##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended December 28, 2008
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 Commission File No. 001-31353
 EMULEX CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    51-0300558(State or other jurisdiction
    
    (I.R.S Employerof incorporation or organization)
    
    Identification No.)3333 Susan StreetCosta Mesa, California
    
    92626(Address of principal executive offices)
    
    (Zip Code)
 (714) 662-5600  Registrants telephone number, including area code
 
 þ o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




---



##### 



PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets December 28, 2008 and June 29, 2008
    
    
    3Condensed Consolidated Statements of Income Three and Six months ended December 28, 2008
and December 30, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows Six months ended December 28, 2008 and
December 30, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 6. Exhibits
    
    
    49Signatures
    
    
    50EX-10.3EX-10.4EX-10.5EX-10.6EX-10.7EX-31.AEX-31.BEX-32
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 
 December 28,
    
    
    June 29,2008
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    231,261
    
    
    $
    217,017Investments
    
    
    53,972
    
    
    
    133,182Accounts and other receivables, net of allowance for doubtful accounts of
$1,717 and $1,753 as of December 28, 2008 and June 29, 2008, respectively
    
    
    64,586
    
    
    
    61,634Inventories
    
    
    14,869
    
    
    
    19,336Prepaid income taxes
    
    
    14,524
    
    
    
    26Other prepaid expenses
    
    
    6,472
    
    
    
    5,079Deferred income taxes
    
    
    18,728
    
    
    
    20,773Total current assets
    
    
    404,412
    
    
    
    457,047Property and equipment, net
    
    
    77,443
    
    
    
    73,580Investments
    
    
    
    
    
    
    150Goodwill
    
    
    87,840
    
    
    
    87,843Intangible assets, net
    
    
    53,878
    
    
    
    67,299Deferred income taxes
    
    
    13,279
    
    
    
    5,481Other assets
    
    
    9,389
    
    
    
    7,656Total assets
    
    $
    646,241
    
    
    $
    699,056Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    13,856
    
    
    $
    23,714Accrued liabilities
    
    
    25,924
    
    
    
    26,363Income taxes payable
    
    
    
    
    
    
    37,528Total current liabilities
    
    
    39,780
    
    
    
    87,605Other liabilities
    
    
    4,712
    
    
    
    3,633Accrued taxes
    
    
    35,299
    
    
    
    31,979Total liabilities
    
    
    79,791
    
    
    
    123,217Commitments and contingencies (Note 6)Subsequent events (Note 8)Stockholders equity:Preferred stock, $0.01 par value; 1,000,000 shares authorized (150,000
shares designated as Series A Junior Participating Preferred Stock); none
issued and outstanding
    
    
    
    
    
    
    Common stock, $0.10 par value; 240,000,000 shares authorized; 89,064,849
and 88,113,322 issued at December 28, 2008 and June 29, 2008, respectively
    
    
    8,906
    
    
    
    8,811Additional paid-in capital
    
    
    1,093,817
    
    
    
    1,080,722Accumulated deficit
    
    
    (385,596
    )
    
    
    (403,614
    )Accumulated other comprehensive (loss) income
    
    
    (677
    )
    
    
    7Treasury stock, at cost; 8,550,971 and 5,660,337 shares at December 28, 2008
and June 29, 2008, respectively
    
    
    (150,000
    )
    
    
    (110,087
    )Total stockholders equity
    
    
    566,450
    
    
    
    575,839Total liabilities and stockholders equity
    
    $
    646,241
    
    
    $
    699,056
  3




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 28,
    
    
    December 30,
    
    
    December 28,
    
    
    December 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenues
    
    $
    108,661
    
    
    $
    130,622
    
    
    $
    220,357
    
    
    $
    247,692Cost of sales
    
    
    42,676
    
    
    
    48,880
    
    
    
    84,420
    
    
    
    98,023Gross profit
    
    
    65,985
    
    
    
    81,742
    
    
    
    135,937
    
    
    
    149,669Operating expenses:Engineering and development
    
    
    31,101
    
    
    
    31,477
    
    
    
    65,884
    
    
    
    62,764Selling and marketing
    
    
    13,270
    
    
    
    13,740
    
    
    
    27,786
    
    
    
    26,644General and administrative
    
    
    9,548
    
    
    
    8,808
    
    
    
    18,964
    
    
    
    17,377Amortization of other intangible assets
    
    
    1,851
    
    
    
    2,280
    
    
    
    3,938
    
    
    
    4,918Total operating expenses
    
    
    55,770
    
    
    
    56,305
    
    
    
    116,572
    
    
    
    111,703Operating income
    
    
    10,215
    
    
    
    25,437
    
    
    
    19,365
    
    
    
    37,966Nonoperating income, net:Interest income
    
    
    1,224
    
    
    
    3,487
    
    
    
    3,073
    
    
    
    6,796Interest expense
    
    
    (34
    )
    
    
    (7
    )
    
    
    (36
    )
    
    
    (11
    )Other (expense) income, net
    
    
    (127
    )
    
    
    
    
    
    
    197
    
    
    
    61Total nonoperating income, net
    
    
    1,063
    
    
    
    3,480
    
    
    
    3,234
    
    
    
    6,846Income before income taxes
    
    
    11,278
    
    
    
    28,917
    
    
    
    22,599
    
    
    
    44,812Income tax provision
    
    
    761
    
    
    
    11,273
    
    
    
    4,581
    
    
    
    16,997Net income
    
    $
    10,517
    
    
    $
    17,644
    
    
    $
    18,018
    
    
    $
    27,815Net income per share:Basic
    
    $
    0.13
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.34Diluted
    
    $
    0.13
    
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.33Number of shares used in per share computations:Basic
    
    
    80,169
    
    
    
    81,885
    
    
    
    80,604
    
    
    
    82,254Diluted
    
    
    81,248
    
    
    
    83,809
    
    
    
    82,068
    
    
    
    84,305
  4




---



##### Table of Contents



Six Months EndedDecember 28,
    
    
    December 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    18,018
    
    
    $
    27,815Adjustments to reconcile net income to net cash provided by (used
in) operating activities:Depreciation and amortization of property and equipment
    
    
    10,950
    
    
    
    9,307Share-based compensation expense
    
    
    12,519
    
    
    
    14,091Amortization of intangible assets
    
    
    13,399
    
    
    
    17,631Impairment of intangible assets
    
    
    
    
    
    
    3,097Accrued interest income, net
    
    
    683
    
    
    
    (Gain) loss on disposal of property and equipment
    
    
    (94
    )
    
    
    131Deferred income taxes
    
    
    (5,570
    )
    
    
    (3,715
    )Excess tax benefit from share-based compensation
    
    
    (188
    )
    
    
    (1,004
    )Foreign currency adjustments
    
    
    (157
    )
    
    
    60Changes in assets and liabilities:Accounts and other receivables
    
    
    (3,840
    )
    
    
    (4,304
    )Inventories
    
    
    4,468
    
    
    
    10,791Prepaid expenses and other assets
    
    
    (2,457
    )
    
    
    (2,252
    )Accounts payable, accrued liabilities, and other liabilities
    
    
    (9,742
    )
    
    
    3,892Accrued taxes
    
    
    3,319
    
    
    
    (1,221
    )Income taxes payable and prepaid income taxes
    
    
    (52,008
    )
    
    
    8,932Net cash (used in) provided by operating activities
    
    
    (10,700
    )
    
    
    83,251Cash flows from investing activities:Net proceeds from sale of property and equipment
    
    
    50
    
    
    
    20Additions to property and equipment
    
    
    (14,512
    )
    
    
    (13,064
    )Investment in privately-held company
    
    
    (947
    )
    
    
    Purchases of investments
    
    
    (97,715
    )
    
    
    (554,040
    )Maturities of investments
    
    
    176,392
    
    
    
    573,838Net cash provided by investing activities
    
    
    63,268
    
    
    
    6,754Cash flows from financing activities:Repurchase of common stock
    
    
    (39,913
    )
    
    
    (40,000
    )Tax withholding payments reimbursed by common stock
    
    
    (2,416
    )
    
    
    (2,288
    )Proceeds from issuance of common stock under stock plans
    
    
    3,850
    
    
    
    7,400Excess tax benefit from share-based compensation expense
    
    
    188
    
    
    
    1,004Net cash used in financing activities
    
    
    (38,291
    )
    
    
    (33,884
    )Effect of exchange rates on cash and cash equivalents
    
    
    (33
    )
    
    
    (42
    )Net increase in cash and cash equivalents
    
    
    14,244
    
    
    
    56,079Cash and cash equivalents at beginning of period
    
    
    217,017
    
    
    
    69,036Cash and cash equivalents at end of period
    
    $
    231,261
    
    
    $
    125,115
  5




---



##### Table of Contents



Basis of Presentation
   Supplemental Cash Flow Information
 Six Months EndedDecember 28,
    
    December 30,2008
    
    2007(in thousands)Cash paid during the period for:Interest
    
    $
    5
    
    
    $
    11Income taxes
    
    $
    60,905
    
    
    $
    13,609Non-cash activities:Additional goodwill resulting from escrow
release as required by the Sierra Logic, Inc.
acquisition agreement
    
    $
    
    
    
    $
    12,138Purchases of property and equipment not paid, net
    
    $
    779
    
    
    $
    1,668
 Recently Adopted Accounting Standards
 .
  6




---



##### Table of Contents



Recently Issued Accounting Standards
     7




---



##### Table of Contents



Investments
   Gross
    
    
    GrossUnrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)December 28, 2008Municipal bonds
    
    $
    151
    
    
    $
    2
    
    
    $
    
    
    
    $
    153U.S. Government securities
    
    
    19,220
    
    
    
    103
    
    
    
    
    
    
    
    19,323U.S. Government sponsored entity securities
    
    
    34,601
    
    
    
    190
    
    
    
    
    
    
    
    34,791$
    53,972
    
    
    $
    295
    
    
    $
    
    
    
    $
    54,267June 29, 2008Municipal bonds
    
    $
    4,626
    
    
    $
    18
    
    
    $
    
    
    
    $
    4,644U.S. Government securities
    
    
    29,250
    
    
    
    2
    
    
    
    
    
    
    
    29,252U.S. Government sponsored entity securities
    
    
    90,528
    
    
    
    19
    
    
    
    
    
    
    
    90,547Corporate bonds
    
    
    8,928
    
    
    
    13
    
    
    
    
    
    
    
    8,941$
    133,332
    
    
    $
    52
    
    
    $
    
    
    
    $
    133,384
  December 28,
    
    
    June 29,2008
    
    
    2008(in thousands)Short-term investments (maturities less than one year)
    
    $
    53,972
    
    
    $
    133,182Long-term investments (maturities of one to five years)
    
    
    
    
    
    
    150$
    53,972
    
    
    $
    133,332
 8




---



##### Table of Contents



Inventories
  December 28,
    
    
    June 29,2008
    
    
    2008(in thousands)Raw materials
    
    $
    4,731
    
    
    $
    4,090Finished goods
    
    
    10,138
    
    
    
    15,246$
    14,869
    
    
    $
    19,336
 Goodwill and Intangible Assets, net
       December 28,
    
    
    June 29,2008
    
    
    2008(in thousands)Intangible assets subject to amortization:Core technology and patents
    
    $
    92,256
    
    
    $
    92,272Accumulated amortization, core technology and patents
    
    
    (78,996
    )
    
    
    (75,607
    )Developed technology
    
    
    77,312
    
    
    
    77,313Accumulated amortization, developed technology
    
    
    (39,637
    )
    
    
    (32,788
    )Customer relationships
    
    
    38,670
    
    
    
    38,674Accumulated amortization, customer relationships
    
    
    (36,906
    )
    
    
    (34,047
    )Tradename
    
    
    4,641
    
    
    
    4,643Accumulated amortization, tradename
    
    
    (3,462
    )
    
    
    (3,161
    )$
    53,878
    
    
    $
    67,299
 9




---



##### Table of Contents



(in thousands)2009 (remaining 6 months)
    
    $
    10,8572010
    
    
    21,7152011
    
    
    17,7212012
    
    
    3,5852013
    
    
    Thereafter
    
    
    $
    53,878
 Accrued Liabilities
  December 28,
    
    
    June 29,2008
    
    
    2008(in thousands)Payroll and related costs
    
    $
    12,353
    
    
    $
    11,792Warranty liability
    
    
    3,477
    
    
    
    4,174Deferred revenue and accrued rebates
    
    
    3,884
    
    
    
    4,848Other
    
    
    6,210
    
    
    
    5,549$
    25,924
    
    
    $
    26,363
 10




---



##### Table of Contents



(in thousands)Balance as of June 29, 2008
    
    $
    4,174Accrual for warranties issued
    
    
    766Changes to pre-existing warranties (including changes in estimates)
    
    
    (415
    )Settlements made (in cash or in kind)
    
    
    (1,048
    )Balance as of December 28, 2008
    
    $
    3,477
 Commitments and Contingencies
 Litigation
  11




---



##### Table of Contents



Other Commitments and Contingencies
   Treasury Stock
   12




---



##### Table of Contents



Stock-Based Compensation
   Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Six Months Ended
    
    
    Six Months EndedDecember 28,
    
    
    December 30,
    
    
    December 28,
    
    
    December 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Total cost of
stock-based payment
plans during the
period
    
    $
    5,735
    
    
    $
    7,103
    
    
    $
    12,518
    
    
    $
    14,050Amounts capitalized
in inventory during
the period
    
    
    (165
    )
    
    
    (120
    )
    
    
    (344
    )
    
    
    (277
    )Amounts recognized
in income for
amounts previously
capitalized in
inventory
    
    
    179
    
    
    
    157
    
    
    
    345
    
    
    
    318Amounts charged
against income,
before income tax
benefit
    
    $
    5,749
    
    
    $
    7,140
    
    
    $
    12,519
    
    
    $
    14,091Amount of related
income tax benefit
recognized in
income
    
    $
    1,574
    
    
    $
    1,795
    
    
    $
    3,490
    
    
    $
    3,612
   Three Months Ended
    
    Six Months EndedDecember 28,
    
    December 30,
    
    December 28,
    
    December 30,2008
    
    2007
    
    2008
    
    2007Expected volatility
    
    50%  51%
    
    37%
    
    42%  51%
    
    33%  37%Weighted average expected volatility
    
    51%
    
    37%
    
    43%
    
    36%Expected dividends
    
    
    
    
    
    
    
    Expected term (in years)
    
    2.97  4.97
    
    2.4  4.4
    
    2.97  4.97
    
    2.4  4.4Weighted average expected term
(in years)
    
    3.81
    
    3.25
    
    3.81
    
    3.25Risk-free rate
    
    1.12%  1.50%
    
    3.23%  3.43%
    
    1.12%  3.02%
    
    3.23%  4.17%
 13




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedDecember 28,
    
    December 30,
    
    December 28,
    
    December 30,2008
    
    2007
    
    2008
    
    2007Expected volatility
    
    
    49
    %
    
    
    32
    %
    
    
    49
    %
    
    
    32
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected term (in years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Risk-free rate
    
    
    1.13
    %
    
    
    4.08
    %
    
    
    1.13
    %
    
    
    4.08
    %
  WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicOptions
    
    Exercise Price
    
    Term
    
    Value(in years)
    
    (in millions)Options outstanding at June 29, 2008
    
    
    14,078,051
    
    
    $
    21.54
    
    
    
    4.09
    
    
    $
    5.75Options granted
    
    
    161,000
    
    
    $
    11.59Options exercised
    
    
    (206,506
    )
    
    $
    5.74Options canceled
    
    
    (1,213,680
    )
    
    $
    25.38Options forfeited
    
    
    (292,828
    )
    
    $
    16.34Options outstanding at December 28, 2008
    
    
    12,526,037
    
    
    $
    21.42
    
    
    
    3.67
    
    
    $
    1.0Options vested and expected to vest at December 28, 2008
    
    
    12,416,886
    
    
    $
    21.47
    
    
    
    3.66
    
    
    $
    1.0Options exercisable at December 28, 2008
    
    
    10,710,764
    
    
    $
    22.31
    
    
    
    3.47
    
    
    $
    0.9
  WeightedAverage GrantNumber of
    
    Date FairAwards
    
    ValueAwards outstanding and unvested at June 29, 2008
    
    
    2,135,765
    
    
    $
    18.07Awards granted
    
    
    1,232,550
    
    
    $
    10.36Awards vested
    
    
    (636,529
    )
    
    $
    18.42Awards forfeited
    
    
    (199,640
    )
    
    $
    18.28Awards outstanding and unvested at December 28, 2008
    
    
    2,532,146
    
    
    $
    14.21
    14




---



##### Table of Contents



Income Taxes
   15




---



##### Table of Contents



Net Income Per Share
   Three Months Ended
    
    
    Six Months EndedDecember 28,
    
    
    December 30,
    
    
    December 28,
    
    
    December 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands, except per
    
    
    (in thousands, except pershare data)
    
    
    share data)Numerator  Net income
    
    $
    10,517
    
    
    $
    17,644
    
    
    $
    18,018
    
    
    $
    27,815Denominator:Denominator for basic net income
per share weighted average
shares outstanding
    
    
    80,169
    
    
    
    81,885
    
    
    
    80,604
    
    
    
    82,254Effect of dilutive securities:Dilutive options outstanding,
unvested stock and ESPP
    
    
    1,079
    
    
    
    1,924
    
    
    
    1,464
    
    
    
    2,051Denominator for diluted net
income per share  adjusted
weighted average shares
outstanding
    
    
    81,248
    
    
    
    83,809
    
    
    
    82,068
    
    
    
    84,305Basic net income per share
    
    $
    0.13
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.34Diluted net income per share
    
    $
    0.13
    
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.33Antidilutive options and unvested
stock excluded from the
computations
    
    
    13,659
    
    
    
    9,330
    
    
    
    13,156
    
    
    
    9,198Average market price of common stock
    
    $
    7.86
    
    
    $
    18.68
    
    
    $
    10.02
    
    
    $
    19.32
  16




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
   17




---



##### Table of Contents



Executive Overview
        18




---



##### Table of Contents



Global Initiatives
   Results of Operations
  Percentage of Net Revenues
    
    Percentage of Net RevenuesThree Months Ended
    
    Six Months EndedDecember 28,
    
    December 30,
    
    December 28,
    
    December 30,2008
    
    2007
    
    2008
    
    2007Net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    39.3
    
    
    
    37.4
    
    
    
    38.3
    
    
    
    39.6Gross profit
    
    
    60.7
    
    
    
    62.6
    
    
    
    61.7
    
    
    
    60.4Operating expenses:Engineering and
development
    
    
    28.6
    
    
    
    24.1
    
    
    
    29.9
    
    
    
    25.3Selling and marketing
    
    
    12.2
    
    
    
    10.5
    
    
    
    12.6
    
    
    
    10.8General and
administrative
    
    
    8.8
    
    
    
    6.7
    
    
    
    8.6
    
    
    
    7.0Amortization of other
intangible assets
    
    
    1.7
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    2.0Total operating
expenses
    
    
    51.3
    
    
    
    43.1
    
    
    
    52.9
    
    
    
    45.1Operating income
    
    
    9.4
    
    
    
    19.5
    
    
    
    8.8
    
    
    
    15.3Nonoperating income, net:Interest income
    
    
    1.1
    
    
    
    2.6
    
    
    
    1.4
    
    
    
    2.8Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other (expense)
income, net
    
    
    (0.1
    )
    
    
    
    
    
    
    0.1
    
    
    
    Total nonoperating
income, net
    
    
    1.0
    
    
    
    2.6
    
    
    
    1.5
    
    
    
    2.8Income before income taxes
    
    
    10.4
    
    
    
    22.1
    
    
    
    10.3
    
    
    
    18.1Income tax provision
    
    
    0.7
    
    
    
    8.6
    
    
    
    2.1
    
    
    
    6.9Net income
    
    
    9.7
    %
    
    
    13.5
    %
    
    
    8.2
    %
    
    
    11.2
    %
 19




---



##### Table of Contents



Three months ended December 28, 2008, compared to three months ended December 30, 2007
 Net Revenues.
 Net Revenues by Product Line
  Net Revenues by Product LineThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of Net
    
    December 30,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeHost Server Products
    
    $
    81,063
    
    
    
    75
    %
    
    $
    94,434
    
    
    
    72
    %
    
    $
    (13,371
    )
    
    
    (14
    )%Embedded Storage Products
    
    
    27,454
    
    
    
    25
    %
    
    
    36,075
    
    
    
    28
    %
    
    
    (8,621
    )
    
    
    (24
    )%Intelligent Network
Products and Other
    
    
    144
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    31
    
    
    
    (27
    )%Total net revenues
    
    $
    108,661
    
    
    
    100
    %
    
    $
    130,622
    
    
    
    100
    %
    
    $
    (21,961
    )
    
    
    (17
    )%
     Net Revenues by Major Customers
  Net Revenues by Major CustomersDirect Revenues
    
    Total Direct and Indirect Revenues (2)Three Months
    
    Three Months
    
    Three Months
    
    Three MonthsEnded
    
    Ended
    
    Ended
    
    EndedDecember 28, 2008
    
    December 30, 2007
    
    December 28, 2008
    
    December 30, 2007Net revenue percentage (1) :OEM:EMC
    
    
    
    
    
    
    
    
    
    
    14
    %
    
    
    19
    %Hewlett-Packard
    
    
    18
    %
    
    
    15
    %
    
    
    18
    %
    
    
    15
    %IBM
    
    
    23
    %
    
    
    22
    %
    
    
    30
    %
    
    
    30
    %Other:Info X
    
    
    
    
    
    
    15
    %
    
    
    
    
    
    
    
 
 (1)
    
    Amounts less than 10% are not presented.(2)
    
    Customer-specific models purchased or marketed indirectly through distributors, resellers,
and other third parties are included with the OEMs revenues in these columns rather than as
revenue for the distributors, resellers or other third parties. 20




---



##### Table of Contents



Net Revenues by Sales Channel
  Net Revenues by Sales ChannelThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of Net
    
    December 30,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeOEM
    
    $
    87,410
    
    
    
    80
    %
    
    $
    96,314
    
    
    
    74
    %
    
    $
    (8,904
    )
    
    
    (9
    )%Distribution
    
    
    21,173
    
    
    
    20
    %
    
    
    34,111
    
    
    
    26
    %
    
    
    (12,938
    )
    
    
    (38
    )%Other
    
    
    78
    
    
    
    
    
    
    
    197
    
    
    
    
    
    
    
    (119
    )
    
    
    (60
    )%Total net revenues
    
    $
    108,661
    
    
    
    100
    %
    
    $
    130,622
    
    
    
    100
    %
    
    $
    (21,961
    )
    
    
    (17
    )%
  Net Revenues by Geographic Territory
  21




---



##### Table of Contents



Net United States and International RevenuesThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of net
    
    December 30,
    
    of net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeUnited States
    
    $
    41,499
    
    
    
    38
    %
    
    $
    52,181
    
    
    
    40
    %
    
    $
    (10,682
    )
    
    
    (20
    )%Asia Pacific
    
    
    28,084
    
    
    
    26
    %
    
    
    32,967
    
    
    
    25
    %
    
    
    (4,883
    )
    
    
    (15
    )%Europe, Middle
East, Africa and
rest of the world
    
    
    39,078
    
    
    
    36
    %
    
    
    45,474
    
    
    
    35
    %
    
    
    (6,396
    )
    
    
    (14
    )%Total net revenues
    
    $
    108,661
    
    
    
    100
    %
    
    $
    130,622
    
    
    
    100
    %
    
    $
    (21,961
    )
    
    
    (17
    )%
  Gross Profit.
 Gross ProfitThree Months Ended
    
    Percentage of
    
    Three Months Ended
    
    Percentage of
    
    Increase/
    
    PercentageDecember 28, 2008
    
    Net Revenues
    
    December 30, 2007
    
    Net Revenues
    
    (Decrease)
    
    Points Change$
    65,985
    
    
    
    61
    %
    
    $
    81,742
    
    
    
    63
    %
    
    $
    (15,757
    )
    
    
    (2
    )%
  Engineering and Development.
 Engineering and DevelopmentThree Months Ended
    
    Percentage of
    
    Three Months Ended
    
    Percentage of
    
    Increase/
    
    PercentageDecember 28, 2008
    
    Net Revenues
    
    December 30, 2007
    
    Net Revenues
    
    (Decrease)
    
    Points Change$
    31,101
    
    
    
    29
    %
    

    $
    31,477
    
    
    
    24
    %
    
    $
    (376
    )
    
    5%
 22




---



##### Table of Contents



Selling and Marketing.
 Selling and MarketingThree Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Three Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$13,270
    
    12%
    
    $13,740
    
    11%
    
    $(470)
    
    2%
  General and Administrative.
 General and AdministrativeThree Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Three Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$9,548
    
    9%
    
    $8,808
    
    7%
    
    $740
    
    2%
  Amortization of Other Intangible Assets.
 Amortization of Other Intangible AssetsThree Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Three Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$1,851
    
    2%
    
    $2,280
    
    2%
    
    $(429)
    
    
 23




---



##### Table of Contents



Nonoperating Income, net.
 Nonoperating Income, netThree Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Three Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$1,063
    
    1%
    
    $3,480
    
    3%
    
    $(2,417)
    
    (2)%
  Income Taxes
 Income TaxesThree Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Three Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$761
    
    1%
    
    $11,273
    
    9%
    
    $(10,512)
    
    (8)%
  Six months ended December 28, 2008, compared to six months ended December 30, 2007
 Net Revenues.
 Net Revenues by Product Line
  24




---



##### Table of Contents



Net Revenues by Product LineSix Months
    
    
    
    
    
    Six MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of Net
    
    December 30,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeHost Server Products
    
    $
    162,266
    
    
    
    74
    %
    
    $
    183,203
    
    
    
    74
    %
    
    $
    (20,937
    )
    
    
    (11
    )%Embedded Storage Products
    
    
    57,818
    
    
    
    26
    %
    
    
    64,071
    
    
    
    26
    %
    
    
    (6,253
    )
    
    
    (10
    )%Intelligent Network
Products and Other
    
    
    273
    
    
    
    
    
    
    
    418
    
    
    
    
    
    
    
    (145
    )
    
    
    (35
    )%Total net revenues
    
    $
    220,357
    
    
    
    100
    %
    
    $
    247,692
    
    
    
    100
    %
    
    $
    (27,335
    )
    
    
    (11
    )%
    Net Revenues by Major Customers
  Net Revenues by Major CustomersDirect Revenues
    
    Total Direct and Indirect Revenues (2)Six Months
    
    Six Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedDecember 28, 2008
    
    December 30, 2007
    
    December 28, 2008
    
    December 30, 2007Net revenue percentage (1):OEM:EMC
    
    
    
    
    
    
    
    
    
    
    14
    %
    
    
    21
    %Hewlett-Packard
    
    
    17
    %
    
    
    14
    %
    
    
    17
    %
    
    
    15
    %IBM
    
    
    22
    %
    
    
    21
    %
    
    
    30
    %
    
    
    29
    %Other:Info X
    
    
    
    
    
    
    16
    %
    
    
    
    
    
    
    
 
 (1)
    
    Amounts less than 10% are not presented.(2)
    
    Customer-specific models purchased or marketed indirectly through distributors, resellers,
and other third parties are included with the OEMs revenues in these columns rather than as
revenue for the distributors, resellers or other third parties.  25




---



##### Table of Contents



Net Revenues by Sales Channel
  Net Revenues by Sales ChannelSix Months
    
    
    
    
    
    Six MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of Net
    
    December 30,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeOEM
    
    $
    174,921
    
    
    
    79
    %
    
    $
    178,879
    
    
    
    72
    %
    
    $
    (3,958
    )
    
    
    (2
    )%Distribution
    
    
    45,291
    
    
    
    21
    %
    
    
    68,473
    
    
    
    28
    %
    
    
    (23,182
    )
    
    
    (34
    )%Other
    
    
    145
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    (195
    )
    
    
    (57
    )%Total net revenues
    
    $
    220,357
    
    
    
    100
    %
    
    $
    247,692
    
    
    
    100
    %
    
    $
    (27,335
    )
    
    
    (11
    )%
  Net Revenues by Geographic Territory
  Net United States and International RevenuesSix Months
    
    
    
    
    
    Six MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageDecember 28,
    
    of Net
    
    December 30,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2008
    
    Revenues
    
    2007
    
    Revenues
    
    (Decrease)
    
    ChangeUnited States
    
    $
    81,298
    
    
    
    37
    %
    
    $
    101,652
    
    
    
    41
    %
    
    $
    (20,354
    )
    
    
    (20
    )%Asia Pacific
    
    
    60,558
    
    
    
    27
    %
    
    
    64,311
    
    
    
    26
    %
    
    
    (3,753
    )
    
    
    (5
    )%Europe, Middle
East, Africa and
rest of the world
    
    
    78,501
    
    
    
    36
    %
    
    
    81,729
    
    
    
    33
    %
    
    
    (3,228
    )
    
    
    (4
    )%Total net revenues
    
    $
    220,357
    
    
    
    100
    %
    
    $
    247,692
    
    
    
    100
    %
    
    $
    (27,335
    )
    
    
    (11
    )%
  26




---



##### Table of Contents



Gross Profit.
 Gross ProfitSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$135,937
    
    62%
    
    $149,669
    
    60%
    
    $(13,732)
    
    1%
  Engineering and Development.
 Engineering and DevelopmentSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$65,884
    
    30%
    
    $62,764
    
    25%
    
    $3,120
    
    5%
  Selling and Marketing.
 Selling and MarketingSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$27,786
    
    13%
    
    $26,644
    
    11%
    
    $1,142
    
    2%
 27




---



##### Table of Contents



General and Administrative.
 General and AdministrativeSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$18,964
    
    9%
    
    $17,377
    
    7%
    
    $1,587
    
    2%
  Amortization of Other Intangible Assets.
 Amortization of Other Intangible AssetsSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$3,938
    
    2%
    
    $4,918
    
    2%
    
    $(980)
    
    
  Nonoperating Income, net.
 Nonoperating Income, netSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$3,234
    
    1%
    
    $6,846
    
    3%
    
    $(3,612)
    
    (1)%
  28




---



##### Table of Contents



Income Taxes
 Income TaxesSix Months Ended 
December 28, 2008
    
    Percentage of Net
Revenues
    
    Six Months Ended
December 30, 2007
    
    Percentage of Net
Revenues
    
    Increase/ (Decrease)
    
    Percentage Points
Change$4,581
    
    2%
    
    $16,997
    
    7%
    
    $(12,416)
    
    (5)%
  Critical Accounting Policies
   Revenue Recognition.
 Warranty.
 29




---



##### Table of Contents



Allowance for Doubtful Accounts
 Intangible Assets and Other Long-Lived Assets
 Inventories
 Goodwill
  Income Taxes
  30




---



##### Table of Contents



Stock-Based Compensation
 Recently Adopted Accounting Standards
  Recently Issued Accounting Standards
  Liquidity and Capital Resources
    31




---



##### Table of Contents



Payments Due by PeriodTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter(In thousands)Leases (1)
    
    $
    20,272
    
    
    $
    2,866
    
    
    $
    6,063
    
    
    $
    5,915
    
    
    $
    3,843
    
    
    $
    1,585
    
    
    
    Purchase commitments (2)
    
    
    31,325
    
    
    
    29,574
    
    
    
    1,167
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    Other commitments (3)
    
    
    7,702
    
    
    
    5,438
    
    
    
    1,254
    
    
    
    1,006
    
    
    
    4
    
    
    
    
    
    
    
    Total
    
    $
    59,299
    
    
    $
    37,878
    
    
    $
    8,484
    
    
    $
    7,505
    
    
    $
    3,847
    
    
    $
    1,585
    
    
    $
    
 
 (1)
    
    Lease payments include common area maintenance (CAM) charges.(2)
    
    Consists primarily of commitments to purchase inventory.(3)
    
    Consists primarily of commitments to purchase non-recurring engineering services but excludes
approximately $35.3 million of unrecognized tax benefits under FIN 48 for which we cannot make
a reasonably reliable estimate of the period of payment. See Note 9 to our condensed
consolidated financial statements. 32




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4. Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Litigation
  33




---



##### Table of Contents



Item 1A. Risk Factors
 Recent disruptions in world credit and equity markets has resulted in a downturn in information
technology spending in general, or spending on computer and storage systems in particular, that
will adversely affect our revenues and results of operations in the near term and possibly beyond.
  34




---



##### Table of Contents



Our markets are highly competitive and our business and results of operations may be adversely
affected by entry of new competitors into the markets, aggressive pricing, and the introduction or
expansion of competitive products and technologies.
  A significant portion of our business depends upon the continued growth of the storage networking
market, and our business will be adversely affected if such growth does not occur or occurs more
slowly than we anticipate.
  Because a significant portion of our revenues is generated from sales to a limited number of
customers, none of which are the subject of exclusive or long-term contracts, the loss of one or
more of these customers, or our customers failure to make timely payments to us, could adversely
affect our business.
  35




---



##### Table of Contents



Our operating results are difficult to forecast and could be adversely affected by many factors,
and our stock price may decline if our results fail to meet expectations.
  
    
    changes in the size, mix, timing and terms of OEM and/or other customer orders;
    
    changes in the sales and deployment cycles for our products and/or desired inventory
levels for our products;
    
    acquisitions or strategic investments by our customers, competitors or us;
    
    timing and market acceptance of new or enhanced product introductions by us, our OEM
customers and/or competitors;
    
    market share losses or difficulty in gaining incremental market share;
    
    fluctuations in product development, procurement, resource utilization and other
operating expenses;
    
    component shortages;
    
    reduced demand from our customers if there is a shortage of, or difficulties in
acquiring, components or other products, such as Fibre Channel or serial advanced
technology attachment (SATA) disk drives and optical modules, used in conjunction with our
products in the deployment of systems;
    
    inability of our electronics manufacturing service providers to produce and distribute
our products in a timely fashion;
    
    difficulties with updates, changes or additions to our information technology systems;
    
    breaches of our network security, including viruses;
    
    changes in general social and economic conditions, including but not limited to natural
disasters, terrorism, public health crises, slower than expected market growth, reduced
economic activity, delayed economic recovery, loss of consumer confidence, increased energy
costs, adverse business conditions and liquidity concerns, concerns about inflation or
deflation, recession, and reduced business profits and capital spending, with resulting
changes in customer technology budgeting and spending;
    
    changes in technology, industry standards or consumer preferences;
 36




---



##### Table of Contents




    
    seasonality;
    
    changes in our effective tax rate; and
    
    changes in our accounting or other policies resulting from the adoption of new laws,
regulations or pronouncements.
  Our relatively small backlog of unfilled orders, possible customer delays or deferrals and our
tendency to generate a large percentage of our quarterly sales near the end of the quarter
contribute to possible fluctuations in our operating results that could have an adverse impact on
our results of operations and stock price.
  Our industry is subject to rapid technological change and we must keep pace with the changes to
successfully compete.
  We have experienced losses in our history and may experience losses in our future that may
adversely affect our financial condition.
  37




---



##### Table of Contents



The migration of our customers toward newer product platforms may have a significant adverse
effect.
  The migration of our customers from purchasing our products through the distribution channel and
toward OEM server manufacturers may have a significant adverse effect.
  Any failure of our OEM customers to keep up with rapid technological change and successfully
market and sell systems that incorporate new technologies could adversely affect our business.
  Rapid changes in the evolution of technology, including the unexpected extent or timing of
the transition from HBA solutions or embedded switch box solutions to lower priced ASIC solutions,
could adversely affect our business.
  If customers elect to utilize lower end HBAs in higher-end environments or applications, our
business and financial condition could be negatively affected.
  Advancement of storage device capacity technology may not allow for additional revenue growth.
  38




---



##### Table of Contents



A decrease in the average unit selling prices and/or an increase in the manufactured cost of our
products due to inflation or other factors could adversely affect our revenue, gross margins and
financial performance.
  Delays in product development could adversely affect our business.
  
    
    difficulties in hiring and retaining necessary employees and independent contractors;
    
    difficulties in reallocating engineering resources and other resource limitations;
    
    unanticipated engineering or manufacturing complexity, including from third party
suppliers of intellectual property such as foundries of our ASICs;
    
    undetected errors or failures in our products;
    
    changing OEM product specifications;
    
    delays in the acceptance or shipment of products by OEM customers; and
    
    changing market or competitive product requirements.
  Our joint development activities may result in products that are not commercially successful or
that are not available in a timely fashion.
  39




---



##### Table of Contents



A change in our business relationships with our third party suppliers or our electronics
manufacturing service providers could adversely affect our business.
  
    
    discontinued production by a supplier;
    
    required long-term purchase commitments;
    
    undetected errors, failures or production quality issues, including projected failures
that may exceed epidemic failure rates specified in agreements with our customers or that
may require us to make concessions or accommodations for continuing customer relationships;
    
    timeliness of product delivery;
    
    sole sourcing and components made by a small number of suppliers, including the
inability to obtain components and finished goods at reasonable cost from such sources and
suppliers;
    
    financial stability and viability of our suppliers and electronics manufacturing
service (EMS) providers;
    
    changes in business strategies of our suppliers and EMS providers;
    
    increases in manufacturing costs due to lower volumes or more complex manufacturing
process than anticipated;
    
    disruption in shipping channels;
    
    natural disasters;
    
    inability or unwillingness of our suppliers or EMS providers to continue their business
with us;
    
    environmental, tax or legislative changes in the location where our products are
produced or delivered;
    
    difficulties associated with international operations; and
    
    market shortages.
   40




---



##### Table of Contents



If our intellectual property protections are inadequate, it could adversely affect our business.
    Third party claims of intellectual property infringement could adversely affect our business.
   41




---



##### Table of Contents



The inability or increased cost of attracting, motivating, or retaining key managerial and
technical personnel could adversely affect our business.
  Our international business activities subject us to risks that could adversely affect our
business.
  
    
    imposition of or changes in governmental controls, taxes, tariffs, trade restrictions,
and regulatory requirements to our current or future operations;
    
    costs and risks of localizing products for international countries;
    
    longer accounts receivable payment cycles;
    
    changes in the value of local currencies relative to our functional currency;
    
    fluctuations in freight costs and potential disruptions in the transportation
infrastructure for our products and components;
    
    import and export restrictions;
    
    loss of tax benefits or increases in tax expenses;
    
    general economic and social conditions within international countries;
    
    taxation in multiple jurisdictions;
 42




---



##### Table of Contents




    
    difficulty maintaining management oversight and control of remote locations;
    
    potential restrictions on transferring funds between countries and difficulties
associated with repatriating cash generated or held outside of the U.S. in a tax-efficient
manner;
    
    the increased travel, infrastructure, accounting, and legal compliance costs associated
with multiple international locations; and
    
    political instability, war, or terrorism.
  Potential acquisitions or strategic investments may be more costly or less profitable than
anticipated and may adversely affect the price of our common stock.
  
    
    difficulties in the assimilation of the operations, technologies, products, and
personnel of the acquired company;
    
    purchased technology that is not adopted by customers in the way or the time frame we
anticipated;
    
    diversion of managements attention from other business concerns;
    
    risks of entering markets in which we have limited or no prior experience;
    
    risks associated with assuming the legal obligations of the acquired company;
    
    minority interest in a company, resulting from a strategic investment, that could have
an impact on our results;
    
    risks related to the effect that the acquired companys internal control processes
might have on our financial reporting and managements report on our internal controls over
financial reporting;
    
    potential loss of key employees of the company we invested in or acquired;
    
    risks related to companies we invest in not being able to secure additional funding,
obtain favorable investment terms for future financings, or to take advantage of liquidity
events such as initial public offerings, mergers, and private sales;
    
    there may exist unknown defects of an acquired companys products or assets that may
not be identified due to the inherent limitations involved in the due diligence process of
an acquisition; and
    
    changes in generally accepted accounting principles regarding the accounting treatment
for acquisitions to less favorable treatment than is currently allowed.
 43




---



##### Table of Contents



Our stock price is volatile, which has and may result in lawsuits against us and our officers and
directors.
  
    
    quarterly variations in customer demand and operating results;
    
    announcements of new products by us or our competitors;
    
    the gain or loss of significant customers or design wins;
    
    changes in analysts earnings estimates;
    
    changes in analyst recommendations, price targets, or other parameters that may not be
related to earnings estimates;
    
    rumors or dissemination of false information;
    
    pricing pressures;
    
    short selling of our common stock;
    
    general conditions in the computer, storage, or communications markets; and
    
    events affecting other companies that investors deem to be comparable to us.
  Terrorist activities and resulting military and other actions could adversely affect our business.
  44




---



##### Table of Contents



Our corporate offices and principal product development facilities are located in regions that are
subject to earthquakes and other natural disasters.
   Our shareholder rights plan, certificate of incorporation and Delaware law could adversely affect
the performance of our stock.
  Our system of internal controls may be inadequate.
  Changes in laws, regulations, and financial accounting standards may affect our reported results
of operations.
  The final determination of our income tax liability may be materially different from our income
tax provisions and accruals.
  45




---



##### Table of Contents



We may need additional capital in the future and such additional financing may not be available on
favorable terms.
  
    
    take advantage of unanticipated opportunities, including more rapid international
expansion or acquisitions of complementary businesses or technologies;
    
    develop new products or services;
    
    repay outstanding indebtedness; and
    
    respond to unanticipated competitive pressures.
  Global warming issues may cause us to alter the way we conduct our business.
  46




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    Issuer Purchases of Equity Securities
 Total Number of
    
    Approximate DollarShares Purchased as
    
    Value of SharesTotal Number
    
    Average
    
    Part of Publicly
    
    that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans
    
    Purchased under thePeriod
    
    Purchased
    
    per Share
    
    Or Programs
    
    Plans or ProgramsSeptember 29, 2008  October 26, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000,000October 27, 2008  November 23, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000,000November 24, 2008  December 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000,000Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000,000
 
 Item 4. Submission of Matters to a Vote of Security Holders
  Nominee
    
    In Favor
    
    WithheldFred B. Cox
    
    
    70,544,561
    
    
    
    3,616,353Michael P. Downey
    
    
    70,700,694
    
    
    
    3,460,220Bruce C. Edwards
    
    
    69,868,381
    
    
    
    4,292,533Paul F. Folino
    
    
    70,536,210
    
    
    
    3,624,704Robert H. Goon
    
    
    70,680,184
    
    
    
    3,480,730Don M. Lyle
    
    
    69,004,592
    
    
    
    5,156,322James M. McCluney
    
    
    70,687,405
    
    
    
    3,473,509Dean A. Yoost
    
    
    71,565,098
    
    
    
    2,595,816
  For
    
    
    56,306,366Against
    
    
    8,060,668Abstain
    
    
    54,615Broker non-votes
    
    
    9,739,265
 47




---



##### Table of Contents



For
    
    
    23,815,999Against
    
    
    40,547,842Abstain
    
    
    57,808Broker non-votes
    
    
    9,739,265
  For
    
    
    58,407,944Against
    
    
    5,929,606Abstain
    
    
    84,099Broker non-votes
    
    
    9,739,265
  For
    
    
    62,607,990Against
    
    
    1,753,489Abstain
    
    
    60,170Broker non-votes
    
    
    9,739,265
  For
    
    
    72,919,891Against
    
    
    1,121,936Abstain
    
    
    119,087Broker non-votes
    
    
    
 48




---



##### Table of Contents



Item 6. Exhibits
 Exhibit 3.1
    
    Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Companys 1997 Annual Report
on Form 10-K).Exhibit 3.2
    
    Certificate of Amendment of Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.4 to the
Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2000).Exhibit 3.3
    
    Amended and restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 to the Companys Current Report on
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009).Exhibit 3.4
    
    Amended and Restated Certificate of Designations, Preferences
and Rights of Series A Junior Participating Preferred Stock of
Emulex Corporation, incorporated by reference to Exhibit 3.1
to the Companys Form 8-K filed with the Securities and
Exchange Commission on January 16, 2009.Exhibit 4.1
    
    Rights Agreement, dated as of January 15, 2009, with Mellon
Investor Services LLC, as rights agent, which includes as
Exhibit B the Form of Rights Certificate, incorporated by
reference to Exhibit 4.1 to the Companys Form 8-K filed with
the Securities and Exchange Commission on January 16, 2009.10.1
    
    Emulex Corporation 2005 Equity Incentive Plan, as amended
(incorporated by reference to Appendix A to Emulex
Corporations proxy statement on Schedule 14A for the 2008
annual meeting of its stockholders filed with the Securities
and Exchange Commission on October 14, 2008).10.2
    
    Emulex Corporation Employee Stock Purchase Plan, as amended
(incorporated by reference to Appendix B to Emulex
Corporations proxy statement on Schedule 14A for the 2008
annual meeting of its stockholders filed with the Securities
and Exchange Commission on October 14, 2008).10.3
    
    Form of Notice of Grant of Restricted Stock Unit under the
Amended and Restated 2005 Equity Incentive Plan.10.4
    
    Form of Restricted Stock Unit Award Agreement under the
Amended and Restated 2005 Equity Incentive Plan.10.5
    
    Form of Appendix to the Restricted Stock Award Agreement,
Restricted Stock Unit Award Agreement, and Nonqualified Stock
Options Agreement for Change in Control Retention Plan
Participants or Employees Covered by a Key Employee Retention
Agreement under the Amended and Restated 2005 Equity Incentive
Plan.10.6
    
    Form of Restricted Stock Unit Award Agreement for Non-U.S.
Grantees under the Amended and Restated 2005 Equity Incentive
Plan.10.7
    
    Form of Appendix to Restricted Stock Unit Award Agreement for
Non-U.S. Grantees under the Amended and Restated 2005 Equity
Incentive Plan.Exhibit 31A
    
    Certification of the Principal Executive Officer Pursuant to
17 CFR 240.13a-14(a), as Adopted Pursuant to § 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 31B
    
    Certification of the Principal Financial Officer Pursuant to
17 CFR 240.13a-14(a), as Adopted Pursuant to § 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 32
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
 49




---



##### Table of Contents



SIGNATURES
   EMULEX CORPORATIONBy:
    /s/ James M. McCluneyJames M. McCluneyChief Executive Officer and PresidentBy:
    /s/ Michael J. RockenbachMichael J. RockenbachExecutive Vice President and Chief Financial Officer
(Principal Financial and Chief Accounting Officer) 50




---



##### Table of Contents



Exhibit 3.1
    
    Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Companys 1997 Annual Report
on Form 10-K).Exhibit 3.2
    
    Certificate of Amendment of Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.4 to the
Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2000).Exhibit 3.3
    
    Amended and restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 to the Companys Current Report on
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009).Exhibit 3.4
    
    Amended and Restated Certificate of Designations, Preferences
and Rights of Series A Junior Participating Preferred Stock of
Emulex Corporation, incorporated by reference to Exhibit 3.1
to the Companys Form 8-K filed with the Securities and
Exchange Commission on January 16, 2009.Exhibit 4.1
    
    Rights Agreement, dated as of January 15, 2009, with Mellon
Investor Services LLC, as rights agent, which includes as
Exhibit B the Form of Rights Certificate, incorporated by
reference to Exhibit 4.1 to the Companys Form 8-K filed with
the Securities and Exchange Commission on January 16, 2009.Exhibit 10.1
    
    Emulex Corporation 2005 Equity Incentive Plan, as amended
(incorporated by reference to Appendix A to Emulex
Corporations proxy statement on Schedule 14A for the 2008
annual meeting of its stockholders filed with the Securities
and Exchange Commission on October 14, 2008).Exhibit 10.2
    
    Emulex Corporation Employee Stock Purchase Plan, as amended
(incorporated by reference to Appendix B to Emulex
Corporations proxy statement on Schedule 14A for the 2008
annual meeting of its stockholders filed with the Securities
and Exchange Commission on October 14, 2008).Exhibit 10.3
    
    Form of Notice of Grant of Restricted Stock Unit under the
Amended and Restated 2005 Equity Incentive Plan.Exhibit 10.4
    
    Form of Restricted Stock Unit Award Agreement under the
Amended and Restated 2005 Equity Incentive Plan.Exhibit 10.5
    
    Form of Appendix to the Restricted Stock Award Agreement,
Restricted Stock Unit Award Agreement, and Nonqualified Stock
Options Agreement for Change in Control Retention Plan
Participants or  Employees Covered by a Key Employee
Retention Agreement under the Amended and Restated 2005
Equity Incentive Plan.Exhibit 10.6
    
    Form of Restricted Stock Unit Award Agreement for Non-U.S.
Grantees under the Amended and Restated 2005 Equity Incentive
Plan.Exhibit 10.7
    
    Form of Appendix to Restricted Stock Unit Award Agreement for
Non-U.S. Grantees under the Amended and Restated 2005 Equity
Incentive Plan.Exhibit 31A
    
    Certification of the Principal Executive Officer Pursuant to
17 CFR 240.13a-14(a), as Adopted Pursuant to § 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 31B
    
    Certification of the Principal Financial Officer Pursuant to
17 CFR 240.13a-14(a), as Adopted Pursuant to § 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 32
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.
 51