Mogul, good article in briefing.com.
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Emulex (EMLX) 46 1/2 -36 7/16: 100% y/y revenue growth to $36.5 mln; EPS of $0.20, two cents better than consensus estimates; gross margins up 90bp; sign Hewlett-Packard (HWP) as a new OEM account...great quarter, shareholders should be pleased right? Not exactly. Emulex shares are off 45% on the day after releasing the preceding Q3 results. The problem? Investors wanted more. More upside to revenues and a stronger bottom line. Emulex makes network access products, printer servers, fibre channel host adapters, hubs and software products for access to and storage of electronic data and applications. Their fibre channel business accounts for 85% of total sales, and the 10% q/q sales growth for the division did not compare favorably to last quarter's 31% sequential jump. In fact, overall sales growth slowed from the 30% neighborhood (on a sequential basis) the previous two quarters to 9% in Q3. 9% q/q growth is nothing to sneeze at, but when the bar is set at 30%, eventually you're not going clear it; that's just part of the maturation process. Furthermore, most Street analysts were expecting $34-36 mln in revenues, and Emulex topped them. Certainly exogenous variables such as today's CPI release and overall market sentiment are playing a part in todays plummet, but the slowdown in Fibre Channel sales also accounts for a large part of today's action. It should be pointed out that the company is ramping their fibre channel production capacity to meet strong demand, and they are the market leader in the space. Moreover, order backlog in Q3 came in around $27 mln, about 22% higher than last quarter. The story here is a familiar one, and you'll be hearing of many more cases like Emulex. Impatient shareholders have come to expect the steep revenue growth curve of an immature, developing company, when the growth rate starts to flatten as it inevitably will, sellers hit the panic button. Look for Emulex to bounce back after the momentum crowd that pushed EMLX shares to the $225 level in March clears out. - MG
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I'm in for a loss now and $225 seems so far away, but I like the revenue growths and EPS increases.
Jack |
