Emulex: Fiscal 3Q11 Financial Results

          
Emulex Corporation announced results for its third fiscal quarter ended March 27, 2011.

Third Quarter Financial Highlights

• Total net revenues of $112.1 million, an increase of 10% year-over-year and a sequential decline of 2%
• 10Gb/s Ethernet (10GbE) totaled more than 12% of net revenues
• Host Server Products (HSP) net revenues were $84.8 million, or 76% of net revenues, an increase of 22% year-over-year, and a decrease of 8% sequentially
• Embedded Storage Products (ESP) net revenues were $27.2 million, or 24% of net revenues, a decrease of 16% year over year, and an increase of 25% sequentially
• GAAP gross margins of 55% and non-GAAP gross margins of 63%
• GAAP operating loss of $16.8 million, or 15% of total net revenues, and non-GAAP operating income of $8.1 million, or 7% of total net revenues
• GAAP net loss of $18.6 million and non-GAAP net income of $9.4 million
• GAAP loss per share of $0.21 and non-GAAP diluted earnings per share of $0.10
• Cash, cash equivalents and investments at the end of the quarter were $182.8 million, a sequential increase of $4.2 million

Business Highlights

• Announced two additional Integrated FlexFabric Adapter ULOM design wins for HP ProLiant BL620c G7 and HP ProLiant BL680c G7 servers
• Announced general availability of the Pilot 3 integrated Baseboard Management Controllers  (iBMC), and qualification of Pilot 3 across Intel’s new Sandy Bridge based server family
• Announced certification of our OneConnect 10Gb/s Universal Converged Network Adapters (UCNAs) and LightPulse 8Gb/s Fibre Channel Host Bus Adapters (HBAs) for Cisco’s Data Center Fabric
• Announced the general availability of the OneConnect OCe11000 family of UCNAs, based on the BladeEngine 3 (BE3) 10Gb/s Ethernet (10GbE) I/O Controller (IOC) technology
• Certified for Juniper Networks QFX3500 10GbE switches with Emulex OneConnect UCNAs, including support for FCoE and iSCSI networked storage
• Announced support for HP Integrity server blades with Emulex OneConnect UCNA technology within the HP NC551m Dual Port 10Gb FlexFabric Adapter mezzanine cards.
• Captured market leadership in 10GbE LOM ports, according to the Dell’Oro Group’s Q4 2010 Network Controller and Adapter report
• Number one market share position in total 10GbE adapter and Local Area Network on Motherboard (LOM) port shipments based on Crehan Research’s Q4 2010 Server-class Adapter and LOM market share report
• Ranked second in total 10GbE adapter and LOM revenue market share in the Crehan Q4 report
• Awarded a 5-Star Partner rating in the 2011 CRN Partner Programs Guide for excellence in overall channel program by CRN Magazine

Financial Results
In the third quarter, total net revenues decreased 2% sequentially, but increased 10% from the comparable quarter of last year, reaching $112.1 million. The third quarter GAAP net loss was $18.6 million, or $0.21 per share, compared to a GAAP net loss of $39.8 million, or $0.46 per share, reported in Q2 of fiscal 2011, and GAAP net income of $13.3 million, or $0.16 per diluted share in Q3 of fiscal 2010.  Non-GAAP net income for the third quarter was $9.4 million, or $0.10 per diluted share.  Non-GAAP net income decreased 30% sequentially from the $13.4 million reported in the second quarter, and declined 62% from $24.3 million in the comparable quarter of the last fiscal year. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

CEO Jim McCluney commented: "I’m very pleased with our results for the March quarter, delivering revenues at the high end of our guidance. HSP revenues for the quarter increased more than 20% from the prior year, with particular strength in our 10Gb/s family of products as we continued to consolidate our early leadership in network convergence. This was complemented by strong sequential growth in our Embedded Storage Products."

"Looking ahead to the fourth quarter, we are modeling for 16% year over year revenue growth at the midpoint of our guidance and we are keenly focused on operational efficiencies to further increase shareholder value," 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 timing of new server launches by our customers, Emulex is providing guidance for its fourth fiscal quarter ending July 3, 2011. For the fourth quarter of fiscal 2011, Emulex is forecasting total net revenues in the range of $117-$123 million.  The Company expects non-GAAP earnings per diluted share could amount to $0.08-$0.12 in the fourth quarter. On a GAAP basis, Emulex expects a loss per share of $0.03-$0.07 in the fourth quarter.  GAAP estimates for the fourth quarter reflect approximately $0.15 per diluted share in expected charges arising primarily from amortization of intangibles and stock-based compensation and expenses related to site closures.