News Column

Emulex Announces Preliminary Fiscal 2014 Fourth Quarter and Annual Results

August 7, 2014

COSTA MESA, Calif.--(BUSINESS WIRE)-- Emulex Corporation (NYSE:ELX), a leader in network connectivity, monitoring and management, today announced preliminary earnings results for the fourth quarter and fiscal year ending June 29, 2014.

Fourth Quarter Financial Highlights

  • Total revenue of $99.8 million was at the high end of the prior guidance range, aided by sequential growth in Fibre Channel host products.
  • Non-GAAP diluted earnings of $0.07 and a GAAP loss of $0.19 per share as compared to guidance of $0.00 - $0.05 and a loss of $0.16 - $0.21, respectively.
  • Non-GAAP gross margins of 66%, unchanged sequentially and up 100 basis points year-over-year, with GAAP gross margins of 58%, unchanged over both periods.
  • Cash, cash equivalents and investments at the end of the quarter of $158.4 million.
  • Diluted share count of 77.8 million shares in the fourth quarter, down from 93.5 million at the end of the first quarter of fiscal 2014.

    “I’m very pleased with the operational execution by the Emulex team during the fourth quarter. We achieved the high end of our revenue guidance, and with the completion of the closure of the Bolton engineering facility, we have accomplished the reduction in our operating expenses that we announced back in November. This, combined with strong gross margins helped us exceed the high end of our earnings per share guidance,” commented Jeff Benck, president and CEO, Emulex. “We experienced good recovery in our Fibre Channel business in the quarter with sequential revenue growth. Based on reported results to date, we expect to demonstrate more than two points of Fibre Channel market share gain in the quarter.

    “As we look forward, we believe that we should benefit from two major server upgrade cycles this year, IBM Power 8 and the Intel Grantley refresh. With this new Intel design cycle nearing completion, Emulex has significantly broadened its design win footprint in Ethernet from a concentration among two OEMs to now include offerings from all of the top eight server OEMs as well as the leading open compute ODMs,” Benck concluded.

    Business Outlook

    Although actual results may vary depending on a variety of factors, including those listed in the Safe Harbor Statement below and our filings with the SEC, Emulex is forecasting total net revenues in the range of $93 - $99 million. The Company expects first quarter non-GAAP earnings of $0.07 - $0.11 and a GAAP loss of $0.07 - $0.11 per share. GAAP estimates for the first quarter reflect approximately $0.18 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation, royalties, mitigation expenses and license fees associated with the Broadcom patent litigation, the accretion of debt discount on outstanding convertible senior notes, and the tax effects and the impact of our U.S. GAAP tax valuation allowance associated with these items. Reconciliation between GAAP and non-GAAP results is included in the accompanying financial data.

    Fourth Quarter Business Highlights

  • Deepened Lenovo relationship with new 10Gb Ethernet and 16Gb Fibre Channel solutions for Lenovo ThinkServer rack and tower servers and was awarded the Lenovo Outstanding Quality supplier award for the second time in three years.
  • Announced next generation 10GbE converged adapters as EMC E-Lab qualified for use with solutions including EMC VNX and the new VMAX3 storage arrays.
  • Unveiled next generation 10Gb and 40Gb Ethernet solutions featuring advanced packet processing, enabling the telecommunications market to lower costs and scale flexibility by accelerating the deployment of Network Functions Virtualization (NFV) for the mobile, cloud-enabled world.
  • Commenced a strategic partnership with Compuware to deliver integrated best-of-breed application-aware network performance management (AA-NPM) and network monitoring solutions using Compuware’s Data Center Real-User Monitoring (DC RUM) and EndaceProbe™ Intelligent Network Recorders (INRs).
    EMULEX CORPORATION AND SUBSIDIARIES
    Condensed Consolidated Statements of Operations
    (unaudited, in thousands, except per share data)
     
      Three Months Ended   Twelve Months Ended
    June 29,   June 30,June 29,   June 30,
      2014       2013       2014       2013  
    Net revenues $ 99,775 $ 120,369 $ 447,333 $ 478,567
     
    Cost of sales:
    Cost of goods sold 34,330 42,917 153,994 173,004
    Amortization of core and developed technology intangible assets 6,277 6,025 24,916 21,800
    Expenses related to the Broadcom patents   1,593       1,587       7,426       4,963  
    Cost of sales   42,200       50,529       186,336      

    199,767

     
    Gross profit   57,575       69,840       260,997       278,800  
     
    Operating expenses:
    Engineering and development 36,359 46,202 155,909 168,446
    Selling and marketing 20,467 20,550 77,757 66,235
    General and administrative 8,666 9,872 41,115 38,893
    Amortization of other intangible assets   1,584       1,559       6,375       5,935  
    Total operating expenses   67,076       78,183       281,156       279,509  
     
    Operating loss   (9,501 )     (8,343 )     (20,159 )     (709 )
     
    Non-operating loss:
    Interest income 1 11 26 34
    Interest expense (2,354 ) (13 ) (5,860 ) (24 )
    Other income (expense), net   (75 )     (40 )     (193 )     (4,884 )
    Total non-operating loss   (2,428 )     (42 )     (6,027 )     (4,874 )
     
    Loss before income taxes (11,929 ) (8,385 ) (26,186 ) (5,583 )
     
    Income tax provision (benefit)   2,736       (3,775 )     3,346       (369 )
     
    Net loss $ (14,665 )   $ (4,610 )   $ (29,532 )   $ (5,214 )
     
    Net loss per share:
    Basic $ (0.19 )   $ (0.05 )   $ (0.35 )   $ (0.06 )
    Diluted $ (0.19 )   $ (0.05 )   $ (0.35 )   $ (0.06 )
     
    Number of shares used in net loss per share computations:
    Basic   76,459       91,084       83,917       90,271  
    Diluted   76,459       91,084       83,917       90,271  
     
    EMULEX CORPORATION AND SUBSIDIARIES
    Condensed Consolidated Balance Sheets
    (unaudited, in thousands)
     
      June 29,   June 30,
    2014   2013

    Assets

     
    Current assets:
    Cash and cash equivalents $ 158,439 $ 105,637
    Accounts receivable, net 76,974 82,363
    Inventories 25,831 23,897
    Prepaid income taxes 2,839 10,166
    Prepaid expenses and other current assets 17,190 14,113
    Deferred income taxes   223     3,137
    Total current assets 281,496 239,313
     
    Property and equipment, net 59,908 62,415
    Goodwill and intangible assets, net 356,526 387,817
    Other assets   19,993     21,164
    $ 717,923   $ 710,709

     

    Liabilities and Stockholders’ Equity

     
    Current liabilities:
    Accounts payable $ 25,762 $ 27,725
    Accrued and other current liabilities   42,183     43,861
    Total current liabilities 67,945 71,586
     
    Convertible senior notes 146,478
    Other liabilities 6,842 4,924
    Deferred income taxes 15,550 17,048
    Accrued taxes   26,462     29,526
    Total liabilities   263,277     123,084
     
    Total stockholders’ equity   454,646     587,625
    $ 717,923   $ 710,709
     
    EMULEX CORPORATION AND SUBSIDIARIES
    Condensed Consolidated Statement of Cash Flows
    (unaudited, in thousands)
     
      Twelve Months Ended
    June 29,   June 30,
      2014       2013  
     
    Cash flows from operations:
    Net (loss) income $ (29,532 ) $ (5,214 )
    Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
    Depreciation and amortization 50,327 45,935
    Stock based compensation 15,257 21,802
    Deferred income taxes 1,428 1,886
    Other reconciling items 2,490 (209 )
    Changes in assets and liabilities   7,813       (53,603 )
    Net cash provided by (used in) operating activities   47,783       10,597  
     
    Cash flows from investing activities:
    Investment in property and equipment, net (15,983 ) (15,696 )
    Acquisitions, net of cash acquired (107,709 )
    Maturities of (proceeds from) investments, net         28,939  
    Net cash provided by (used in) investing activities   (15,983 )     (94,466 )
     
    Cash flows from financing activities:
    Issuance of convertible senior notes 175,000
    Repurchase of common stock (150,000 )
    Non-controlling interest (11,828 )
    Other   (4,459 )     628  
    Net cash provided by (used in) financing activities   20,541       (11,200 )
     
    Effect of exchange rates on cash and cash equivalents   461       (342 )
     
    Net increase (decrease) in cash & cash equivalents 52,802 (95,411 )
    Opening cash balance   105,637       201,048  
    Ending cash balance $ 158,439     $ 105,637  
     
    EMULEX CORPORATION AND SUBSIDIARIES
    Supplemental Information
     

    Reconciliation of GAAP Net Loss to Non-GAAP Net Income:

      Three Months Ended   Twelve Months Ended
    ($000s)June 29,   June 30,June 29,   June 30,
      2014       2013       2014       2013  
    GAAP net loss as presented above $ (14,665 )   $ (4,610 )   $ (29,532 )   $ (5,214 )
    GAAP loss per share as presented above $ (0.19 )   $ (0.05 )   $ (0.35 )   $ (0.06 )
    Shares used in GAAP loss per share computations   76,459       91,084       83,917       90,271  
     
    Items excluded from GAAP net loss to calculate non-GAAP net income:
    Amortization of intangibles:
    Cost of sales 6,277 6,025 24,916 21,800
    Amortization of intangibles (operating expense)   1,584       1,559       6,375       5,935  
    Total amortization of intangibles 7,861 7,584 31,291 27,735
    Stock-based compensation:
    Cost of sales 198 269 667 1,013
    Engineering and development 1,271 2,284 5,550 9,802
    Selling and marketing 891 1,017 3,929 3,593
    General and administrative   671       1,964       5,111       7,393  
    Total stock-based compensation 3,031 5,534 15,257 21,801
    Site closure and other restructuring costs:
    Cost of sales (6 ) 45 296 45
    Engineering and development 263 1,728 5,688 1,728
    Selling and marketing 1,348 591 2,473 591
    General and administrative   581       340       1,981       340  
    Total site closure and other restructuring costs 2,186 2,704 10,438 2,704
    Expenses related to the Broadcom patents:
    Cost of sales 1,593 1,587 7,426 4,963
    Engineering and development (271 ) 3,809 2,132 6,948
    Selling and marketing 1,154 1,979
    General and administrative   22       307       5,347       1,658  
    Total expenses related to the Broadcom patents 2,498 5,703 16,884 13,569
    Expenses related to the acquisition of Endace:
    Cost of sales 349 858
    Engineering and development 116 275
    Selling and marketing 69 21 85
    General and administrative (39 ) 328 282 3,176
    Non-operating income                     4,692  
    Total expenses related to the acquisition of Endace (39 ) 862 303 9,086
    Expenses related to class action lawsuit:
    General and administrative   18             18        
    Total expenses related to class action lawsuit 18 18
    IRS NOPA:
    General and administrative   762             934        
    Total IRS NOPA 762 934
    Accretion of debt discount on convertible senior notes 1,587 3,914
    Tax impact of above items and U.S. GAAP tax valuation allowance   2,563       (3,779 )     (875 )     (2,752 )
    Impact on GAAP net loss 20,467 18,608 78,164 72,143
     
    Non-GAAP net income $ 5,802     $ 13,998     $ 48,632     $ 66,929  
    Non-GAAP diluted earnings per share $ 0.07     $ 0.15     $ 0.57     $ 0.73  
    Diluted shares used in non-GAAP earnings per share computations   77,784       92,842       85,583       92,171  
     

    Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin:

     
      Three Months Ended   Twelve Months Ended
    ($000s)June 29,   June 30,June 29,   June 30,
      2014       2013       2014       2013  
    Revenue $ 99,775     $ 120,369  

     

    $ 447,333     $ 478,567  
     
    GAAP gross margin   57,575       69,840       260,997       278,800  
    GAAP gross margin %   57.7 %     58.0 %     58.3 %     58.3 %
     
    Items excluded from GAAP gross margin to calculate non-GAAP gross margin:
    Amortization of intangibles 6,277 6,025 24,916 21,800
    Stock-based compensation 198 269 667 1,013
    Site closure and other restructuring costs (6 ) 45 296 45
    Expenses related to the Broadcom patents 1,593 1,587 7,426 4,963
    Expenses related to the acquisition of Endace         349             858  
    Impact on gross margin 8,062 8,275 33,305 28,679
     
    Non-GAAP gross margin $ 65,637     $ 78,115     $ 294,302     $ 307,479  
    Non-GAAP gross margin %   65.8 %     64.9 %     65.8 %     64.2 %

     

    Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses:

     
    Three Months EndedTwelve Months Ended
    June 29,June 30,June 29,June 30,
    ($000s)   2014       2013       2014       2013  
     
    GAAP operating expenses, as presented above $ 67,076     $ 78,183     $ 281,156     $ 279,509  
     
    Items excluded from GAAP operating expenses to calculate non-GAAP operating expenses:
    Amortization of other intangibles (1,584 ) (1,559 ) (6,375 ) (5,935 )
    Stock-based compensation (2,833 ) (5,265 ) (14,590 ) (20,788 )
    Site closure and other restructuring costs (2,192 ) (2,659 ) (10,142 ) (2,659 )
    Expenses related to the Broadcom patents (905 ) (4,116 ) (9,458 ) (8,606 )
    Expenses related to the acquisition of Endace 39 (513 ) (303 ) (3,536 )
    Expenses related to class action lawsuit (18 ) (18 )
    IRS NOPA   (762 )           (934 )      
    Impact on operating expenses   (8,255 )     (14,112 )     (41,820 )     (41,524 )
    Non-GAAP operating expenses $ 58,821     $ 64,071     $ 239,336     $ 237,985  
     

    Reconciliation of GAAP Operating Loss to Non-GAAP Operating Income:

     
      Three Months Ended   Twelve Months Ended
    ($000s)June 29,   June 30,June 29,   June 30,
      2014       2013       2014       2013  
     
    GAAP operating loss as presented above $ (9,501 )   $ (8,343 )   $ (20,159 )   $ (709 )
     
    Items excluded from GAAP operating loss to calculate non-GAAP operating income:
    Amortization of intangibles 7,861 7,584 31,291 27,735
    Stock-based compensation 3,031 5,534 15,257 21,801
    Site closure and other restructuring costs 2,186 2,704 10,438 2,704
    Expenses related to the Broadcom patents 2,498 5,703 16,884 13,569
    Expenses related to the acquisition of Endace (39 ) 862 303 4,394
    Expenses related to class action lawsuit 18 18
    IRS NOPA   762             934        
    Impact on operating loss   16,317       22,387       75,125       70,203  
    Non-GAAP operating income $ 6,816     $ 14,044     $ 54,966     $ 69,494  
     
     
     
    Guidance for
    Three Months Ending
    September 28, 2014
     
     
    Non-GAAP diluted earnings per share guidance $0.07 - $0.11
     

    Items excluded, net of tax, from non-GAAP diluted earnings per share to calculate GAAP loss per share guidance:

    Amortization of intangibles (0.10)
    Stock-based compensation (0.04)
    Expenses related to the Broadcom patents (0.03)
    Accretion of debt discount on convertible senior notes (0.02)
    Tax impact of above items and U.S. GAAP tax valuation allowance 0.01
     
    GAAP loss per share guidance ($0.07 - $0.11)
     

    Historical Net Revenue by Product Lines:

     
      Q4 FY     Q4 FY    
    2014% Total2013% Total
    ($000s)Revenues   RevenuesRevenues   Revenues% Change
     
    Network Connectivity Products $ 75,850 76 % $ 82,943 69 % (9 )%
    Storage Connectivity and Other Products   16,850   17 %   29,115   24 % (42 )%
    Emulex Connectivity Division   92,700   93 %     112,058   93 %   (17 )%
    Network Visibility Products   7,075   7 %     8,311   7 %   (15 )%
    Total net revenues $ 99,775   100 % $ 120,369   100 % (17 )%
     
     

    Historical Net Revenues by Channel:

     
    Q4 FYQ4 FY
    2014% Total2013% Total
    ($000s)Revenues   RevenuesRevenues   Revenues% Change
     
    Revenues from OEM customers $ 82,995 83 % $ 101,342 84 % (18 )%
    Revenues from distribution 13,646 14 % 14,107 12 % (3 )%
    Other   3,134   3 %   4,920   4 % (36 )%
    Total net revenues $ 99,775   100 % $ 120,369   100 % (17 )%
     

    Historical Net Revenues by Territory:

     
    Q4 FYQ4 FY
    2014% Total2013% Total
    ($000s)Revenues   RevenuesRevenues   Revenues% Change
     
    Asia-Pacific $ 61,469 61 % $ 68,297 57 % (10 )%
    United States 22,707 23 % 33,881 28 % (33 )%
    Europe, Middle East and Africa 14,752 15 % 16,537 14 % (11 )%
    Rest of world   847   1 %   1,654   1 % (49 )%
    Total net revenues $ 99,775   100 % $ 120,369   100 % (17 )%


    Note Regarding Non-GAAP Financial Information

    To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we have included the following non-GAAP financial measures in this press release or in the webcast to discuss our financial results for the fourth fiscal quarter which may be accessed via our website at www.emulex.com: (i) non-GAAP gross margin, (ii) non-GAAP operating expenses, (iii) non-GAAP operating income, (iv) non-GAAP net income, and (v) non-GAAP diluted earnings per share. These non-GAAP financial measures exclude certain expenses and reflect an additional way of viewing aspects of our operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our results of operations and the factors and trends affecting our business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. We use our non-GAAP financial measures internally to better understand and evaluate our business, prepare annual budgets, and in measuring performance for some forms of compensation.

    Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

    Amortization of intangibles. Amortization of intangibles generally represents costs incurred by an acquired company or other third party to build value prior to our acquisition of the intangible assets. As such, it is effectively part of the transaction costs of the acquisition rather than ongoing costs of operating our core business. As a result, we believe that exclusion of these costs in presenting non-GAAP financial measures provides management and investors a more effective means of evaluating its historical performance and projected costs and the potential for realizing cost efficiencies within our core business. Amortization of intangibles will recur in future periods.

    Stock-based compensation. Although stock-based compensation represents an important part of incentive compensation offered to our key employees, we believe that exclusion of the impact of stock-based compensation assists management and investors in evaluating the period over period performance of our business operations and in comparing our performance with those of our competitors. Stock-based compensation expense will recur in future periods.

    Site closure and other restructuring costs. We have recognized expenses related to an organizational restructure including closure and consolidation of certain facilities, as well as severance and related costs. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type may be incurred in future periods but are generally infrequent in nature.

    Patent litigation damages, license fees and royalties related to the Broadcom patents. We have incurred expenses in the form of damages, sunset period royalties and settlement costs as a result of a judgment in a patent litigation proceeding with Broadcom and the related partial settlement and worldwide license agreement executed on July 3, 2012 (the Release Agreement). We believe that exclusion of these cost of sales expenses related to the Broadcom patents is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business and/or infrequent in nature but will continue in future periods.

    Dismissal Agreement and mitigation expenses related to the Broadcom patents. Effective March 30, 2014, we have entered into a Dismissal and Standstill Agreement (Dismissal Agreement) agreeing to pay Broadcom, a non-refundable, non-cancelable dismissal and standstill fee of $5 million. We have recognized mitigation expenses related to the Broadcom patents. We believe that exclusion of these operating expenses related to the Broadcom patents is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business and/or infrequent in nature but will continue in future periods.

    Expenses related to the acquisition of Endace Limited. We have incurred various expenses in connection with our acquisition of Endace Limited including but not limited to legal fees, accounting fees, the mark-up on acquired inventory, severance costs and realized translation loss. We believe that exclusion of these charges is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors, as these expenditures do not reflect a continuing cost of operating our current core business. In this regard, we note that expenses of this type relate to the acquisition of an operating business and, as such, are infrequent in nature but may occur in future periods in the event we make a material acquisition.

    Expenses related to class action lawsuit. We have incurred expenses related to a class action lawsuit. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.

    IRS NOPA Expenses. We have incurred various legal and accounting expenses related to the receipt and our response to the Notice of Proposed Adjustment (NOPA) received from the Internal Revenue Service in March of 2014. We disagree with the IRS’ proposed adjustments and the basis for its positions, and will administratively appeal to the IRS Appeals Office. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature but will continue in future periods until these audits are resolved.

    Accretion of debt discount on convertible senior notes. We have accreted debt discount in connection with the convertible senior notes. We believe that exclusion of this expense is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business but will continue in future periods until maturity of the convertible senior notes.

    Valuation allowance for U.S. federal and state deferred tax assets. The Company has concluded that it is more likely than not that we will be unable to fully utilize the majority of our U.S. federal and state deferred tax assets. As a result, the Company has previously recorded a valuation allowance against those assets to the extent that they cannot be realized through net operating loss carrybacks to prior tax years. We believe that eliminating the impact of a discrete adjustment of this nature and its continuing impact on our effective tax rate is useful to management and investors in evaluating the performance of the Company’s ongoing operations on a period-to-period basis and relative to the Company’s competitors. In this regard, we note that adjustments of this type are generally infrequent in nature.

    - - - - - - - - -

    "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above, contain forward-looking statements that involve risk and uncertainties. We expressly disclaim any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. We wish to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These factors include the possibility that all or a substantial portion of the cost savings targeted by us will not be realized on a timely basis or at all even though we expect to incur charges relating to the cost saving initiative and that the share repurchases implemented by us may not be completed in whole or in part or within the expected timeframe. The assumptions on which the cost savings, share repurchase and capital return goals and expectations are based necessarily involve judgments with respect to, among other things, economic, competitive and financial market conditions and the impact of the cost savings initiative on our customers, all of which are difficult or impossible to predict and many of which are beyond the Company’s control. Furthermore, our changes to the membership of our board of directors may not have the desired effect in helping us achieve and implement our business and strategic goals. These factors also include the possibility that we may not realize the anticipated benefits from the acquisition of Endace Limited on a timely basis or at all, and may be unable to integrate the technology, operations and personnel of Endace into our existing operations in a timely and efficient manner. In addition, intellectual property claims, with or without merit, could result in costly litigation, cause product shipment delays, require us to indemnify customers, or require us to enter into royalty or licensing agreements, which may or may not be available. Furthermore, we have in the past obtained, and may be required in the future to obtain, licenses of technology owned by other parties. We cannot be certain that the necessary licenses will be available or that they will be obtainable on commercially reasonable terms. If we were to fail to obtain such royalty or licensing agreements in a timely manner and on reasonable terms, our business, results of operations and financial condition could be materially adversely affected. Lawsuits present inherent risks, any of which could have a material adverse effect on our business, financial condition, or results of operations. Such potential risks include continuing expenses of litigation, loss of patent rights, monetary damages, injunctions against the sale of products incorporating the technology in question, counterclaims, attorneys’ fees, incremental costs associated with product or component redesigns, liabilities to customers under reimbursement agreements or contractual indemnification provisions, and diversion of management’s attention from other business matters. In addition, the fact that the economy generally, and the network connectivity and visibility market segments specifically, have been in a state of uncertainty makes it difficult to determine if past experience is a good guide to the future and makes it impossible to determine if markets will grow or shrink in the short term. Continued weakness in domestic and worldwide macro-economic conditions, currency exchange rate fluctuations, potential disruptions in world credit and equity markets, and the resulting economic uncertainty for our customers, as well as the overall network connectivity and visibility markets, has and could continue to adversely affect our revenues and results of operations. As a result of these uncertainties, we are unable to predict our future results with any accuracy. Other factors affecting these forward-looking statements include but are not limited to the following: faster than anticipated declines in the storage networking market, slower than expected growth of the converged networking market or the failure of our Original Equipment Manufacturer (OEM) customers to successfully incorporate our products into their systems; our dependence on a limited number of customers and the effects of the loss of, decrease in or delays of orders by any such customers, or the failure of such customers to make timely payments; the emergence of new or stronger competitors as a result of consolidation movements in the market; the timing and market acceptance of our products or our OEM customers’ new or enhanced products; costs associated with entry into new areas of the network connectivity and visibility markets; the variability in the level of our backlog and the variable and seasonal procurement patterns of our customers; any inadequacy of our intellectual property protection and the costs of actual or potential third-party claims of infringement and any related indemnity obligations or adverse judgments; the effect of any actual or potential unsolicited offers to acquire us; proxy contests or the activities of activist investors; impairment charges, including but not limited to goodwill and intangible assets; changes in tax rates or legislation; the effects of acquisitions; the effects of terrorist activities, natural disasters, and any resulting disruption in our supply chain or customer purchasing patterns or any other resulting economic or political instability; the highly competitive nature of the markets for our products as well as pricing pressures that may result from such competitive conditions; the effect of rapid migration of customers towards newer, lower cost product platforms; transitions from board or box level to application specific integrated circuit (ASIC) solutions for selected applications; a shift in unit product mix from higher-end to lower-end or mezzanine card products; a faster than anticipated decrease in the average unit selling prices or an increase in the manufactured cost of our products; delays in product development; our reliance on third-party suppliers and subcontractors for components and assembly; our ability to attract and retain key technical personnel; our ability to benefit from our research and development activities as well as government grants related thereto; our dependence on international sales and internationally produced products; changes in accounting standards; and any resulting regulatory changes on our business. These and other factors could cause actual results to differ materially from those in the forward-looking statements and are discussed in our filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K and 10-Q, under the caption “Risk Factors.”

    About Emulex

    Emulex, a leader in network connectivity, monitoring and management, provides hardware and software solutions for global networks that support enterprise, cloud, government and telecommunications. Emulex’s products enable unrivaled end-to-end application visibility, optimization and acceleration. The Company's I/O connectivity offerings, including its line of ultra high-performance Ethernet and Fibre Channel-based connectivity products, have been designed into server and storage solutions from leading OEMs, including Cisco, Dell, EMC, Fujitsu, Hitachi, HP, Huawei, IBM, NetApp and Oracle, and can be found in the data centers of nearly all of the Fortune 1000. Emulex’s monitoring and management solutions, including its portfolio of network visibility and recording products, provide organizations with complete network performance management at speeds up to 100Gb Ethernet. Emulex is headquartered in Costa Mesa, Calif., and has offices and research facilities in North America, Asia and Europe. For more information about Emulex (NYSE:ELX) please visit http://www.Emulex.com.

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

    This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies.



    Emulex Corporation

    Investor Contact:

    Paul Mansky

    Sr. Director Corporate Development & Investor Relations

    +1 714 885-2888

    paul.mansky@emulex.com

    or

    Press Contact:

    Katherine Lane

    Sr. Director Corporate & Marketing Communications

    +1 714 885-3828

    katherine.lane@emulex.com

    Source: Emulex Corporation


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