Welcome!

IBM Cloud Authors: John Basso, John Esposito, Liz McMillan, Jason Bloomberg, Elizabeth White

News Feed Item

Emulex Announces Second Quarter Results

Emulex Corporation (NYSE:ELX), a leader in network connectivity, monitoring and management, today announced earnings results for the second quarter of fiscal 2014, which ended on December 29, 2013.

Second Quarter Financial Highlights

  • Total net revenues of $123.0 million
  • Network Connectivity Products (NCP) net revenues of $87.2 million, representing 71% of total net revenues
  • Network Visibility Products (NVP), net revenues of $9.6 million, representing 8% of total net revenues
  • Storage Connectivity and Other Products (SCOP) net revenues of $26.1 million, representing 21% of total net revenues
  • Non-GAAP gross margins of 66% and GAAP gross margins of 59%
  • Non-GAAP diluted earnings per share of $0.21
  • GAAP loss per share of $0.05, which includes an approximately $0.09 impact related to our previously announced restructuring
  • Cash, cash equivalents and investments at the end of the quarter of $198.7 million
  • Raised $175 million through a convertible debt offering
  • Announced a $200 million share repurchase program of which $100 million was transacted in Q2, consisting of $56 million of direct treasury stock purchases and $44 million paid for treasury stock repurchases under an accelerated stock buyback program which will conclude by May 2014
  • Weighted share count of 88.6 million shares in the December quarter compared to 93.5 million in the first quarter

Second Quarter Business Highlights

  • Implemented a three-part initiative to improve profitability and enhance shareholder value
    • Expanded cost savings program to deliver $30 million in annual cost savings compared to the fiscal 2013 spending level in the connectivity business. The program includes a 15% workforce reduction and the closure of the Bolton, Massachusetts engineering facility by the end of fiscal 2014
    • Announced a $200 million share repurchase program, of which $100 million is expected to be completed by the end of May 2014 primarily funded by completion of $175 million convertible debt offering due in 2018
    • Received acceptances from Gary J. Daichendt, a former networking executive and current board member of ShoreTel and NCR, John A. Kelley, Jr., a former storage and telecom equipment chief executive officer (CEO) and current board member of Polycom, and Rahul N. Merchant, former chief information and innovation officer for the City of New York and current board member of Fair Isaac Corporation (FICO), to be seated as independent board members at our upcoming shareholders meeting on February 6, 2014
  • Unveiled the next generation OneConnect® 10Gb and 40Gb Ethernet (10/40GbE) network adapter family, which represents the Company’s first 40GbE Network Adapters and RDMA over Converged Ethernet (RoCE) capable Converged Network Adapters (CNAs), delivering increased server virtualization density, software-defined networking enablement and advanced functionality for hybrid cloud environments
  • Delivered revenue shipments of the redesigned OCe11000R adapters based on the new XE4310R Ethernet controller
  • Announced joint development with Brocade to deliver a new generation of advanced Gen 6 (32Gb) Fibre Channel (FC) solutions, enabling increased network performance, higher scalability and improved reliability for the highly virtualized data center
  • Announced a key customer reference with IRESS, a financial services organization, who is deploying the EndaceProbe™ Intelligent Network Recorder (INR) and the EndaceVision™ software suite to consolidate its network operations infrastructure, improve network performance and increase security monitoring capabilities in its data centers
  • Expanded Gen 5 Fibre Channel ecosystem partner certification for its LightPulse® Gen 5 (16Gb) FC Host Bus Adapters (HBAs), including ATTO Technology, Bloombase, Imation, Permabit and Violin Memory

“With solid top line performance, I’m pleased to report that we once again exceeded the high-end of our earnings guidance, and have made significant progress on our three-part initiative to increase shareholder value,” commented Jeff Benck, president and CEO, Emulex. “I’m particularly proud that our team began shipping revenue units based upon our redesigned controller last quarter, and just last week, we introduced our next generation Ethernet adapter family, including the company’s first 40Gb Ethernet and RDMA-capable adapters.”

“We’ve also added a wealth of experience to the Company with the addition of Kyle Wescoat as CFO and the new independent director candidates, which will help the Company as we continue our initiatives in support of enhanced profitability and shareholder value,” Benck concluded.

Business Outlook

Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, including uncertainty related to the macro IT spending environment, the timing of new server and storage launches by our customers, and the results and related costs of ongoing patent litigation, Emulex is providing guidance for its third fiscal quarter ending March 30, 2014. For the third quarter of fiscal 2014, Emulex is forecasting total net revenues in the range of $110 - $114 million. The Company expects non-GAAP earnings per diluted share of $0.14 - $0.17 in the third quarter. GAAP estimates for the third quarter reflect approximately $0.21 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation, the royalties, mitigation expenses and license fees associated with the Broadcom patent litigation, accretion of debt discount on convertible senior notes, and site closure and related restructuring costs, as well as the associated tax effects and the impact of our U.S. GAAP tax valuation allowance. A reconciliation between GAAP and non-GAAP results are included in the accompanying financial data.

   
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
 
Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
2013     2012     2013     2012  
Net revenues $122,996 $122,145 $237,828 $241,412
 
Cost of sales:
Cost of goods sold 42,109 44,472 81,800 88,623

Amortization of core and developed technology intangible assets

6,239 5,149 12,399 10,297

Patent litigation damages, license fees and royalties

2,358     958     3,855     1,950  
Cost of sales 50,706     50,579     98,054     100,870  
Gross profit 72,290     71,566     139,774     140,542  
 
Operating expenses:
Engineering and development 42,020 40,113 82,431 78,583
Selling and marketing 19,849 14,769 38,941 28,506
General and administrative 10,407 10,987 20,036 19,495

Amortization of other intangible assets

1,603     1,365     3,207     2,888  
Total operating expenses 73,879     67,234     144,615     129,472  
 
Operating (loss) income (1,589 )   4,332     (4,841 )   11,070  
 
Non-operating loss:
Interest income 16 8 20 8
Interest expense (1,148 ) 2 (1,150 ) (4 )
Other income (expense), net (135 )   (27 )   17     (363 )
Total non-operating loss (1,267 )   (17 )   (1,113 )   (359 )
 
(Loss) income before income taxes (2,856 ) 4,315 (5,954 ) 10,711
 
Income tax provision (benefit) 1,171     (1,268 )   1,714     4,471  
 
Net (loss) income $(4,027 )   $5,583     $(7,668 )   $6,240  
 
Net (loss) earnings per share:
Basic $(0.05 )   $0.06     $(0.09 )   $0.07  
Diluted $(0.05 )   $0.06     $(0.09 )   $0.07  
 
Number of shares used in per share computations:
Basic 86,881     90,063     89,162     89,705  
Diluted 86,881     91,816     89,162     91,637  
 
 
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
     
December 29, June 30,
2013     2013

Assets

 
Current assets:
Cash and cash equivalents $ 198,679 $ 105,637
Accounts receivable, net 87,177 82,363
Inventories 24,051 23,897
Prepaid income taxes 2,473 10,166
Prepaid expenses and other current assets 17,110 14,113
Deferred income taxes   3,137       3,137
Total current assets 332,627 239,313
 
Property and equipment, net 62,477 62,415
Goodwill and Intangible assets, net 372,211 387,817
Other assets   23,090       21,164
$ 790,405     $ 710,709

 

Liabilities and Stockholders’ Equity

 
Current liabilities:
Accounts payable $ 30,354 $ 27,725
Accrued and other current liabilities   46,201       43,861
Total current liabilities 76,555 71,586
 
 
Convertible notes 143,667 -
Other liabilities 5,602 4,924
Deferred income taxes 17,048 17,048
Accrued taxes   29,526       29,526
Total liabilities   272,398       123,084
 
 
Total stockholders’ equity   518,007       587,625
$ 790,405     $ 710,709
 
 
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(unaudited, in thousands)
 

Six Months Ended
December 29,   December 30,
2013   2012
 
Cash flows from operations:
Net (loss) income $ (7,668 ) $ 6,240

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation and amortization 25,209 21,956
Stock based compensation 8,316 10,929
Deferred income taxes - (452 )
Other reconciling items 829 (202 )
Changes in assets and liabilities   6,848       (49,954 )

Net cash provided by (used in) operating activities

  33,534       (11,483 )
 
Cash flows from investing activities:
Investment in property and equipment, net (10,006 ) (6,960 )
Maturities of/(proceeds from) investments, net   -       26,701  

Net cash provided by (used in) investing activities

  (10,006 )     19,741  
 
Cash flows from financing activities:
Issuance of convertible senior notes 175,000 -
Repurchase of common stock (100,000 ) -
Other   (5,649 )     (515 )
Net cash provided by (used in) financing activities   69,351       (515 )
 
Effect of exchange rates on cash and cash equivalents  

163

     

161

 
 
Net increase in cash & cash equivalents 93,042 7,904
Opening cash balance   105,637       201,048  
Ending cash balance $ 198,679     $ 208,952  
 
 

EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information

Historical Net Revenue by Product Lines:

Network Connectivity Products (NCP) primarily consist of Fibre Channel LightPulse® and Ethernet OneConnect® standup HBAs, mezzanine cards, I/O ASICs, ULOMs, and UCNAs to provide server Input/Output (I/O) and target storage array connectivity to enable servers to reliably and efficiently connect to Local Area Networks, Storage Area Networks and Network Attached Storage by offloading data communication processing tasks from the servers as information is delivered and sent to the network.

Network Visibility Products (NVP) consists entirely of the recently acquired Endace® family of network visibility and intelligent network recording products, which consists of EndaceProbe™ Intelligent Network Recorder appliances, the EndaceVision™ browser-based network traffic search engine, EndaceAccess™ network visibility headend systems and Data Acquisition and Generation (DAG) network capture cards, providing organizations with complete network performance management at speeds up to 100Gb Ethernet.

Storage Connectivity and Other Products (SCOP) includes Emulex InSpeed®, switch-on-a-chip (SOC) and backend connectivity, bridge, and router products, Pilot™ Integrated Baseboard Management Controllers (iBMCs), certain legacy products and other products and services. Many of these products are deployed inside storage arrays, tape libraries, and other storage appliances, connecting storage controllers to storage capacity, delivering improved performance, reliability, and connectivity.

($000s)   Q2 FY
2014

Revenues

  Q1 FY
2014

Revenues

  Q4 FY
2013
Revenues
  Q3 FY
2013

Revenues

  Q2 FY
2013
Revenues
  % Change
Q2 vs Q2
         
Network Connectivity Products $ 87,205 $ 77,980 $ 82,943 $ 85,166 $ 96,132 (9 )%

Storage Connectivity and Other Products

  26,143       26,755       29,115      

26,747

      26,013    

nm

 
Emulex Connectivity Division $ 113,348     $ 104,735     $ 112,058     $ 111,913     $ 122,145     (7 )%
Network Visibility Products   9,648       10,097       8,311       4,873       -     na  
Total net revenues $ 122,996     $ 114,832     $ 120,369     $ 116,786     $ 122,145     1 %
na – not applicable

nm – not meaningful

 
% Total

Revenues

  % Total
Revenues
  % Total

Revenues

  % Total
Revenues
  % Total
Revenues
     
 
Network Connectivity Products 71 % 68 % 69 % 73 % 79 %
Storage Connectivity and Other Products   21 %     23 %     24 %     23 %     21 %      
Emulex Connectivity Division   92 %     91 %     93 %     96 %     100 %      
Network Visibility Products   8 %     9 %     7 %     4 %     -        
Total net revenues   100 %     100 %     100 %     100 %     100 %      
 
 

Historical Net Revenues by Channel and Territory:

             
($000s) Q2 FY
2014

Revenues

 

% Total
Revenues

  Q2 FY
2013

Revenues

 

% Total
Revenues

  % Change  
 
Revenues from OEM customers $ 102,235 83 % $ 110,174 90 % (7 )%
Revenues from distribution 16,424 13 % 11,896 10 % 38 %
Other   4,337   4 %   75   nm   nm  
Total net revenues $ 122,996   100 % $ 122,145   100 % 1 %
 
Asia-Pacific $ 71,169 58 % $ 73,610 60 % (3 )%
United States 34,012 28 % 31,151 26 % 9 %
Europe, Middle East and Africa 17,176 14 % 15,941 13 % 8 %
Rest of world   639   nm     1,443   1 % nm  
Total net revenues $ 122,996   100 % $ 122,145   100 % 1 %

nm – not meaningful

 
 

Summary of Stock-Based Compensation:

   

Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
($000s)   2013     2012     2013     2012
 
Cost of sales $ 147 $ 181 $ 236 $ 496
Engineering and development 1,132 2,214 3,036 4,912
Selling and marketing 874 941 2,076 1,686
General and administrative   1,591     2,039     2,968     3,835
Total stock-based compensation $ 3,744   $ 5,375   $ 8,316   $ 10,929
 
 

Summary of Site Closure and Related Restructuring Costs:

   

Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
($000s)   2013     2012     2013     2012
 
Cost of sales $ 277 $ - $ 277 $ -
Engineering and development 5,259 - 5,259 -
Selling and marketing 668 - 668 -
General and administrative   1,246     -     1,246     -

Total site closure and restructuring costs

$ 7,450   $ -  

$

7,450

 

$

-

 
 

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

   
Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
2013     2012     2013     2012  
 
GAAP gross margin 58.8 %   58.6 %   58.8 %   58.2 %
 
Items excluded from GAAP gross margin to calculate non-GAAP gross margin:
Stock-based compensation 0.1 % 0.1 % 0.1 % 0.2 %
Amortization of intangibles 5.1 % 4.2 % 5.2 % 4.3 %

Site closure and related restructuring costs

0.2 % - 0.1 % -

Patent litigation damages, license fees and royalties

1.9 %   0.8 %  

1.6

%

 

0.8

%

Non-GAAP gross margin 66.1 %   63.7 %   65.8 %   63.5 %
 
 

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

   

Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
($000s)   2013       2012       2013       2012  
 

GAAP operating expenses, as presented above

$ 73,879     $ 67,234     $ 144,615     $ 129,472  
 

Items excluded from GAAP operating expenses to calculate non-GAAP operating expenses:

Stock-based compensation

(3,597 ) (5,194 ) (8,080 ) (10,433 )
Amortization of other intangibles (1,603 ) (1,365 ) (3,207 ) (2,888 )
Severance and associated costs 80 - 80 -

Site closure and related restructuring costs

(7,173 ) -

(7,173

)

-

Mitigation expenses related to the Broadcom patents

(930 ) (982 ) (3,449 ) (1,464 )

Expenses related to the acquisition of Endace

  -       (2,060 )     (373 )     (2,060 )
Impact on operating expenses   (13,223 )     (9,601 )     (22,202 )     (16,845 )
Non-GAAP operating expenses $ 60,656     $ 57,633     $ 122,413     $ 112,627  
 
 

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

   

Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
($000s)   2013       2012     2013       2012
 

GAAP operating (loss) income as presented above

$ (1,589 )   $ 4,332   $ (4,841 )   $ 11,070
 
Items excluded from GAAP operating (loss) income to calculate non-GAAP operating income:
Stock-based compensation 3,744 5,375 8,316 10,929
Amortization of intangibles 7,842 6,514 15,606 13,185
Severance and associated costs (80 ) - (80 ) -

Site closure and related restructuring costs

7,450 -

7,450

-

Patent litigation damages, license fees and royalties

2,358 958

3,855

1,950

Mitigation expenses related to the Broadcom patents

930 982 3,449 1,464

Expenses related to the acquisition of Endace

  -       2,060     373       2,060

Impact on operating (loss) income

  22,244       15,889     38,969       29,588
Non-GAAP operating income $ 20,655     $ 20,221   $ 34,128     $ 40,658
 
 

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

   
Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
($000s)   2013       2012       2013       2012  
 

GAAP net (loss) income as presented above

$ (4,027 )   $ 5,583     $ (7,668 )   $ 6,240  
 
Items excluded from GAAP net (loss) income to calculate non-GAAP net income:
Stock-based compensation 3,744 5,375 8,316 10,929
Amortization of intangibles 7,842 6,514 15,606 13,185
Severance and associated costs (80 ) - (80 ) -

Site closure and related restructuring costs

7,450 -

7,450

-

Patent litigation damages, license fees and royalties

2,358 958

3,855

1,950

Mitigation related to the Broadcom patents

930 982 3,449 1,464

Expenses related to the acquisition of Endace

- 2,060 373 2,060

Accretion of debt discount on convertible senior notes

765 -

765

-

Tax impact of above items and U.S. GAAP tax valuation allowance   (636 )     (4,238 )    

(1,331

)

   

(1,082

)

Impact on GAAP net (loss) income   22,373       11,651       38,403       28,506  
Non-GAAP net income $ 18,346     $ 17,234     $ 30,735     $ 34,746  
 
 

Reconciliation of GAAP Diluted (Loss) Earnings Per Share to Non-GAAP Diluted Earnings Per Share:

   
Three Months Ended Six Months Ended
December 29,   December 30, December 29,   December 30,
(shares in 000s)   2013       2012       2013       2012  

GAAP diluted (loss) earnings per share as presented above

$ (0.05 )   $ 0.06     $ (0.09 )   $ 0.07  
 

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

Stock-based compensation 0.04 0.06 0.09 0.12
Amortization of intangibles 0.09 0.07 0.17 0.14
Severance and associated costs (0.00 ) - (0.00

)

-

Site closure and related restructuring costs

0.09 - 0.08 -

Patent litigation damages, license fees and royalties

 

 

0.03

 

0.01

 

0.05

 

0.02

Mitigation related to the Broadcom patents

0.01 0.01 0.04 0.02

Expenses related to the acquisition of Endace

- 0.02 0.00 0.02

Accretion of debt discount on convertible senior notes

0.01 -

0.01

-

Tax impact of above items and U.S. GAAP tax valuation allowance

  (0.01 )     (0.04 )     (0.01 )     (0.01 )

Impact on GAAP (loss) earnings per share

  0.26       0.13      

0.43

     

0.31

 
Non-GAAP diluted earnings per share $ 0.21     $ 0.19     $ 0.34     $ 0.38  

Diluted shares used in non-GAAP per share computations

  88,578       91,816       91,008       91,637  
 
 

Forward-Looking Diluted Earnings per Share Reconciliation:

 
Guidance for

Three Months Ending

March 30, 2014

 
 
Non-GAAP diluted earnings per share guidance $0.14 - $0.17
 

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

Stock-based compensation (0.06 )
Amortization of intangibles (0.09 )

Patent litigation damages, license fees, royalties and mitigation expenses

(0.04 )
Accretion of debt discount on convertible senior notes (0.02 )
Site Closure and related restructuring costs (0.01 )
Tax impact of above items and U.S. GAAP tax valuation allowance 0.01  
 
GAAP earnings (loss) per diluted share guidance ($0.07 – $0.04 )
 
 

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 second 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:

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.

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.

Severance and associated costs. We have incurred severance and certain related costs in connection with the change in employment status of certain employees, including terminations resulting from elimination of certain positions. We believe that the exclusion of such severance and related costs from the relevant non-GAAP financial measures enables management and investors to more effectively evaluate historical performance and projected costs. While severance and associated costs are generally infrequent in nature, we may incur severance or associated costs in response to changing economic conditions or in connection with acquisitions.

Site closure and related 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, in addition to approximately $0.5m of expense included in stock-based compensation. 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.

Patent litigation damages, license fees and royalties. 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 charges related to the Broadcom patent damages, sunset period royalties and Release Agreement are 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 this amount relates to a judgment in litigation and does not reflect a continuing cost of operating our core business. 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 until affected products are phased out.

Mitigation expenses related to the Broadcom patents. We have recognized mitigation expenses related to the Broadcom patents. We believe that exclusion of these redesign, requalification and appeal 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.

Expenses related to the acquisition of Endace Limited (LSE:EDA). We have incurred various expenses during the acquisition process 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 are 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 are infrequent in nature.

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 at all or on a timely basis 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 proposed 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, that 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 can be obtained 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. Ongoing lawsuits, such as the action brought by Broadcom Corporation (Broadcom), 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. With respect to the continuing Broadcom litigation, such potential risks also include the adequacy of any sunset period to make design changes, the ability to implement any design changes, the availability of customer resources to complete any re-qualification or re-testing that may be needed, the ability to maintain favorable working relationships with Emulex suppliers of serializer/deserializer (SerDes) modules, and the ability to obtain a settlement which does not put us at a competitive disadvantage. 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, related disruptions in world credit and equity markets, and the resulting economic uncertainty for our customers, as well as the overall network connectivity and visibility networks, 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.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
There is an ever-growing explosion of new devices that are connected to the Internet using “cloud” solutions. This rapid growth is creating a massive new demand for efficient access to data. And it’s not just about connecting to that data anymore. This new demand is bringing new issues and challenges and it is important for companies to scale for the coming growth. And with that scaling comes the need for greater security, gathering and data analysis, storage, connectivity and, of course, the...
Manufacturers are embracing the Industrial Internet the same way consumers are leveraging Fitbits – to improve overall health and wellness. Both can provide consistent measurement, visibility, and suggest performance improvements customized to help reach goals. Fitbit users can view real-time data and make adjustments to increase their activity. In his session at @ThingsExpo, Mark Bernardo Professional Services Leader, Americas, at GE Digital, will discuss how leveraging the Industrial Interne...
The IoTs will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform. In his session at @ThingsExpo, Craig Sproule, CEO of Metavine, will demonstrate how to move beyond today's coding paradigm and share the must-have mindsets for removing complexity from the development proc...
The IETF draft standard for M2M certificates is a security solution specifically designed for the demanding needs of IoT/M2M applications. In his session at @ThingsExpo, Brian Romansky, VP of Strategic Technology at TrustPoint Innovation, will explain how M2M certificates can efficiently enable confidentiality, integrity, and authenticity on highly constrained devices.
The increasing popularity of the Internet of Things necessitates that our physical and cognitive relationship with wearable technology will change rapidly in the near future. This advent means logging has become a thing of the past. Before, it was on us to track our own data, but now that data is automatically available. What does this mean for mHealth and the "connected" body? In her session at @ThingsExpo, Lisa Calkins, CEO and co-founder of Amadeus Consulting, will discuss the impact of wea...
SYS-CON Events announced today that Ericsson has been named “Gold Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. Ericsson is a world leader in the rapidly changing environment of communications technology – providing equipment, software and services to enable transformation through mobility. Some 40 percent of global mobile traffic runs through networks we have supplied. More than 1 billion subscribers around the world re...
We're entering the post-smartphone era, where wearable gadgets from watches and fitness bands to glasses and health aids will power the next technological revolution. With mass adoption of wearable devices comes a new data ecosystem that must be protected. Wearables open new pathways that facilitate the tracking, sharing and storing of consumers’ personal health, location and daily activity data. Consumers have some idea of the data these devices capture, but most don’t realize how revealing and...
trust and privacy in their ecosystem. Assurance and protection of device identity, secure data encryption and authentication are the key security challenges organizations are trying to address when integrating IoT devices. This holds true for IoT applications in a wide range of industries, for example, healthcare, consumer devices, and manufacturing. In his session at @ThingsExpo, Lancen LaChance, vice president of product management, IoT solutions at GlobalSign, will teach IoT developers how t...
A critical component of any IoT project is the back-end systems that capture data from remote IoT devices and structure it in a way to answer useful questions. Traditional data warehouse and analytical systems are mature technologies that can be used to handle large data sets, but they are not well suited to many IoT-scale products and the need for real-time insights. At Fuze, we have developed a backend platform as part of our mobility-oriented cloud service that uses Big Data-based approache...
Increasing IoT connectivity is forcing enterprises to find elegant solutions to organize and visualize all incoming data from these connected devices with re-configurable dashboard widgets to effectively allow rapid decision-making for everything from immediate actions in tactical situations to strategic analysis and reporting. In his session at 18th Cloud Expo, Shikhir Singh, Senior Developer Relations Manager at Sencha, will discuss how to create HTML5 dashboards that interact with IoT devic...
We’ve worked with dozens of early adopters across numerous industries and will debunk common misperceptions, which starts with understanding that many of the connected products we’ll use over the next 5 years are already products, they’re just not yet connected. With an IoT product, time-in-market provides much more essential feedback than ever before. Innovation comes from what you do with the data that the connected product provides in order to enhance the customer experience and optimize busi...
Artificial Intelligence has the potential to massively disrupt IoT. In his session at 18th Cloud Expo, AJ Abdallat, CEO of Beyond AI, will discuss what the five main drivers are in Artificial Intelligence that could shape the future of the Internet of Things. AJ Abdallat is CEO of Beyond AI. He has over 20 years of management experience in the fields of artificial intelligence, sensors, instruments, devices and software for telecommunications, life sciences, environmental monitoring, process...
In his session at @ThingsExpo, Chris Klein, CEO and Co-founder of Rachio, will discuss next generation communities that are using IoT to create more sustainable, intelligent communities. One example is Sterling Ranch, a 10,000 home development that – with the help of Siemens – will integrate IoT technology into the community to provide residents with energy and water savings as well as intelligent security. Everything from stop lights to sprinkler systems to building infrastructures will run ef...
Digital payments using wearable devices such as smart watches, fitness trackers, and payment wristbands are an increasing area of focus for industry participants, and consumer acceptance from early trials and deployments has encouraged some of the biggest names in technology and banking to continue their push to drive growth in this nascent market. Wearable payment systems may utilize near field communication (NFC), radio frequency identification (RFID), or quick response (QR) codes and barcodes...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
You deployed your app with the Bluemix PaaS and it's gaining some serious traction, so it's time to make some tweaks. Did you design your application in a way that it can scale in the cloud? Were you even thinking about the cloud when you built the app? If not, chances are your app is going to break. Check out this webcast to learn various techniques for designing applications that will scale successfully in Bluemix, for the confidence you need to take your apps to the next level and beyond.
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus inter...
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
SYS-CON Events announced today that Fusion, a leading provider of cloud services, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Fusion, a leading provider of integrated cloud solutions to small, medium and large businesses, is the industry's single source for the cloud. Fusion's advanced, proprietary cloud service platform enables the integration of leading edge solutions in the cloud, including cloud...