Emulex to Continue Redesign of Products Impacting Five Percent of Net Revenues
Court Approves Continued Shipment of Impacted Products Worldwide
COSTA MESA, Calif., March 19, 2012 – Emulex Corporation (NYSE: ELX) today reported the continued implementation of design changes for products impacted by the issuance of an injunction for two patents by the U.S. District Court for the Central District of California in the lawsuit filed against Emulex by Broadcom Corporation (NASDAQ: BRCM), based on U.S. revenues for sales of impacted products that were about five percent of Emulex’s net revenues for its second quarter of fiscal 2012. The injunction included a “sunset period” of 18 months for Emulex to continue selling impacted products in the US without design changes. Based on the jury assessment of royalties, and the terms of the injunction, Emulex estimates a charge of approximately $600,000 in liability for damages to Broadcom to its third quarter fiscal 2012 GAAP results. This amount is in addition to the $387,922 in liability previously reported by Emulex for that patent during the first quarter of 2012.
For its second fiscal quarter which ended on January 1, 2012, Emulex reported net revenues of $128.7 million, 76 percent (or $97.8 million) of which came from outside the US based on billed-to location. For the second fiscal quarter of fiscal 2012, the net revenues in the US for products impacted by issuance of the injunction were approximately $7 million. The design changes primarily focus on serializer/deserializer (SerDes) modules, which Emulex does not design but obtains from several suppliers, and which are included in impacted Emulex products. The impacted Emulex products include BE2, BE3, XE201, SOC 320, SOC 422 and SOC 442 ASICs, and products containing those ASICs.
“Emulex is dedicated to protecting the interest of its customers,” said Jim McCluney, the Chief Executive Officer of Emulex. “We have been working with our suppliers to implement design changes to the SerDes modules included in the impacted products.”
Broadcom had earlier asserted 12 different US patents against Emulex. Emulex presented a vigorous defense prior to the trial, and only 6 patents remained by the time of trial. After three weeks of trial, the court determined that one of the patents (7,058,150) had been infringed by Emulex, and the jury rendered an advisory verdict to the Court that it is not invalid, and awarded $387,922 in damages with respect to that patent. Subsequently, the judge determined that a second patent (7,471,691) had been infringed by Emulex. With respect to the remaining four patents, the jury found one not infringed and could not reach a unanimous verdict on the other three. Emulex intends to continue to vigorously defend its products, including a potential appeal.
Emulex, the leader in converged networking solutions, provides enterprise-class connectivity for servers, networks and storage devices within the data center. The Company's product portfolio of Fibre Channel host bus adapters, network interface cards, converged network adapters, controllers, embedded bridges and switches, and connectivity management software are proven, tested and trusted by the world's largest and most demanding IT environments. Emulex solutions are used and offered by the industry's leading server and storage OEMs including, Cisco, Dell, EMC, Fujitsu, Hitachi, Hitachi Data Systems, HP, Huawei, IBM, NEC, NetApp and Oracle. Emulex is headquartered in Costa Mesa, Calif., and has offices and research facilities in North America, Asia and Europe. More information about Emulex (NYSE:ELX) is available at www.Emulex.com.
Emulex Safe Harbor Statement
"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. These forward-looking statements include, among other matters, statements concerning Emulex's acquisition of ServerEngines Corporation, including anticipated benefits expected from the acquisition, expected impact on Emulex's results of operations and financial condition, and expected market opportunities; Emulex's business outlook, as well as expectations of other future events and future performance. Emulex wishes to caution readers that a number of significant factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include among others, the anticipated benefits of the combined companies may not be achieved, the combined operations may not be successfully integrated in a timely manner, if at all, and other risks inherent in acquisitions of businesses, including unanticipated costs and expenditures, potential changes in relationships with strategic partners, potential contractual or intellectual property issues, and potential accounting charges and write-downs; as well as changes in economic and industry conditions and the effects of ongoing global economic uncertainty, changes in end user demand for technology solutions; the effect of any actual or potential unsolicited offers to acquire Emulex; Emulex's dependence on a limited number of customers and the effects of the loss of, or decrease or delays in orders by, any such customers, or the failure of such customers to make payments; the emergence of new or stronger competitors as a result of consolidation movements in the market; the rapidly changing nature of technology, evolving industry standards and frequent introductions of new products and enhancements by competitors; the effect of rapid migration of customers towards newer, lower cost product platforms; slower than expected growth of the storage networking market or the failure of Emulex's Original Equipment Manufacturer ("OEM") customers to successfully incorporate Emulex products into their systems; delays in product development; the highly competitive nature of the markets for Emulex's products; Emulex's ability to gain market acceptance for its products; any inadequacy of Emulex's intellectual property protection or the potential for third-party claims of infringement; Emulex's ability to attract and retain skilled personnel; and Emulex's reliance on third-party suppliers. These and other factors that could cause actual results to differ materially from those in the forward-looking statements are also discussed in Emulex's filings with the Securities and Exchange Commission, including its recent filings on Forms 8-K, 10-K and 10-Q. Statements in this release are based on current expectations and, except as required by law, Emulex undertakes no obligation to revise or update any forward-looking statements for any reason. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.