• 04/25/2003
    9:30 PM
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Is Emulex Slowing Down?

Despite good Q3 results, HBA vendor's shares fall 20% on prospect of lower sales growth
Emulex Corp. (NYSE: ELX), despite reporting good results for its third quarter on Thursday, saw its stock get brutally hammered today as investors responded to the host bus adapter vendor's weaker-than-expected outlook for the current quarter and beyond (see Emulex Breaks Even in Q3).

Shares of Emulex were down 20.5 percent, to $19.39, in midday trading amid a generally down market.

Also hurting the stock today were two downgrades by Wall Street analyst firms. RBC Capital Markets downgraded Emulex to Underperform from Sector Perform; and Thomas Weisel Partners changed its rating from Peer Perform to Underperform on the expectation of lower revenue growth.

"Our analysis of HBA market share gain exhaustion supports a cautious view of Emulex's future HBA revenue growth vis--vis investor expectations, and successful execution in new segments is far from certain," wrote Thomas Weisel analyst Jason Ader in a research note today.

Emulex reported revenues of $79.6 million for the quarter ended March 30, 2003, up 4 percent sequentially. It posted a net loss of $248,000, essentially breaking even, in line with Wall Street expectations. Emulex executives noted that it was the company's sixth consecutive quarter of growth.

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