Just saw that Emulex (EMLX) is outsourcing all their manufacturing to a division of KNT.
BTW, A good friend of mine works for KNT.
Emulex Implements Outsourcing Strategy To Reduce
Manufacturing Costs
Company To Incur One-Time Charge To Exit Manufacturing
COSTA MESA, Calif.--(BUSINESS WIRE)--March 25, 1998--Emulex Corp. (Nasdaq: EMLX - news), a
leader in gigabit fibre channel, printer server and network access products, Wednesday announced that it
plans to outsource the production of its product lines to K-TEC Electronics, one of the leading contract
manufacturers in the United States.
A vertically-integrated, turnkey contract manufacturer with headquarters in Texas, K-TEC Electronics' SMT
Division provides a state-of-the-art continuous flow production line featuring Ball Grid Array capability and
in-line testing, as well as purchasing and materials management.
As a result, Emulex plans to close its manufacturing operations, presently located in Dorado, Puerto Rico, and
to incur pretax charges totaling approximately $13 million during the third fiscal quarter ending March 29,
1998.
''The designs we are deploying in our newest-generation fibre channel product line require state-of-the-art
manufacturing expertise, and future designs are expected to demand even more sophisticated manufacturing
capabilities,'' stated Paul Folino, president and chief executive officer of Emulex.
''This new relationship provides us with the opportunity to leverage ongoing advances in K-TEC Electronics'
manufacturing as Emulex's technological requirements continue to evolve.
''Furthermore, this move enables the company to focus its financial and management resources on its core
competencies in gigabit technologies, ASIC design and OEM relationships. Our customers will continue to
enjoy ISO 9001 quality in Emulex products, while we deploy K-TEC Electronics' global supplier partnerships
and consolidated purchasing power to improve product availability and reduce costs.
''Our longer-term objectives are to deploy the cost savings from the K-TEC Electronics relationship to
position the company for pricing flexibility while still improving gross margins.''
As the company exits its manufacturing operations in Puerto Rico, initiates its subcontracted production and
streamlines its product offerings, the company expects to reduce its headcount by approximately 130 full-time
employees, or 48% of the workforce, and 45 temporary workers in Puerto Rico. Approximately $6 million of
the total $13 million charge will be comprised of cash charges primarily relating to the headcount reduction
that the company expects to incur over the next two to three quarters. The remaining $7 million in noncash
charges pertain to the write-down of manufacturing assets, the planned streamlining of lower volume or mature
products, principally in the network access sector of the company's business, as well as a write-down of
excess and obsolete inventory. Emulex has confirmed the availability of its $10 million line of credit with
Silicon Valley Bank during the transition to the company's new manufacturing strategy.
''Beyond a reduction in product cost, our corporate goals include reduced capital expenditures in inventory
carrying costs, which we believe will provide meaningful opportunities to improve cash flow in future
quarters,'' noted Mike Rockenbach, chief financial officer of Emulex.
''In addition, we expect that the company's cumulative tax loss carryforwards should enable the company to
continue to record a tax rate in the 10% range for the remainder of fiscal 1998 and the next several years.''
The company expects to report its third quarter results on or about April 23, 1998.
Emulex Corp. is a leading designer of high-performance network connectivity products including fibre channel,
printer server and network access products. The company's hardware and software-based networking
solutions improve communication in computer networks and enhance data flow between computers and
peripherals. Fibre channel is a high-performance ANSI standard interface that is supported by the 120+
worldwide member Fibre Channel Association that includes Sun, Hewlett-Packard and Seagate. As a leading
developer and supplier of fibre channel technology, Emulex's fibre channel devices support all implementations
of the fibre channel standard, including arbitrated loop, switched fabric and point-to-point topologies. The
company markets to OEMs and end users through its own worldwide selling organization, as well as two-tier
distribution partners. Corporate headquarters are located in Costa Mesa. News releases and other
information about Emulex Corp. are available via Emulex's World Wide Web address at
emulex.com.
''Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: With the exception of
historical information, the statements set forth above include forward-looking statements that involve risk and
uncertainties. The company wishes to caution readers that a number of important factors could cause actual
results to differ materially from those in the forward-looking statements. Those factors include the following:
the fact that the company's markets are characterized by rapidly changing technology, evolving industry
standards and frequent introductions of new products and enhancements, and the company's ability to
respond to such changes; difficulties which the company may experience in exiting its manufacturing
operations; the fact that the fibre channel market is at an early stage of development; the highly competitive
nature of the markets for the company's products; the company's ability to attract and retain skilled personnel;
the company's reliance on third party suppliers for components used in the company's products; and the
company's reliance on certain contract manufacturers, OEMs, distributors and key customers. These and
other factors which could cause actual results to differ materially from those in the forward-looking statements
are also discussed in the company's filings with the Securities and Exchange Commission, including its recent
filings on Form 10-K and Form 10-Q.
This news release refers to various products and companies by their trade names. In most, if not all, cases
these designations are claimed as trademarks or registered trademarks by their respective companies.
Contact:
Emulex Corp., Costa Mesa
Michael J. Rockenbach, 714/513-8213 |
