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Avago Acquiring Emulex for $606 Million

After LSI and PLX

Avago Technologies Limited and Emulex Corporation have entered into a definitive agreement under which Avago will acquire Emulex in network connectivity, monitoring and management, in an all-cash transaction valued at approximately $606 million, or $609 million net of cash and debt acquired.

Under the terms of the agreement, which has been approved by the boards of directors of both companies, a subsidiary of Avago will commence a tender offer for all of the outstanding shares of Emulex common stock for $8 per share in cash. Avago expects to fund the transaction with cash available on its balance sheet.

Emulex’s connectivity business fits very well with Avago’s existing portfolio serving the enterprise storage end market,” stated Hock Tan, president and CEO, Avago. “We are excited to welcome the Emulex team to Avago.”

This combination represents a great opportunity for Emulex and its employees to build upon our history of delivering solutions to our customers, while providing immediate value to our stockholders,” said Jeffrey Benck, president and CEO, Emulex. “Our leading portfolio is a strong complement to Avago’s offerings and capabilities, accelerating our strategy to support next generation server and storage architectures.”

Upon closing, the transaction is expected to be immediately accretive to Avago’s non-GAAP earnings per share.

Senior members of the Emulex management team and all of the directors of Emulex, collectively owning approximately 2.5% of Emulex’s outstanding shares have executed Tender and Support Agreements in support of the transaction.

The transaction is subject to customary closing conditions, including the tender into the offer by Emulex stockholders of shares representing at least a majority of the outstanding shares of Emulex common stock on a fully diluted basis, and the receipt of relevant regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and relevant foreign antitrust laws.

It is expected that the transaction will close in the second half of Avago’s fiscal year ending November 1, 2015.


Totally unknown in the storage industry until the end of 2013, Avago acquired three companies and sold another part its storage business in a little more than one year:

  • Acquisition of LSI for $6.6 billion in December 2013
  • Sale of LSI flash businesses to Seagate for $450 million
  • Acquisition of PLX technologies for $309 million in June 2014
  • Acquisition of Emulex now for $606 million

Globally the balance is an investment of more than $7 billion, making the Singapore-based chip maker that was in wireless, wired, and industrial end markets, now a major firm in enterprise storage connectivity.

For $606 million, Avago got a company with annual revenue at around $400 million and slightly profitable, with cash, cash equivalents and investments of $185 million at the end of the quarter ending December 28, 2014.

About the deal, Avago's CFO Tony Maslowski said: "We plan to align Emulex with Avago's business model over the course of our fiscal year 2016 and once aligned, we expect Emulex businesses to contribute approximately $250 million to $300 million in annual net revenue with improved operating margins."

On April 21, 2009, Broadcom made a proposal to buy the Emulex for a better price, $764 million, and then increased its offer to $925 million. But the board refused the deal.
Headquartered in Costa Mesa, CA and founded in 1978, Emulex was the main firm in the lucrative FC HBAs and CNAs with big OEMs including Cisco, Dell, EMC, Fujitsu, Hitachi, HP, Huawei, IBM, NetApp and Oracle. Main competitorsh are Atto, Brocade, Cisco, QLogic in FC SAN.

Most recently it entered into high-end Ethernet controllers as FC market was slowing.

For 1FQ15 ending ended February 1, 2015, Avago's revenue was $1,635 million, an increase of 3% from $1,590 million in the previous quarter and an increase of 131% from $709 million in the same quarter last year. Enterprise storage, at $29 million, was flat from 4FQ14 and up 5% from 1FQ14. It represented 29% of our total revenues from continuing operations. In HDD, sales grew by mid-single-digit sequentially. In server and storage connectivity, revenue grew Q/Q in the mid-single-digit, driven by the start of the granularly-based server refresh cycle as well as a strong attach rate for its 12Gb SAS solutions.

For next quarter, Avago expects growth in server and storage connectivity from increasing adoption of PCIe switches and sustain SAS shipments but a seasonal decline in HDDs, finally expecting low single-digit sequential revenue growth for its enterprise storage segment.

Hock Tan, president and CEO, commented on the acquisition: "Emulex is very complementary to Avago's enterprise storage businesses, and aligns very well with the Avago business model. It is a leading supplier of FC and related products selling primarily into server and enterprise storage OEMs that Avago currently serves with our SAS rate and PCIe switching and fiber optics products (...) We expect this transaction to allow us to offer one of the broadest suites of silicon and software storage solutions to the enterprise and data center markets."

Emulex acquired seven companies, the most expansive one being Giganet, bought in 2011 for $645 million, a price higher than what Avago will pay for the entire company.

Acquisitions of Emulex

Year Acquired company Price Activity of acquired company
2001 Giganet 645 iSCSI networking solutions
2003 Vixel 310 Embedded switch for RAIDs
2003 Trebia Networks (assets) 2 Storage network processors
2006 Aarohi Communications  39 Processor for 10GbE IP virtualization
2006 Sierra Logic 180 FC to SCSI and SATA ASICs
2010 ServerEngines 159 10GbE ASICs and IP server management controller
2012 Endace 130 Network performance management