Emulex: Fiscal 1Q09 Financial Results

Emulex Corporation announced results for its first fiscal quarter ended September 28, 2008.

First Quarter Financial Highlights

• Total net revenues of $111.7 million
• Host Server Product net revenues of $81.2 million — 73% of total net revenues
• Embedded Storage Product net revenues of $30.4 million — 27% of total net revenues
• GAAP gross margin of 63% and non-GAAP gross margin of 67%
• GAAP operating income of $9.2 million, or 8% of total net revenues, and non-GAAP operating income of $25.3 million, or 23% of total net revenues
• GAAP diluted earnings per share of $0.09 and non-GAAP diluted EPS of $0.22
• Cash, cash equivalents and investments of $294.4 million
• Inventory turnover of 8.6 times

Business Highlights

• EMC qualified Emulex’s FCoE CNAs, which are now available through EMC Select
• NetApp certified Emulex’s FCoE CNAs for use with its new native FCoE and Fibre Channel SAN storage solutions
• Sun is now selling Emulex’s 8Gb/s HBAs across the Sun Fire Enterprise Server Families and Sun StorageTek Storage Solutions
• NetApp is shipping Emulex’s 8Gb/s HBAs with its NetApp Storage Systems
• Pillar Data Systems has deployed Emulex’s InSpeed SOC 422 Embedded Storage Switches across its complete line of Axiom storage systems
• 3PAR selected Emulex’s Embedded BR-2401 FC-to-SATA storage bridge for use within 3PAR InServ storage servers
• Emulex joined the VMware Alliance Affiliate Initiative as the only connectivity partner in the program

Financial Results
First quarter total net revenues were $111.7 million, a decrease of 5% from the comparable quarter of last year and a 1% sequential decrease. First quarter GAAP net income was $7.1 million, or $0.09 per diluted share, compared to GAAP net income of $10.2 million, or $0.12 per diluted share, reported in the year ago period and a loss of $50.4 million, or $0.61 per share, in the immediately preceding quarter. Non-GAAP net income for the first quarter, which excludes amortization of intangibles, stock-based compensation, and severance and associated costs, was $17.9 million, or $0.22 per diluted share. Non-GAAP net income per diluted share decreased 19% from $0.27 per diluted share reported a year ago and was flat sequentially compared to the fourth quarter. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

Jim McCluney, president and CEO, commented:" Despite the continuing economic and market volatility, we are pleased to deliver results at the high end of our guidance of $108-$111 million in revenues for the first quarter, and exceeding our non-GAAP earnings guidance of $0.18-$0.20 per diluted share. Our balance sheet remains strong, with $294 million in cash and investments, after completing our share repurchase plan originally adopted in 2006, and making the tax payments associated with our globalization initiatives during the quarter."

"Over the past six months we have been streamlining our organization and better aligning our investments for both near and long term growth opportunities. In fiscal 2009, we believe the expansion of our globalization initiatives, combined with focused R&D investment and expense management, will position Emulex for success through these uncertain times," concluded McCluney.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, including the economic uncertainty resulting from recent disruptions in global credit and equity markets, Emulex is providing guidance for its second fiscal quarter ending December 28, 2008. Emulex is budgeting for second quarter fiscal 2009 total net revenues in the range of $111-$116 million. The Company expects non-GAAP gross margin will be approximately 67% and non-GAAP earnings per diluted share could amount to $0.20-$0.23 in the second quarter. On a GAAP basis, Emulex expects gross margin of approximately 63% and diluted second quarter earnings per share of $0.09-$0.12 per diluted share. GAAP estimates reflect approximately $0.11 per diluted share in expected charges arising primarily from amortization of intangibles and stock-based compensation for the second quarter.