Emulex Reports Earnings update from January 2007

COSTA MESA, Calif. -- Emulex Corporation (NYSE:ELX - News) today announced results for its second fiscal quarter ended December 31, 2006.

Second Quarter Financial Highlights

-- Revenues of $121.4 million, a 19% sequential increase which exceeded the October guidance of $115-$119 million
-- GAAP gross margins of 54% and non-GAAP gross margins of 62%. Both GAAP and non-GAAP gross margins reflect an excess and obsolete inventory charge of approximately $2.5 million against older generation multi-chip 2Gb/s Host Server Products due to expected demand transition to single chip 2Gb/s and 4Gb/s products

-- GAAP net loss of $10.1 million and non-GAAP net income of $24.9 million or 21% of revenue
-- GAAP net loss per diluted share of $0.12 and non-GAAP net income per diluted share of $0.27
-- Inventories of $25.3 million, and inventory turns of 8.8
-- Cash, and investments at the end of the quarter totaled $269 million after the cost of completing the acquisition of Sierra Logic and retiring all of the $236 million of previously outstanding convertible debt
-- Emulex completed the acquisition of Sierra Logic using approximately $162 million in cash for the purchase of all common and preferred stock, of which $24 million is currently held in escrow

GAAP results include an in-process R&D charge of approximately $22 million associated with the acquisition of Sierra Logic in October 2006 based on our preliminary purchase price allocation.

Emulex Corp.