The company plans on laying off 69 people effective October 17, according to documents filed with the state, reports the Orange County Register. QLogic announced in June it had been purchased by San Jose-based chipmaker Cavium Inc. for $1.36 billion. The deal was finalized on August 16.
QLogic is now a wholly owned subsidiary of Cavium which makes switches, adapter cards and other networking equipment. QLogic provides a number of high tech products, including the Fibre Channel Adapters, which allow the storage and movement of large amounts of data.
QLogic was spun off of Costa Mesa-based Emulex in 1992. There had been an executive merry-go-round in recent years with people coming and going.
- Simon Biddiscombe resigned as president and CEO in 2013 after falling revenue.
- Its chief financial officer, Jean Hu, became interim CEO.
- The next year Prasad Rampalli was appointed CEO but he abruptly left six months later.
- Hu returned to the interim post as chief executive, a job she maintains today.
The company’s chairman, HK Desai died at age 68 after a heart attack in 2014.
The combination allows Cavium to supply complete end-to-end networking solutions to enterprise customers according to the Motley Fool. Cavium estimates the QLogic acquisition increases its total market opportunity by more than $2 billion. The website states QLogic’s revenue “has gone nowhere” over the past ten years and its profitability has fallen.
Cavium was founded by Syed Basharat Ali and Muhammad Raghib Hussain in November 2000. It’s listed as number 81 on Forbes’ list of Most Innovative Growth Companies. By the end of 2015 the company had $412,744,000 in sales and $268,977,000 in gross profits, according to Yahoo Finance.
Your business may not be the size of Cavium’s but you might still consider buying another business to merge it into your own or set it up as a subsidiary.
- You could expend the energy, time and expense of growing your business over time or purchase another one.
- You can review its operating history and understand its market.
- You need not start from scratch but can see how the business has performed in the past to better predict how well things will go in the future.
- You can determine its cash flow and operating expenses, giving you a better understanding of how much additional investment it may need.
- You may see the potential of such a business, something the current owner may be missing, or you may have a better business plan.
But buying a business is not without risks. There are a couple issues that you should consider getting help with. Evaluating the current operations of any business can be daunting requiring a thorough job of due diligence. We help businesses buying other companies with this work, saving our clients time, energy, resources and so they can avoid nasty post-purchase surprises. You should also hire an accountant to thoroughly go over the company’s financial records.
If you are thinking about purchasing a business, contact our office so we can talk about possible legal issues involved and steps you should take to protect your legal and financial interests.