Emulex: Fiscal 3Q08 Financial Results

Emulex Corporation announced results for its third fiscal quarter ended March 30, 2008.

Third Quarter Highlights

• Total net revenues of $127.8 million — an increase of 6% year- over-year
• Host Server Product net revenues of $85.1 million — 67% of total net revenues
• Embedded Storage Product net revenues of $42.5 million — 33% of total net revenues
• GAAP gross margin of 63% and non-GAAP gross margin of 67%
• GAAP operating income of $19.5 million, or 15% of total net revenues, and non-GAAP operating income of $34.4 million, or 27% of net revenues
• GAAP diluted EPS of $0.19 and non-GAAP diluted EPS of $0.31
• Cash, cash equivalents and investments of $332.1 million
• Inventory turnover of 12.2 times

Financial Results
Third quarter net revenues were $127.8 million, an increase of 6% over the comparable quarter of last year and a 2% decrease from the second quarter of the current fiscal year. Third quarter GAAP net income was $15.5 million, or $0.19 per diluted share. GAAP net income per diluted share increased 46% from the $0.13 per diluted share reported in the year ago period, but decreased 10% on a sequential basis from $0.21 per diluted share. Non-GAAP net income for the third quarter, which excludes amortization of intangibles and stock-based compensation, was $25.7 million, or $0.31 per diluted share. Non-GAAP net income per diluted share increased 15% from the $0.27 per diluted share reported last year, but decreased 9% sequentially from $0.34 per diluted share reported in the second quarter. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

Jim McCluney, President and CEO commented, "Our third quarter results saw our Embedded Storage Products achieve revenues in excess of $42 million or one third of total revenues. Our continued focus on improving the supply chain helped deliver solid results for the third quarter. With inventory turns at 12.2, and our solid gross margin performance, our third quarter results once again demonstrated the Company’s commitment to balancing revenue performance and earnings growth."

"We enter the fourth quarter of fiscal 2008 with a healthy balance sheet, strong customer relationships and committed to delivering our tenth consecutive year of top line revenue growth," concluded McCluney.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, Emulex is providing guidance for its fourth fiscal quarter ending June 29, 2008. Emulex is budgeting for fourth quarter net revenues in the range of $118-$123 million. The Company expects non-GAAP gross margin will be approximately 68% and non-GAAP earnings per diluted share could amount to $0.24-$0.27 in the fourth quarter. On a GAAP basis, Emulex expects gross margin of approximately 64% and diluted fourth quarter earnings per share of $0.13-$0.16. GAAP estimates reflect approximately $0.11 per diluted share in expected GAAP charges arising primarily from amortization of intangibles and stock-based compensation for the fourth quarter.

Emulex Corporation