Emulex Completes Acquisition of ServerEngines

Emulex Corporation has completed the acquisition of ServerEngines Corporation, a privately held, fabless semiconductor company founded in 2004 and headquartered in Sunnyvale, California.

The ServerEngines acquisition adds to Emulex’s product portfolio the BladeEngine family of 10Gb/s Ethernet ASICs, which provide a best-of-breed performance, and are architected to meet the cost and footprint requirements for LOM applications. These ASICs are used in Emulex’s award-winning OneConnect Universal Converged Network Adapters (UCNAs), which have been selected by leading server and storage Original Equipment Manufacturers (OEMs), including Cisco, Dell, EMC, Fujitsu, Hitachi Data Systems, HP, IBM and NetApp. The acquisition will also add the ServerEngines’ Pilot family of Server Management Controllers, which reside on the motherboard, enabling remote IP based "lights out" management capabilities. With the acquisition, Emulex adds approximately 165 employees to its ranks, primarily engineers, based in Sunnyvale, California, Austin, Texas and Hyderabad, India.

The terms of the merger agreement include the payment of approximately $78 million in cash, which is net of $25 million debt plus interest owed to Emulex, and eight million shares of Emulex stock. The agreement further provides for the payment of an additional four million shares of Emulex stock, which will be issuable if ServerEngines’ business achieves two post-closing milestones, the last of which is targeted for completion by the end of 2011. Emulex will also assume other liabilities and ServerEngines stock options upon close.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, Emulex is reiterating its guidance of expected total net revenues in the range of $100 – $104 million for its first fiscal quarter of 2011, as provided on its August 2010 earnings call. On a GAAP basis, the Company expects results of a loss per share of $0.02 to earnings of $0.01 per diluted share for the first quarter of fiscal 2011. On a non-GAAP basis, Emulex is also reiterating its August 2010 earnings call guidance of expected earnings per diluted share of $0.08 – $0.11 in the first quarter, reflecting approximately $0.10 per diluted share in expected GAAP charges, arising primarily from amortization of intangibles and stock-based compensation.

Included in this guidance is the operations from the completion of the ServerEngines acquisition, which includes approximately $1 million of expected revenues and an expected reduction in earnings per diluted share of $0.02-$0.03 for the first quarter of fiscal 2011. Additionally, Emulex will incur charges associated with the acquisition of ServerEngines, including charges for additional stock-based compensation and amortization of intangibles. However, as the valuation and the purchase allocation are not yet complete, Emulex is unable to predict the impact of the acquisition on its GAAP earnings per share at this time.

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Emulex to Acquire 10GbE Chip Partner ServerEngines
For approximately $159 million