Financial: Emulex Q2 Results - Company Financial Information

Edge: Work-Group Computing Report, Feb 1, 1999

Emulex Corp. (Nasdaq:EMLX), a leader in fibre channel technology and products, Thursday announced results for its second fiscal quarter ended Dec. 27, 1998. Revenues totaled $15.7 million, compared with $15.5 million reported for the same quarter a year ago. Results for the second quarters of fiscal 1998 and 1999 each included unusual items, including a net charge in fiscal 1999 and a benefit in fiscal 1998, which are detailed separately below.

Including these unusual items, net income for the second quarter of fiscal 1999 amounted to $440,000, or $0.07 per share on a diluted basis, compared with net income of $1.1 million, or $0.18 per share on a diluted basis, for the same quarter a year ago. Excluding these unusual items, net income for the second quarter of fiscal 1999 would have been $725,000, or $0.11 per share, compared with net income of $920,000, or $0.15 per share on a diluted basis, for the same quarter a year ago. "Second quarter shipments of fibre channel host bus adapters and hubs rose 61 percent from a year ago, reaching record levels for the second quarter in a row," stated Paul F. Folino, president and chief executive officer. "In contrast, Emulex's network access and printer server sectors continued to mature, and collectively declined 8 percent on a sequential basis. This decline in our traditional product sectors was offset by escalating demand for the company's flagship LightPulse fibre channel product line, which expanded 45 percent sequentially and propelled sequential growth for total revenue to 12 percent. "As a result of these trends, fibre channel expanded to comprise a majority of total Emulex sales, reaching just over 50 percent of revenue in the second quarter, up from 39 percent in the first quarter. This fibre channel momentum enabled Emulex to sequentially expand diluted earnings per share by 57 percent, from $0.07 to $0.11 per share, excluding the unusual items. We continue to expect that the company's business will become increasingly driven by the fibre channel sector in upcoming quarters. "Emulex's fibre channel OEM relationships continued to develop during the second quarter as several existing OEMs returned to Emulex to provide the fibre channel connectivity solution for their new-generation servers and storage systems." In the second quarter, Emulex announced an agreement with Sequent Computer Systems Inc., which again selected Emulex for gigabit fibre channel connectivity for its NUMA-QTM 2000 high end systems and NUMACenter framework for data center applications. The company also announced that Groupe Bull selected and qualified the Emulex LightPulse LP7000E PCI host adapter as the fibre channel solution that Bull will offer with their Escala servers. In addition, the CLARiiON Advanced Storage Division of Data General Corp., the world's leading supplier of open RAID-based full fibre channel disk arrays, selected Emulex fibre channel adapters to provide connectivity for its FC5000 Series fibre channel disk array family. Furthermore, Emulex announced that LSI Logic is integrating the Emulex LightPulse LP7000E fibre channel adapter as an option for its line of MetaStor fibre channel server-attached storage solutions. During the second quarter, the company also announced that Michael E. Smith, formerly the marketing manager for Fibre Channel Products at Adaptec Inc., joined Emulex as its senior director of Fibre Channel Marketing. Shortly after the close of the second quarter, Emulex announced the LightPulse LP8000 fibre channel host adapter, the latest in its family of high-performance host adapters designed to support mission-critical enterprise applications. The LP8000 offers a groundbreaking combination of a 64-bit PCI interface, full-duplex fibre channel capability, the ability to drive up to 100km cabling, and support for all fibre channel topologies, classes 2 and 3, as well as both F_Port and FL_Port connections to enable full fabric capability. Running full duplex, the LP8000 has been measured at 150MB/s, and is capable of delivering more than 30,000 I/Os per second from a single adapter in the latest Xeon-based server running Windows NT. "As the leading supplier of full-duplex PCI gigabit fibre channel adapters, Emulex is pleased to be continuing our tradition of fibre channel innovation," stated Folino. For the six months ended December 1998, Emulex revenues totaled $29.8 million, compared with $30.5 million reported a year ago. Including the aforementioned unusual items, net income for the first six months of fiscal 1999 amounted to $862,000, or $0.13 per share on a diluted basis, compared with $1.7 million, or $0.27 per share on a diluted basis for the same period a year ago. Excluding unusual items, net income would have been $1.1 million, or $0.17 per share on a diluted basis in the first half of fiscal 1999, compared with $1.5 million, or $0.24 per share on a diluted basis for the same period a year ago. Emulex Corp. is a leading designer of high-performance network connectivity products including fibre channel, printer server and network access products. The company's hardware and software-based networking solutions improve communication in computer networks and enhance data flow between computers and peripherals. Fibre channel is a high-performance ANSI standard interface that is supported by the 120 worldwide member Fibre Channel Association that includes Sun, Hewlett-Packard and Seagate. As a leading developer and supplier of fibre channel technology, Emulex's fibre channel devices support all implementations of the fibre channel standard, including arbitrated loop, switched fabric and point-to-point topologies. The company markets to OEMs and end users through its own worldwide selling organization, as well as two-tier distribution partners. Corporate headquarters are located in Costa Mesa. FMI: http://www.emulex.com. Financial notes: Net income for the three months ended Dec. 27, 1998, included a gain of $777,000 resulting from the sale of the company's former manufacturing facility in Dorado, Puerto Rico, and additional consolidation charges related to severance and other asset impairment charges of $1,094,000 related to the closure of the company's Puerto Rican manufacturing facility announced in the third quarter of fiscal 1998. Excluding these items, net of tax, net income would have been $725,000, or $0.11 per share on a diluted basis. Net income for the three months ended Dec. 28, 1997, included an income tax benefit of $188,000 related to a recovery under a tax sharing agreement with a former subsidiary of the company. Excluding this item, net income would have been $920,000, or $0.15 per share on a diluted basis. Net income for the six months ended Dec. 27, 1998, included a gain of $777,000 resulting from the sale of the company's former manufacturing facility in Dorado, Puerto Rico, and additional consolidation charges related to severance and other asset impairment charges of $1,094,000 related to the closure of the Company's Puerto Rican manufacturing facility announced in the third quarter of fiscal 1998.