EMULEX CORPORATION COSTA MESA, Calif., Jan. 29, 2015 /PRNewswire/ -- Emulex Corporation (NYSE: ELX), a leader in network connectivity, monitoring and management, today announced earnings results for the second quarter of fiscal 2015 ending December 28, 2014.
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Second Quarter Financial Highlights
-- Total revenue of $111 million, above the high end of the initial
guidance range, aided by strong sequential and year-on-year growth in
Gen 5 (16Gb) Fibre Channel products.
-- Non-GAAP diluted earnings of $0.24, up 14% year-on-year, and GAAP
earnings of $0.06 as compared to a prior year loss of $0.05, both above
their respective initial guidance range.
-- Non-GAAP operating margin of 18%, up 130 basis points year-on-year and
560 basis points sequentially, with GAAP operating income of $8 million
as compared to an operating loss of $2 million in the prior year and
operating income of $1 million in the prior quarter.
-- Cash, cash equivalents and investments at the end of the quarter of $185
million.
"The second quarter demonstrated continued progress with initiatives put in place at Emulex over the last 18 months, including the delivery of the broadest set of new Ethernet and Fibre Channel products in the Company's history, increased focus on execution, and a greater emphasis on fiscal discipline," commented Jeff Benck, president and CEO, Emulex. "Coupled with healthy demand for our Fibre Channel portfolio and share gains aided by accelerating adoption of our latest Gen 5 Fibre Channel products, we again exceeded the high end of our initial revenue and earnings guidance."
"We look forward to building on this foundation with the broad slate of OEM wins for our latest 10Gb Ethernet products, designed for the new generation of x86 servers, that will ramp in the market over the next year," Benck concluded.
Business Outlook
Although actual results may vary depending on a variety of factors, including those listed in the Safe Harbor Statement below and our filings with the SEC, Emulex is forecasting total net revenues in the range of $97 - $103 million for the third quarter. The Company expects third quarter non-GAAP earnings of $0.11 - $0.15 and a GAAP loss of $0.06 - $0.10 per share. GAAP estimates for the third quarter reflect approximately $0.21 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation, royalties, mitigation expenses and license fees associated with the Broadcom patent litigation, the accretion of debt discount on outstanding convertible senior notes, and the tax effects and the impact of our U.S. GAAP tax valuation allowance associated with these items. Reconciliation between GAAP and non-GAAP results is included in the accompanying financial data.
Second Quarter Business Highlights
-- Announced Emulex LightPulse® Gen 5 Fibre Channel target mode support
for new DataCore SANsymphony-V10 software-defined storage platform
-- Announced new Emulex Virtual Fabric Adapter 5 (VFA5) technology for new
Lenovo Flex System server family, based on the latest Intel Xeon
processor E5-2600/1600 v3 product families
-- Network Visibility Products (NVP) Division unveiled NetPod(TM)
application-aware network performance management (AA-NPM) solution based
on a combination of Dynatrace Application Performance Management (APM)
technology and Emulex Network Performance Management (NPM) capture
technology
-- Introduced Emulex ExpressConfig(TM) for OpenStack to accelerate
deployment time, lower operational costs and increase Service Level
Agreement attainment
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
December 28, December 29, December 28, December 29,
2014 2013 2014 2013
---- ---- ---- ----
Net revenues $111,087 $122,996 $214,896 $237,828
Cost of sales:
Cost of goods sold 37,535 42,109 74,151 81,800
Amortization of
core and developed
technology
intangible assets 6,355 6,239 12,709 12,399
Expenses related to
the Broadcom
patents 2,090 2,358 3,815 3,855
Cost of sales 45,980 50,706 90,675 98,054
------ ------ ------ ------
Gross profit 65,107 72,290 124,221 139,774
------ ------ ------- -------
Operating expenses:
Engineering and
development 33,680 42,020 67,320 82,431
Selling and
marketing 16,090 19,849 32,742 38,941
General and
administrative 6,456 10,407 13,545 20,036
Amortization of
other intangible
assets 576 1,603 1,176 3,207
Total operating
expenses 56,802 73,879 114,783 144,615
Operating income
(loss) 8,305 (1,589) 9,438 (4,841)
----- ------ ----- ------
Non-operating
(expense) income,
net:
Interest income 2 16 3 20
Interest expense (2,409) (1,148) (4,793) (1,150)
Other (expense)
income, net (27) (135) (395) 17
--- ---- ---- ---
Total non-
operating
(expense) income,
net (2,434) (1,267) (5,185) (1,113)
------ ------ ------ ------
Income (loss)
before income
taxes 5,871 (2,856) 4,253 (5,954)
Income tax
provision 1,549 1,171 650 1,714
----- ----- --- -----
Net income (loss) $4,322 $(4,027) $3,603 $(7,668)
====== ======= ====== =======
Net income (loss)
per share:
Basic $0.06 $(0.05) $0.05 $(0.09)
===== ====== ===== ======
Diluted $0.06 $(0.05) $0.05 $(0.09)
===== ====== ===== ======
Number of shares
used in per share
computations:
Basic 71,459 86,881 71,250 89,162
====== ====== ====== ======
Diluted 73,122 86,881 72,920 89,162
====== ====== ====== ======
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
December 28, June 29,
2014 2014
---- ----
Assets
------
Current
assets:
Cash
and
cash
equivalents $184,722 $158,439
Accounts
receivable,
net 77,235 76,974
Inventories 23,822 25,831
Prepaid
income
taxes 1,236 2,839
Prepaid
expenses
and
other
current
assets 15,873 17,190
Deferred
income
taxes 223 223
--- ---
Total
current
assets 303,111 281,496
Property
and
equipment,
net 58,604 59,908
Goodwill
and
intangible
assets,
net 342,641 356,526
Other
assets 18,030 19,993
Total
assets $722,386 $717,923
======== ========
Liabilities
and
Stockholders'
Equity
-------------
Current
liabilities:
Accounts
payable $24,281 $25,762
Accrued
and
other
current
liabilities 40,907 42,183
Total
current
liabilities 65,188 67,945
Convertible
senior
notes 149,374 146,478
Other
liabilities 6,553 6,842
Deferred
income
taxes 12,543 15,550
Accrued
taxes 26,462 26,462
Total
liabilities 260,120 263,277
------- -------
Total
stockholders'
equity 462,266 454,646
Total
liabilities
and
equity $722,386 $717,923
======== ========
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(unaudited, in thousands)
Six Months Ended
December 28, December 29,
2014 2013
---- ----
Cash
flows
from
operations:
Net
income
(loss) $3,603 $(7,668)
Adjustments
to
reconcile
net
income
(loss)
to
net
cash
provided
by
operating
activities:
Depreciation
and
amortization 23,025 25,209
Stock
based
compensation 6,555 8,316
Deferred
income
taxes (3,007) -
Other
reconciling
items 3,052 829
Changes
in
assets
and
liabilities 3,664 6,848
----- -----
Net
cash
provided
by
operating
activities 36,892 33,534
------ ------
Cash
flows
from
investing
activities:
Investment
in
property
and
equipment,
net (9,183) (10,006)
------ -------
Net
cash
used
in
investing
activities (9,183) (10,006)
------ -------
Cash
flows
from
financing
activities
Issuance
of
convertible
senior
notes - 175,000
Repurchase
of
common
stock (1,004) (100,000)
Other 164 (5,649)
--- ------
Net
cash
(used
in)
provided
by
financing
activities (840) 69,351
---- ------
Effect
of
exchange
rates
on
cash
and
cash
equivalents (586) 163
---- ---
Net
increase
in
cash
&
cash
equivalents 26,283 93,042
Opening
cash
balance 158,439 105,637
------- -------
Ending
cash
balance $184,722 $198,679
======== ========
EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income:
----------------------------------------------------------------
Three Months Ended Six Months Ended
December 28, December 29, December 28, December 29,
($000s) 2014 2013 2014 2013
---- ---- ---- ----
GAAP net income
(loss) as presented
above $4,322 $(4,027) $3,603 $(7,668)
GAAP earnings (loss)
per share as
presented above $0.06 $(0.05) $0.05 $(0.09)
----- ------ ----- ------
Basic Shares used in
GAAP earnings
(loss) per share
computations 71,459 86,881 71,250 89,162
====== ====== ====== ======
Items excluded from GAAP net income (loss) to calculate
non-GAAP net income:
Amortization of intangibles:
Cost of sales $6,355 $6,239 $12,709 $12,399
Amortization of
intangibles
(operating expense) 576 1,603 1,176 3,207
Total amortization
of intangibles 6,931 7,842 13,885 15,606
Stock-based compensation:
Cost of sales 72 147 188 236
Engineering and
development 1,246 1,132 2,886 3,036
Selling and
marketing 1,122 874 2,228 2,076
General and
administrative 584 1,591 1,253 2,968
Total stock-based
compensation 3,024 3,744 6,555 8,316
Site closure and other restructuring costs:
Cost of sales 53 277 89 277
Engineering and
development (48) 5,195 (141) 5,195
Selling and
marketing (419) 652 (1,076) 652
General and
administrative (14) 1,246 (33) 1,246
Total site closure
and other
restructuring costs (428) 7,370 (1,161) 7,370
Expenses related to the Broadcom patents:
Cost of sales 2,090 2,358 3,815 3,855
Engineering and
development 9 806 51 2,322
Selling and
marketing 4 76 131 822
General and
administrative (5) 48 - 305
Total expenses
related to the
Broadcom patents 2,098 3,288 3,997 7,304
Expenses related to the acquisition of Endace:
Selling and
marketing - - - 21
General and
administrative - - - 352
Total expenses
related to the
acquisition of
Endace - - - 373
Expenses related to class action lawsuit:
General and
administrative 164 - 343 -
Total expenses
related to class
action lawsuit 164 - 343 -
Expenses releated to IRS NOPA:
General and
administrative 52 - 52 -
Total expenses
related to IRS NOPA 52 - 52 -
Accretion of debt
discount on
convertible senior
notes 1,640 765 3,253 765
Tax impact of above
items and U.S. GAAP
tax valuation
allowance 26 (636) (2,236) (1,331)
Impact on GAAP net
income (loss) $13,507 $22,373 $24,688 $38,403
Non-GAAP net income $17,829 $18,346 $28,291 $30,735
------- ------- ------- -------
Non-GAAP diluted
earnings per share $0.24 $0.21 $0.39 $0.34
----- ----- ----- -----
Diluted shares used
in non-GAAP
earnings per share
computations 73,122 88,578 72,920 91,008
====== ====== ====== ======
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin:
-------------------------------------------------------------
Three Months Ended Six Months Ended
December 28, December 29, December 28, December 29,
($000s) 2014 2013 2014 2013
---- ---- ---- ----
Revenue $111,087 $122,996 $214,896 $237,828
-------- -------- -------- --------
GAAP gross margin 65,107 72,290 124,221 139,774
------ ------ ------- -------
GAAP gross margin % 58.6% 58.8% 57.8% 58.8%
---- ---- ---- ----
Items excluded from
GAAP gross margin
to calculate non-
GAAP gross margin:
Amortization of
intangibles 6,355 6,239 12,709 12,399
Stock-based
compensation 72 147 188 236
Site closure and
other
restructuring
costs 53 277 89 277
Expenses related to
the Broadcom
patents 2,090 2,358 3,815 3,855
----- ----- ----- -----
Impact on gross
margin 8,570 9,021 16,801 16,767
Non-GAAP gross
margin $73,677 $81,311 $141,022 $156,541
------- ------- -------- --------
Non-GAAP gross
margin % 66.3% 66.1% 65.6% 65.8%
---- ---- ---- ----
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses:
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
December 28, December 29, December 28, December 29,
($000s) 2014 2013 2014 2013
---- ---- ---- ----
GAAP operating
expenses, as
presented above $56,802 $73,879 $114,783 $144,615
------- ------- -------- --------
Items excluded from
GAAP operating
expenses to
calculate non-
GAAP operating
expenses:
Amortization of
intangibles (576) (1,603) (1,176) (3,207)
Stock-based
compensation (2,952) (3,597) (6,367) (8,080)
Site closure and
other
restructuring
costs 481 (7,093) 1,250 (7,093)
Expenses related to
the Broadcom
patents (8) (930) (182) (3,449)
Expenses related to
the acquisition of
Endace - - - (373)
Expenses related to
class action
lawsuit (164) - (343) -
Expenses related to
IRS NOPA (52) - (52) -
--- --- --- ---
Impact on operating
expenses (3,271) (13,223) (6,870) (22,202)
Non-GAAP operating
expenses $53,531 $60,656 $107,913 $122,413
======= ======= ======== ========
Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income:
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
December 28, December 29, December 28, December 29,
($000s) 2014 2013 2014 2013
---- ---- ---- ----
GAAP operating
income (loss) as
presented above $8,305 $(1,589) $9,438 $(4,841)
------ ------- ------ -------
Items excluded from
GAAP operating
income (loss) to
calculate non-
GAAP operating
income:
Amortization of
intangibles 6,931 7,842 13,885 15,606
Stock-based
compensation 3,024 3,744 6,555 8,316
Site closure and
other
restructuring
costs (428) 7,370 (1,161) 7,370
Expenses related to
the Broadcom
patents 2,098 3,288 3,997 7,304
Expenses related to
the acquisition of
Endace - - - 373
Expenses related to
class action
lawsuit 164 - 343 -
Expenses related to
IRS NOPA 52 - 52 -
--- --- --- ---
Impact on operating
income (loss) 11,841 22,244 23,671 38,969
Non-GAAP operating
income $20,146 $20,655 $33,109 $34,128
======= ======= ======= =======
Guidance for
Three Months Ending
March 29, 2015
--------------
Non-GAAP diluted earnings per
share guidance $0.11 - $0.15
Items excluded, net of tax, from
non-GAAP diluted earnings per
share to
calculate GAAP loss per share
guidance:
Amortization of intangibles (0.10)
Stock-based compensation (0.06)
Expenses related to the Broadcom
patents (0.03)
Accretion of debt discount on
convertible senior notes (0.02)
Tax impact of above items and U.S.
GAAP tax valuation allowance 0.00
GAAP loss per share guidance ($0.06 - $0.10)
==============
Net Revenue by Product Lines:
-----------------------------
Q2 FY Q2 FY
2015 % Total 2014 % Total
($000s) Revenues Revenues Revenues Revenues % Change
-------- -------- -------- -------- --------
Network
Connectivity
Products $82,729 74% $87,205 71% -5%
Storage
Connectivity
and Other
Products 22,072 20% 26,143 21% -16%
------ --- ------ ---
Emulex
Connectivity
Division 104,801 94% 113,348 92% -8%
------- --- ------- --- ---
Network
Visibility
Products 6,286 6% 9,648 8% -35%
----- --- ----- --- ---
Total net
revenues $111,087 100% $122,996 100% -10%
======== === ======== === ===
Net Revenues by Channel:
------------------------
Q2 FY Q2 FY
2015 % Total 2014 % Total
($000s) Revenues Revenues Revenues Revenues % Change
-------- -------- -------- -------- --------
OEM $93,019 84% $102,235 83% -9%
Distribution 15,070 13% 16,424 13% -8%
End-user and
other 2,998 3% 4,337 4% -31%
----- --- ----- ---
Total net
revenues $111,087 100% $122,996 100% -10%
======== === ======== === ===
Net Revenues by Territory:
--------------------------
Q2 FY Q2 FY
2015 % Total 2014 % Total
($000s) Revenues Revenues Revenues Revenues % Change
-------- -------- -------- -------- --------
Asia
Pacific $74,756 67% $71,169 58% 5%
United
States 18,887 17% 34,012 28% -44%
Europe,
Middle
East and
Africa 16,441 15% 17,176 14% -4%
Rest of
world 1,003 1% 639 nm 57%
----- --- ---
Total net
revenues $111,087 100% $122,996 100% -10%
======== === ======== === ===
Note Regarding Non-GAAP Financial Information
To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we have included the following non-GAAP financial measures in this press release or in the webcast to discuss our financial results for the second fiscal quarter which may be accessed via our website at www.emulex.com: (i) non-GAAP net income and diluted earnings per share, (ii) non-GAAP gross margin, (iii) non-GAAP operating expenses, (iv) non-GAAP operating income. These non-GAAP financial measures exclude certain expenses and reflect an additional way of viewing aspects of our operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our results of operations and the factors and trends affecting our business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. We use our non-GAAP financial measures internally to better understand and evaluate our business, prepare annual budgets, and in measuring performance for some forms of compensation.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Amortization of intangibles. Amortization of intangibles generally represents costs incurred by an acquired company or other third party to build value prior to our acquisition of the intangible assets. As such, it is effectively part of the transaction costs of the acquisition rather than ongoing costs of operating our core business. As a result, we believe that exclusion of these costs in presenting non-GAAP financial measures provides management and investors a more effective means of evaluating its historical performance and projected costs and the potential for realizing cost efficiencies within our core business. Amortization of intangibles will recur in future periods.
Stock-based compensation. Although stock-based compensation represents an important part of incentive compensation offered to our key employees, we believe that exclusion of the impact of stock-based compensation assists management and investors in evaluating the period over period performance of our business operations and in comparing our performance with those of our competitors. Stock-based compensation expense will recur in future periods.
Site closure and other restructuring costs. We have recognized expenses related to an organizational restructure including closure and consolidation of certain facilities, as well as severance and related costs. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type may be incurred in future periods but are generally infrequent in nature.
Patent litigation damages, license fees and royalties related to the Broadcom patents. We have incurred expenses in the form of damages, sunset period royalties and settlement costs as a result of a judgment in a patent litigation proceeding with Broadcom and the related partial settlement and worldwide license agreement executed on July 3, 2012 (the Release Agreement). We believe that exclusion of these costs of sales expenses related to the Broadcom patents is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business and/or infrequent in nature but will continue in future periods.
Dismissal Agreement and mitigation expenses related to the Broadcom patents. Effective March 30, 2014, we have entered into a Dismissal and Standstill Agreement (Dismissal Agreement) agreeing to pay Broadcom, a non-refundable, non-cancelable dismissal and standstill fee of $5 million. We have recognized mitigation expenses related to the Broadcom patents. We believe that exclusion of these operating expenses related to the Broadcom patents is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business and/or infrequent in nature but will continue in future periods.
Expenses related to the acquisition of Endace Limited. We have incurred various expenses in connection with our acquisition of Endace Limited including but not limited to legal fees, accounting fees, the mark-up on acquired inventory, severance costs and realized translation loss. We believe that exclusion of these charges is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors, as these expenditures do not reflect a continuing cost of operating our current core business. In this regard, we note that expenses of this type relate to the acquisition of an operating business and, as such, are infrequent in nature but may occur in future periods in the event we make a material acquisition.
Expenses related to class action lawsuit. We have incurred expenses related to a class action lawsuit. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.
Expenses related to IRS NOPA. We have incurred various legal and accounting expenses related to the receipt and our response to the Notice of Proposed Adjustment (NOPA) received from the Internal Revenue Service in March of 2014. We disagree with the IRS' proposed adjustments and the basis for its positions, and will administratively appeal to the IRS Appeals Office. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature but will continue in future periods until these audits are resolved.
Accretion of debt discount on convertible senior notes. We have accreted debt discount in connection with the convertible senior notes. We believe that exclusion of this expense is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are generally unrelated to our core business but will continue in future periods until maturity of the convertible senior notes.
Valuation allowance for U.S. federal and state deferred tax assets. The Company has concluded that it is more likely than not that we will be unable to fully utilize the majority of our U.S. federal and state deferred tax assets. As a result, the Company has previously recorded a valuation allowance against those assets to the extent that they cannot be realized through net operating loss carrybacks to prior tax years. We believe that eliminating the impact of a discrete adjustment of this nature and its continuing impact on our effective tax rate is useful to management and investors in evaluating the performance of the Company's ongoing operations on a period-to-period basis and relative to the Company's competitors. In this regard, we note that adjustments of this type are generally infrequent in nature.
- - - - - - - - -
About Emulex
Emulex provides connectivity, monitoring and management solutions for high-performance networks, delivering provisioning, end-to-end application visibility, optimization and acceleration for the next generation of software-defined, telco and Web-scale data centers. The Company's I/O connectivity portfolio, which has been designed into server and storage solutions from leading OEMs and ODMs worldwide, enables organizations to manage bandwidth, latency, security and virtualization. The Emulex network visibility portfolio enables global organizations to monitor and improve application and network performance management. Emulex is headquartered in Costa Mesa, Calif. For more information about Emulex (NYSE:ELX) please visit http://www.Emulex.com.
Investor Contact: Press Contact:
----------------- --------------
Paul Mansky Katherine Lane
Vice President, Corporate Development and
Investor Relations Senior Director, Corporate and Marketing Communications
+1 714 885-2888 +1 714-885-3828
paul.mansky@emulex.com katherine.lane@emulex.com
---------------------- -------------------------
"Safe Harbor" Statement
"Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above contain forward-looking statements that involve risk and uncertainties. We expressly disclaim any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. We wish to caution readers that actual future results could differ materially from those described in the forward-looking statements as a result of a variety of factors, including those discussed in our filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K and 10-Q, under the caption "Risk Factors." Those factors and the factors listed below could cause actual results to differ materially from those in the forward-looking statements:
-- faster than anticipated declines in the demand for storage networking
and fiber channel and slower than expected growth of the converged
networking market or the failure of our Original Equipment Manufacturer
(OEM) customers to successfully incorporate our products into their
systems;
-- the highly competitive nature of the markets for our products as well as
pricing pressures that may result from such competitive conditions and
the emergence of new or stronger competitors as a result of
consolidation movements in the market;
-- our dependence on a limited number of customers and the effects of the
loss of, decrease in or delays of orders by any such customers or the
failure of our OEM customers to successfully incorporate our products
into their systems;
-- our reliance on a limited number of third-party suppliers and
subcontractors for components and assembly, many of which are located
outside of the United States;
-- the effect on our margins of rapid migration of technology and product
substitution by customers, including transitions from application
specific integrated circuit (ASIC) solutions to boards for selected
applications and higher-end to lower-end products, mezzanine card
products or modular Local Area Network (LAN) on Motherboard (LOMs);
-- the non-linearity and variability in the level of our revenue resulting
from the variable and seasonal procurement patterns of our customers;
-- the possibility that our goodwill could become impaired in the near term
which would result in a non-cash charge and could adversely affect our
reported GAAP operating results;
-- any inadequacy of our intellectual property protection or our ability to
obtain necessary licenses or other intellectual property rights on
commercially reasonable terms;
-- our ability to attract and retain key technical personnel;
-- our ability to respond quickly to technological developments and to
benefit from our research and development activities as well as
government grants related thereto and delays in product development;
-- intellectual property and other litigation against us, with or without
merit, that could result in substantial attorneys' fees and costs, cause
product shipment delays, loss of patent rights, monetary damages, costs
associated with product or component redesigns and require us to
indemnify customers or enter into royalty or licensing agreements, which
may or may not be available;
-- our dependence on sales and product production outside of the United
States so that our results could be affected by adverse economic,
social, political and infrastructure conditions in those countries;
-- that we may fail to realize the anticipated benefits from the
acquisition of Endace Limited (Endace) on a timely basis or at all which
could result in an impairment of assets or be unable to complete the
integration of Endace's technology into our existing operations in a
timely and efficient manner;
-- the effect of any actual or potential unsolicited offers to acquire us,
proxy contests or the activities of activist investors;
-- weakness in domestic and worldwide macro-economic conditions, currency
exchange rate fluctuations or potential disruptions in world credit and
equity markets; terrorist activities, natural disasters, or general
economic or political instability and any resulting disruption in our
supply chain or customer purchasing patterns; and
-- changes in tax rates or legislation, accounting standards and other
regulatory changes.
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SOURCE Emulex Corporation
