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Technology Stocks : Earnings: Software , Storage, and IT
IBM 135.32+1.2%4:01 PM EST

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To: 2MAR$ who started this subject2/15/2004 7:11:43 AM
From: 2MAR$   of 14
*ELX ($29~$31~$26) Beats Estimates

By Bill Snyder Staff Reporter
01/28/2004 10:43 AM EST
Click here for more stories by Bill Snyder

Updated from Jan. 27

Driven by strong demand for its core storage products, Emulex (ELX:NYSE - commentary - research) beat second-quarter financial targets and boosted its third-quarter guidance after the close Tuesday.

Investors liked what they heard; in early trading Wednesday, the stock was up 57 cents, or nearly 2%, to $29.75.

The Costa Mesa, Calif., company said second-quarter earnings slipped to $3.6 million, or 4 cents a share, from the year-ago $15.5 million, or 19 cents a share. But the second quarter included more than $11 million in charges related to the now-completed acquisition of Vixel.

Excluding charges, earnings in the December quarter rose to 24 cents from 20 cents a year earlier, beating the Wall Street analysts' consensus by 2 cents. Revenue also beat estimates, rising 23% from a year ago to $94 million.

"I couldn't be more pleased with the Vixel acquisition and our second quarter across the board," CEO Paul Falino said during a conference call after the announcement. "And we're off to a good start in the third quarter."

Emulex bought Vixel for about $310 million in October, and integration of the company appears to be ahead of plan, said analyst Jason Adler of Thomas Weisel Partners in a note to clients. Although management was not explicit, Adler believes the new acquisition contributed about $5 million to the top line during the quarter. (Weisel has done investment banking for Emulex.)

The company forecast third-quarter revenue of $100 million to $102 million and pro forma earnings of up to 25 cents a share. Analysts polled by Thomson First Call were expecting a profit of 23 cents on sales of $98 million. On a generally accepted accounting principles (GAAP) basis, Emulex expects diluted EPS of 17 cents.

Emulex said second-quarter gross margins were 63.3%, down 110 basis points sequentially, largely because of the addition of lower-margin Vixel switching products to the sales mix.

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