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Strategies & Market Trends : Guidance and Visibility

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Nov 21 9:30 AM EST

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To: keithcray who wrote (9854)	8/7/2001 12:37:56 AM
From: keithcray	Read Replies (1) of 208838

Emulex (EMLX) 27.00 +0.65: Shares of EMLX are responding well to news Hewlett-Packard (HWP) has selected the company's fibre channel host bus adapters for HP's network storage appliance solutions running in Linux environments. Investors are hoping the HP press release may be a positive omen ahead of EMLX's quarterly report. The company reports tomorrow after the close and analysts are expecting earnings of $0.10 per share on revenues of approximately $60 million. Topline results in the area of $60 million would fit with trends in the sector suggesting the industry is experiencing third quarter growth that is sequentially flat to slightly positive. It almost goes without saying that sentiment on the storage sector has deteriorated over the past month. While the leading companies have reported "passable" results, the massive sequential growth rates of the past have been either held in check or vaporized altogether. Though the industry's third quarter is expected to come in more or less flat, there continues to be some evidence the SAN market for storage area networks (SANs) will reaccelerate by the fourth quarter. While the broader sector trends work themselves through, it looks as if Emulex may be gaining ground in the SBus segment. This quarter, the company announced SBus design wins at both Hitachi and Compaq. Notably, Emulex largely defers revenue recognition of shipments associated with channel inventory and OEM stocking inventory until its products are actually shipped out by its customers. This means the company is positioned to deliver a quick revenue recovery when industry conditions do improve. According to IDC, the market for Fibre Channel host bus adapters (HBAs), one of EMLX' core businesses, is expected to expand from approximately $270 million in calendar 1999 to $1.8 billion in calendar 2003. Emulex is the clear leader in Fiber Channel HBAs, increasing its share of this market to 34% in calendar year 2000. This represents nearly twice the share of the company's nearest competitor. We don't see a need to be aggressive buyers ahead of EMLX' report, but continue to believe the company is well positioned once signs of a turnaround are evident. -- Michael Ashbaugh, Briefing.com

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