… Emulex: Fiscal 2Q11 Financial Results …

Emulex Corporation announced results for its second fiscal quarter ended December 26, 2010.

Second Quarter Financial Highlights

• Total net revenues of $114.0 million, an increase of 11% sequentially and 5% year-over-year
• 10Gb/s Ethernet (10GbE)-based net revenues grew more than 35% sequentially, and accounted for over 10% of total net revenues for the quarter
• Host Server Products (HSP) net revenues were $92.2 million, or 81% of net revenues, an increase of 17% sequentially and  13% year-over-year
• 8Gb/s products exceeded 50% of HSP Fibre Channel net revenues for the quarter
• Embedded Storage Products (ESP) net revenues were $21.8 million, or 19% of net revenues, a decrease of 9% sequentially and 17% year over year
• GAAP gross margins of 56% and non-GAAP gross margins of 64%
• GAAP operating loss of $8.2 million, or 7% of total net revenues, and non-GAAP operating income of $12.5 million, or 11% of total net revenues
• GAAP net loss of $39.8 million and non-GAAP net income of $13.4 million
• GAAP loss per share of $0.46 and non-GAAP diluted earnings per share of $0.15
• Cash, cash equivalents and investments at the end of the quarter were $178.6 million

Business Highlights

• Captured over ten percent of the total 10GbE adapter and Local Area Network on Motherboard (LOM) revenue market share, according to the Dell’Oro Group’s Q3 2010 Network Controller and Adapter report. Emulex now ranks second in overall 10GbE adapter and LOM ports, and third in total revenue for the September quarter.
• Began OEM sampling of the Pilot 3 integrated Baseboard Management Controllers (iBMC), an integrated lights-out management controller with a unique high performance triple core architecture that provides embedded platform management, high performance Keyboard Video and Mouse (KVM) console operation and high speed remote storage support
• Announced broad support of OneConnect 10Gb/s Ethernet, iSCSI and Fibre Channel over Ethernet (FCoE) Universal Converged Network Adapters (UCNAs) and LightPulse Fibre Channel HBAs on the new Red Hat Enterprise Linux 6 platform
• Introduced OneCommand Guardian and OneCommand Key Manager, a host-based encryption solution designed to provide a scalable cost-effective security for data in-flight and at-rest on servers using Emulex’s OneSecure Adapters or LightPulse Fibre Channel Hosts Bus Adapters (HBAs)
• Announced support of the T10 Protection Information (T10-PI) standard to prevent silent data corruption and ensures the integrity and regulatory compliance of user data on Emulex LightPulse 8Gb/s Fibre Channel HBAs with its BlockGuard feature

Financial Results
Total net revenues increased 11% sequentially and 5% from the comparable quarter of last year, reaching $114.0 million in the second quarter. Second quarter GAAP net loss was $39.8 million, or $0.46 per share, compared to a GAAP net loss of $8.1 million, or $0.10 per share, in the prior quarter, and GAAP net income of $8.9 million, or $0.11 per diluted share, reported in Q2 of fiscal 2010. Non-GAAP net income for the second quarter was $13.4 million, or $0.15 per diluted share.  Non-GAAP net income increased 35% sequentially from the $9.9 million reported in the first quarter, but declined 7% from $14.3 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: "Our December quarter results were a strong finish for calendar 2010, which represents 20% revenue growth over 2009. Revenues were at the high end of our guidance and our gross margins improved sequentially as we began to realize the benefits from the recently completed ServerEngines acquisition."

"Host Server Products sequential revenue growth of 17% was driven by share gains in our core Fibre Channel products and the continuing ramp of our 10GbE UCNAs and ULOMs, which are now over 10% of our revenues," McCluney continued.

"With the next round of 10GbE server design activities well underway at our customers, we are well positioned to expand on the momentum that has been building over the past year," 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 third fiscal quarter ending March 27, 2011. For the third quarter of fiscal 2011, Emulex is forecasting total net revenues in the range of $108-$112 million. The Company expects non-GAAP earnings per diluted share could amount to $0.08-$0.11 in the third quarter.  On a GAAP basis, Emulex expects a loss per share of $0.03-$0.06 in the third quarter. GAAP estimates for the third quarter reflect approximately $0.14 per diluted share in expected charges arising primarily from amortization of intangibles and stock-based compensation.