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Emulex Plans 'Modest' Layoff

Emulex Corp. (NYSE: ELX) will announce a “modest” layoff along with its earnings report today.

A spokeswoman for the HBA (host bus adapter) vendor today confirmed industry whispers that the company would reduce its workforce, pointing to a late June earnings warning that mentioned “modest cost containment measures to control operating expenses.” (See Emulex Cuts Earnings Forecast and Emulex Hits the Deck.)

Robin Austin, senior manager of public relations for Emulex, said the company would provide more details today when it announces earnings for last quarter. “Our actions in this quarter are consistent with that statement,” she said when asked if Emulex would announce layoffs.

Austin said the cuts would probably affect fewer than 10 percent of the workforce, which had a headcount of 510 at the end of March.

Coming off a rocky quarter, Emulex’s short-term prospects don’t look great. HBA growth in the high-end market is slowing, and Emulex lacks diversification in new technology areas such as iSCSI, SATA, and SAS. Its InSpeed embedded switches acquired from Vixel are selling, but they lower the company’s margins (see NEC Selects Emulex InSpeed and Emulex Ships 2M InSpeed Ports).

Judging by QLogic Corp.’s (Nasdaq: QLGC) claim that its Fibre Channel HBA revenue increased 28 percent year-over-year and 8 percent sequentially, Emulex seems to be losing market share with its core product (see QLogic Qloses Quiet Quarter).

Emulex announced June 30 that it would miss its previous revenue forecast by as much as $18 million. The company’s revised forecast called for revenues between $85 million and $86 million, compared to previous guidance between $100 million and $103 million. It expects earnings per share of around $0.18 compared to previous guidance of up to $0.25 EPS. The consensus analysts' earnings estimate is $0.18, according to Reuters. Emulex reported revenue of $99 million for the quarter that ended in March.

Emulex also said in July it expects revenue of around $75 million to $76 million for the quarter that ends in September, which would be down from $84.6 million from the same quarter last year. Emulex said this quarter’s revenue could fall $10 million below actual demand. It blames its major OEM, saying it's switching to a new inventory management process.

— Dave Raffo, Senior Editor, Byte and Switch

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