Emulex Drops Revenue Again

After a second straight quarter of revenue and income declines, Emulex Corp. (NYSE: ELX) executives say they are looking to accelerate their move into the emerging SMB market with entry-level switches and HBAs for blade servers.

Emulex reported revenue of $73.2 million today, which was at the low end of its guidance of $73 million to $76 million and below analysts consensus forecast of $74.5 million. It reported its net income of $9.5 million or earnings per share of $0.11, beating its guidance of $0.09-$0.10 and the consensus forecast of $0.10.

The HBA vendor’s revenue and earnings were down significantly from year-over-year and quarter-over-quarter standpoints. Emulex posted revenue of $86.4 million and EPS of $0.19 last quarter and $84.6 million and $0.24 last year.

Today’s results represent a second straight quarter of declines. In the previous quarter, Emulex laid off 5 percent of its workforce after disappointing results (see Emulex Cuts Guidance, Jobs).

CEO Paul Folino blames the 15 percent sequential revenue drop last quarter on a shift of buying patterns by one of its OEMs -- believed to be EMC Corp. (NYSE: EMC) -- that changed the way HBA revenue was counted.Yet things don’t look much better for the current quarter. Folino forecasts revenue of $81 million to $85 million this quarter for EPS of $0.13 to $0.15. That would be a decline from last year's $94.4 million and $0.24.

Emulex is looking to accelerate growth of its switch revenue, which makes up 15 percent of its overall business. Switch revenue grew nearly 20 percent from last quarter, as Emulex and its HBA rival QLogic Corp. (Nasdaq: QLGC) looked to diversify its products by pushing into the low-end switch market (see HBA Guys Switch Gears and Emulex Launches Entry-Level SAN).

Folino admits “this was a challenging quarter” for Emulex, but says the vendor scored OEM wins for a new 4-Gbit/s HBA, blade-server HBA, and embedded and low-end SAN switches.

"Overall, the HBA market is growing, but at a lower rate than people thought at the beginning of the year," Folino says. "It's a great market but we're looking to diversify."

— Dave Raffo, Senior Editor, Byte and Switch0