##### 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 October 1, 2006
 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 Street 
Costa Mesa, California(Address of principal executive offices)
    
    92626(Zip Code)
 (714) 662-5600  Registrants telephone number, including area code
 
 þ o
  þ o o
 o þ




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PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets
October 1, 2006, and July 2, 2006
    
    
    2Condensed Consolidated Statements of Income
Three months ended October 1, 2006, and October 2, 2005
    
    
    3Condensed Consolidated Statements of Cash Flows
Three months ended October 1, 2006, and October 2, 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    22Item 6.Exhibits
    
    
    34Signatures
    
    
    36EXHIBIT 10.3EXHIBIT 31.AEXHIBIT 31.BEXHIBIT 32
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
   October 1,
    
    
    July 2,2006
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    305,638
    
    
    $
    224,292Investments
    
    
    330,836
    
    
    
    367,054Accounts and other receivables, net of allowance for doubtful
accounts of $1,908 as of October 1, 2006 and July 2, 2006
    
    
    56,235
    
    
    
    61,362Inventories, net
    
    
    21,332
    
    
    
    22,414Prepaid expenses and other assets
    
    
    5,115
    
    
    
    4,618Deferred income taxes
    
    
    21,826
    
    
    
    27,814Total current assets
    
    
    740,982
    
    
    
    707,554Property and equipment, net
    
    
    66,513
    
    
    
    66,951Investments
    
    
    12,073
    
    
    
    7,103Intangible assets, net
    
    
    70,506
    
    
    
    77,765Deferred income taxes
    
    
    8,509
    
    
    
    352Other assets
    
    
    718
    
    
    
    432Total assets
    
    $
    899,301
    
    
    $
    860,157Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    22,599
    
    
    $
    17,847Accrued liabilities
    
    
    24,717
    
    
    
    21,910Income taxes payable
    
    
    33,573
    
    
    
    27,630Convertible subordinated notes
    
    
    235,626
    
    
    
    235,177Total current liabilities
    
    
    316,515
    
    
    
    302,564Other liabilities
    
    
    630
    
    
    
    680Total liabilities
    
    
    317,145
    
    
    
    303,244Commitments and contingencies (notes 7 and 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;
84,751,763 and 84,455,809 issued and outstanding at
October 1, 2006 and July 2, 2006, respectively
    
    
    8,475
    
    
    
    8,446Additional paid-in capital
    
    
    990,145
    
    
    
    979,893Accumulated deficit
    
    
    (416,454
    )
    
    
    (431,416
    )Accumulated other comprehensive loss
    
    
    (10
    )
    
    
    (10
    )Total stockholders equity
    
    
    582,156
    
    
    
    556,913Total liabilities and stockholders equity
    
    $
    899,301
    
    
    $
    860,157
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Three Months EndedOctober 1,
    
    
    October 2,2006
    
    
    2005Net revenues
    
    $
    102,318
    
    
    $
    104,379Cost of sales
    
    
    41,119
    
    
    
    41,802Gross profit
    
    
    61,199
    
    
    
    62,577Operating expenses:Engineering and development
    
    
    25,311
    
    
    
    21,855Selling and marketing
    
    
    10,192
    
    
    
    7,957General and administrative
    
    
    6,160
    
    
    
    5,944Amortization of other intangible assets
    
    
    2,853
    
    
    
    2,731In-process research and development
    
    
    (950
    )
    
    
    Total operating expenses
    
    
    43,566
    
    
    
    38,487Operating income
    
    
    17,633
    
    
    
    24,090Nonoperating income, net:Interest income
    
    
    7,438
    
    
    
    3,746Interest expense
    
    
    (624
    )
    
    
    (624
    )Other income (expense), net
    
    
    813
    
    
    
    (2
    )Total nonoperating income, net
    
    
    7,627
    
    
    
    3,120Income before income taxes
    
    
    25,260
    
    
    
    27,210Income tax provision
    
    
    10,298
    
    
    
    10,774Net income
    
    $
    14,962
    
    
    $
    16,436Net income per share:Basic
    
    $
    0.18
    
    
    $
    0.20Diluted
    
    $
    0.17
    
    
    $
    0.19Number of shares used in per share computations:Basic
    
    
    84,508
    
    
    
    83,398Diluted
    
    
    91,410
    
    
    
    90,825
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Three Months EndedOctober 1,
    
    
    October 2,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    14,962
    
    
    $
    16,436Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization of property and equipment
    
    
    4,268
    
    
    
    4,130Amortization of discount on convertible subordinated notes
    
    
    449
    
    
    
    449Share-based compensation expense
    
    
    6,001
    
    
    
    6,187Amortization of other intangible assets
    
    
    6,743
    
    
    
    6,384In-process research and development
    
    
    (950
    )
    
    
    Loss on disposal of property and equipment
    
    
    7
    
    
    
    15Deferred income taxes
    
    
    (676
    )
    
    
    8,372Excess tax benefit from share-based compensation
    
    
    (30
    )
    
    
    (1,354
    )Changes in assets and liabilities:Accounts and other receivables
    
    
    5,127
    
    
    
    (14,220
    )Inventories
    
    
    1,068
    
    
    
    13,630Prepaid expenses and other assets
    
    
    209
    
    
    
    (479
    )Accounts payable, accrued liabilities, and other liabilities
    
    
    5,780
    
    
    
    (11,157
    )Income taxes payable
    
    
    5,943
    
    
    
    (5,536
    )Net cash provided by operating activities
    
    
    48,901
    
    
    
    22,857Cash flows from investing activities:Net proceeds from sale of property and equipment
    
    
    3
    
    
    
    Additions to property and equipment
    
    
    (2,155
    )
    
    
    (2,587
    )Purchases of investments
    
    
    (347,963
    )
    
    
    (529,887
    )Maturities of investments
    
    
    384,186
    
    
    
    457,981Investment in privately held company
    
    
    (4,975
    )
    
    
    Direct costs capitalized in prepaid expenses and other assets related
to pending Sierra Logic, Inc. acquisition
    
    
    (990
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    28,106
    
    
    
    (74,493
    )Cash flows from financing activities:Proceeds from issuance of common stock under stock plans
    
    
    4,309
    
    
    
    5,433Excess tax benefits from share-based compensation expense
    
    
    30
    
    
    
    1,354Net cash provided by financing activities
    
    
    4,339
    
    
    
    6,787Net increase (decrease) in cash and cash equivalents
    
    
    81,346
    
    
    
    (44,849
    )Cash and cash equivalents at beginning of period
    
    
    224,292
    
    
    
    120,317Cash and cash equivalents at end of period
    
    $
    305,638
    
    
    $
    75,468Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    1
    
    
    $
    1Income taxes
    
    
    5,085
    
    
    
    6,845Non-cash investing and financing activities:Purchases of property and equipment not paid during the period included in the accounts payable balance on the
Companys condensed consolidated balance sheet
    
    
    1,729
    
    
    
    
  
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1.
    
    Basis of PresentationIn the opinion of management of Emulex Corporation (Emulex or the Company), the accompanying
unaudited condensed consolidated financial statements contain all adjustments (which are normal
recurring accruals) necessary to present fairly the Companys consolidated financial position as
of October 1, 2006 and July 2, 2006, and its condensed consolidated statements of income and cash
flows for the three months ended October 1, 2006 and October 2, 2005. Interim results for the
three months ended October 1, 2006, are not necessarily indicative of the results that may be
expected for the year ending July 1, 2007. The accompanying condensed consolidated interim
financial statements should be read in conjunction with the Companys Annual Report on Form 10-K
for the fiscal year ended July 2, 2006. Certain reclassifications have been made to prior period
amounts to conform to the current period presentation.Recently Issued Accounting StandardsIn June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income Taxes. FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. FIN
No. 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. It
also provides guidance on de-recognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning
after December 15, 2006. The Company is in the process of studying the potential financial
statement impact from the adoption of FIN No. 48.In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the
Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial
Statements, which provides interpretive guidance on the consideration of the effects of prior
year misstatements in quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 is effective for companies with fiscal years ending after November 15, 2006.
The Company does not believe the adoption of SAB No. 108 will have a significant impact on its
consolidated financial statements.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement
defines fair value, establishes a framework for measuring fair value and expands disclosure of
fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require
or permit fair value measurements and accordingly, does not require any new fair value
measurements. SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The Company is in the process of studying the potential
financial statement impact from the adoption of SFAS No. 157.2.
    
    Business CombinationOn May 1, 2006, the Company acquired 100% of Aarohi Communications, Inc. (Aarohi), a supplier of
intelligent data center networking products with principal product development facilities located
in San Jose, California and Bangalore, India. The Company accounted for the acquisition of
Aarohi under the purchase method of accounting in accordance with SFAS No. 141, Business
Combinations, and recorded approximately $17.3 million of purchased in-process research and
development expense (IPR&D) during fiscal 2006. The Company has allocated the purchase price to
the assets acquired and liabilities assumed at estimated fair values. This allocation is subject
to further revision as the valuation of property and equipment, identifiable intangible assets,
and deferred taxes are based on preliminary information and the final pre-acquisition tax returns
are not yet complete. During the three months ended October 1, 2006, an allocation adjustment
was made to deferred taxes, which resulted in a decrease of acquired intangible assets, including
IPR&D of approximately $1.0 million.
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3.
    
    Inventories, netInventories, net are summarized as follows:
 October 1,
    
    July 2,2006
    
    2006(in thousands)Raw materials
    
    $
    3,284
    
    
    $
    5,038Finished goods
    
    
    18,048
    
    
    
    17,376$
    21,332
    
    
    $
    22,414
 4.
    
    Intangible assets, netIntangible assets, net, are as follows:
 October 1,
    
    July 2,2006
    
    2006(in thousands)Intangible assets subject to amortization:Core technology and patents
    
    $
    98,409
    
    
    $
    99,070Accumulated amortization, core technology and patents
    
    
    (56,912
    )
    
    
    (53,440
    )Developed technology
    
    
    14,108
    
    
    
    14,405Accumulated amortization, developed technology
    
    
    (7,034
    )
    
    
    (6,223
    )Customer relationships
    
    
    40,116
    
    
    
    40,264Accumulated amortization, customer relationships
    
    
    (21,747
    )
    
    
    (19,828
    )Tradename
    
    
    4,939
    
    
    
    4,941Accumulated amortization, tradename
    
    
    (2,029
    )
    
    
    (1,856
    )Covenants not-to-compete
    
    
    3,656
    
    
    
    3,064Accumulated amortization, covenants not-to-compete
    
    
    (3,000
    )
    
    
    (2,632
    )$
    70,506
    
    
    $
    77,765
  2007 (remaining 9 months)
    
    $
    19,6212008
    
    $
    22,3712009
    
    $
    13,1132010
    
    $
    9,7632011
    
    $
    5,018
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5.
    
    Accrued LiabilitiesComponents of accrued liabilities are as follows:
 October 1,
    
    July 2,2006
    
    2006(in thousands)Payroll and related costs
    
    $
    10,752
    
    
    $
    8,546Warranty reserves
    
    
    3,379
    
    
    
    2,949Deferred revenue, sales returns and allowances
    
    
    4,801
    
    
    
    4,478Accrued advertising and promotions
    
    
    1,462
    
    
    
    1,463Accrued property, sales, franchise and related taxes
    
    
    1,557
    
    
    
    1,336Other
    
    
    2,766
    
    
    
    3,138$
    24,717
    
    
    $
    21,910
   Three Months EndedOctober 1,
    
    October 2,2006
    
    2005(in thousands)Balance at beginning of period
    
    $
    2,949
    
    
    $
    4,085Additions to costs and expenses
    
    
    1,260
    
    
    
    699Amounts charged against reserve
    
    
    (830
    )
    
    
    (1,178
    )Balance at end of period
    
    $
    3,379
    
    
    $
    3,606
 6.
    
    Convertible Subordinated NotesIn fiscal 2004, the Company completed a $517.5 million private placement of 0.25% contingently
convertible subordinated notes due 2023. Interest is payable in cash on June 15th and December
15th of each year beginning June 15, 2004. Under the terms of the offering, the notes will be
convertible into shares of Emulex common stock at a price of $43.20 per share at the option of
the holder upon the occurrence of any of the following:
 
    
    prior to December 15, 2021, on any date during any fiscal quarter (and only during
such fiscal quarter) after the fiscal quarter ending December 31, 2003, if the closing
sale price of the Companys common stock was more than 120% of the then current
conversion price for at least 20 trading days in the period of the 30 consecutive
trading days ending on the last day of the previous fiscal quarter;
    
    on or after December 15, 2021, at all times on or after any date on which the closing
sale price of the Companys common stock is more than 120% of the then current
conversion price of the notes;
    
    if the Company elects to redeem the notes on or after December 20, 2008;
    
    upon the occurrence of specified corporate transactions or significant distributions to holders of the Companys common stock; or
    
    subject to specified exceptions, for the 10 business day period after any five
consecutive trading day period in which the average trading prices for the notes for
such five trading day period was less than 98% of the average conversion value of the
notes during that period.
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The notes will mature in 20 years and will not be callable for the first five years. Holders of
the notes may require the Company to purchase the notes for cash by giving written notice
within the 20 business days prior to each of December 15, 2006, December 15, 2008, December 15,
2013, or December 15, 2018 or upon a change in control. The Company incurred total associated
bankers fees of approximately $11.6 million, which were recorded as a reduction to the
proceeds from the issuance of the notes and are being accreted over the effective life of the
notes, as well as approximately $0.7 million of other associated debt issuance costs, which
have been included in other assets and are also being amortized over the effective life of the
notes. The effective life of the Companys 0.25% contingent convertible subordinated notes due
2023 is three years, which is the period from the note issuance date up to the first date that
the holders can require the Company to repurchase the notes.As previously authorized by the Board of Directors, during fiscal 2005, the Company repurchased
approximately $281.5 million of its 0.25% convertible subordinated notes at a discount to face
value, spending approximately $256.5 million. The resulting net pre-tax gain of approximately
$20.8 million from the repurchase of these 0.25% convertible subordinated notes was recorded in
fiscal 2005. The repurchased notes were cancelled, leaving 0.25% convertible subordinated notes
outstanding with a face value of approximately $236.0 million that, if converted, would result
in the issuance of approximately 5.5 million shares. As of October 1, 2006, none of the
Companys 0.25% contingent convertible notes were authorized for repurchase. However, as
discussed above, the holders may require repurchase by giving written notice within 20 business
days prior to December 15, 2006.7.
    
    Commitments and ContingenciesLitigationOn November 15, 2001, prior to the Companys acquisition of Vixel Corporation, a securities
class action was filed in the United States District Court in the Southern District of New York
as Case No. 01 CIV. 10053 (SAS), Master File No. 21 MC92 (SAS) against Vixel and two of its
officers and directors (one of which is James M. McCluney, the Companys current Chief
Executive Officer and President) and certain underwriters who participated in the Vixel initial
public offering in late 1999. The amended complaint alleges violations under Section 10(b) of
the Exchange Act and Section 11 of the Securities Act and seeks unspecified damages on behalf
of persons who purchased Vixel stock during the period October 1, 1999 through December 6,
2000. In October 2002, the parties agreed to toll the statute of limitations with respect to
Vixels officers and directors until September 30, 2003, and on the basis of this agreement,
Vixels officers and directors were dismissed from the lawsuit without prejudice. During June
2003, Vixel and the other issuer defendants in the action reached a tentative settlement with
the plaintiffs that would, among other things, result in the dismissal with prejudice of all
claims against the defendants and their officers and directors. In connection with the possible
settlement, those officers and directors who had entered tolling agreements with the plaintiffs
agreed to extend those agreements so that they would not expire prior to any settlement being
finalized. Although Vixel approved this settlement proposal in principle, it remains subject to
a number of procedural conditions, as well as formal approval by the court. On August 31, 2005,
a Preliminary Order In Connection With Settlement Proceedings was issued by the court which
among other items, set a date for a Settlement Fairness Hearing held on April 24, 2006, and the
form of notice to the Settlement Classes of the Issuers Settlement Stipulation. In December
2005, the settlement notices authorized by the court were sent to former Vixel stockholders and
the web site www.iposecuritieslitigation.com was created for claimants, as well as a March 24,
2006 objection deadline.At the Settlement Fairness Hearing held on April 24, 2006, the court raised the following
primary issues: (1) the (possible) change in value of the settlement since preliminary
approval, and whether the benefits of the settlement should be evaluated at the time of
approval or at the time of negotiation; (2) how the class certification argument before the
Second Circuit Court of Appeals could or would affect the fairness of the settlement; (3) how
to evaluate the intangible benefits of the settlement to the class members; and (4) how to
value the $1 billion guarantee (for the consolidated litigation involving Vixel and 297 other
Issuers) by insurers in the stipulation and agreement of settlement in light of the
underwriters potential future settlements. The Court did not rule on April 24, 2006 on the
motion for final approval or objections. On June 6, 2006, the Second Circuit Court of Appeals
held oral arguments on the appeal by the Underwriters of Judge Scheindlins
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class certification
decision. On or about July 17, 2006, Emulex assigned to the class action plaintiffs any IPO
claims Emulex (Vixel) has against RBC Dain Rauscher in the IPO litigation, as required by the
settlement
agreement. The Company believes the final resolution of this litigation will not have a
material adverse effect on the Companys consolidated financial position, results of operations
or liquidity.Ongoing lawsuits present inherent risks, any of which could have a material adverse effect on
the Companys business, financial condition or results of operations. Such potential risks
include the continuing expenses of litigation, counterclaims and attorneys fee liability.Additionally, the Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Companys consolidated financial
position, results of operations or liquidity.Other Commitments and ContingenciesThe Company has entered into various agreements for purchases of inventory. As of October 1,
2006, the Companys purchase obligation associated with inventory was approximately $30.6
million.In addition, the Company provides limited indemnification in selected circumstances within its
various customer contracts whereby the Company indemnifies the parties to whom it sells its
products with respect to the Companys product infringement of certain intellectual property,
and in some limited cases against bodily injury or damage to real or tangible personal property
caused by a defective Company product. As of October 1, 2006, there are no known unresolved
claims for indemnification related liability against the Company.8.
    
    Stock-Based CompensationSFAS No. 123R, Share-Based Payment (SFAS No. 123R), requires that the compensation cost
related to share-based payment transactions, measured based on the fair value of the equity or
liability instruments issued, be recognized in the financial statements. We adopted SFAS No.
123R last fiscal year. Determining the fair value of options using the Black-Scholes model
requires subjective assumptions, including future stock price volatility and expected time until
exercise, which greatly affect the calculated fair value on the grant date.At October 1, 2006, the Company had six stock-based payment plans for employees and Directors.
Available for future grant awards are 910,420 shares under the Employee Stock Purchase Plan,
2,481,875 shares under the Employee Stock Option and Equity Incentive Plans, 175,000 shares
under the 1997 Stock Award Plan for Non-Employee Directors (the Director Plan), and 198,051
under the Aarohi 2001 Stock Option Plan (Aarohi Plan). Amounts recognized in the condensed
consolidated financial statements with respect to these plans are as follows:
 Three Months Ended
    
    Three Months EndedOctober 1,
    
    October 2,2006
    
    2005(in thousands)
    
    (in thousands)Total cost of stock-based payment plans during the period
    
    $
    5,987
    
    
    $
    4,987Amounts capitalized in inventory during the period
    
    
    (121
    )
    
    
    (154
    )Amounts recognized in income for amounts previously capitalized in inventory
    
    
    135
    
    
    
    Amounts charged against income, before income tax benefit
    
    $
    6,001
    
    
    $
    4,833Amount of related income tax benefit recognized in income
    
    $
    993
    
    
    $
    1,001
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All Other Plans
    
    Purchase PlanExpected volatility
    
    
    35% - 38
    %
    
    
    31
    %Weighted average expected volatility
    
    
    36
    %
    
    
    31
    %Expected dividends
    
    
    
    
    
    
    Expected term (in years)
    
    
    1.4  4.4
    
    
    
    0.5Weighted average expected term (in years)
    
    
    3.11
    
    
    
    0.50Risk-free rate
    
    
    4.58% - 4.67
    %
    
    
    5.01
    %
  WeightedAverage
    
    AggregateWeighted
    
    Remaining
    
    IntrinsicAverage
    
    Contractual
    
    ValueOptions
    
    Exercise Price
    
    Term (years)
    
    (in millions)Balance, July 2, 2006
    
    
    14,612,882
    
    
    $
    22.06Granted
    
    
    223,677
    
    
    
    16.21Exercised
    
    
    185,042
    
    
    
    14.67Canceled
    
    
    594,947
    
    
    
    51.48Forfeited
    
    
    68,365
    
    
    
    16.26Balance, October 1, 2006
    
    
    13,988,205
    
    
    $
    20.85
    
    
    
    5.55
    
    
    $
    36.5Exercisable, October 1, 2006
    
    
    9,910,728
    
    
    $
    22.10
    
    
    
    5.14
    
    
    $
    27.2
 As of October 1, 2006, there was approximately $24.6 million of total unrecognized compensation
cost related to nonvested share-based compensation arrangements granted under the plans. That
cost is expected to be recognized over a weighted-average period of one year. The weighted
average fair value of option awards granted during the three months ended October 1, 2006 was
$4.90.The total intrinsic value of stock options exercised was approximately $0.5 million during the
three months ended October 1, 2006.Cash received from share option exercises under stock-based payments plans for the three months
ended October 1, 2006 was approximately $4.3 million. The actual tax benefit realized for the
tax deductions from option exercise of stock-based payment plans totaled approximately $0.2
million for the three months ended October 1, 2006.As of October 1, 2006, the amount of shares authorized under the Plan, the 2004 Plan, the
Directors Plan and the Purchase Plan are sufficient to cover future stock option exercises. As
of October 1, 2006, there are no stock repurchase programs authorized by the Board of
Directors.9.
    
    Net Income per ShareBasic net income per share for the three months ended October 1, 2006 and October 2, 2005, was
computed by dividing net income by the weighted average number of common shares outstanding
during the period.
 10




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##### Table of Contents



Three Months EndedOctober 1,
    
    October 2,2006
    
    2005(in thousands except per share data)Numerator:Net income
    
    $
    14,962
    
    
    $
    16,436Adjustment for interest expense on convertible subordinated notes, net of tax
    
    
    369
    
    
    
    376Numerator for diluted net income per share
    
    $
    15,331
    
    
    $
    16,812Denominator:Denominator
for basic net income per share weighted average
shares outstanding
    
    
    84,508
    
    
    
    83,398Effect of dilutive securities:Dilutive options outstanding
    
    
    1,439
    
    
    
    1,964Dilutive common shares from assumed conversion of convertible
subordinated notes
    
    
    5,463
    
    
    
    5,463Denominator
for diluted net income per share  adjusted weighted average shares outstanding
    
    
    91,410
    
    
    
    90,825Basic net income per share
    
    $
    0.18
    
    
    $
    0.20Diluted net income per share
    
    $
    0.17
    
    
    $
    0.19Antidilutive options excluded from the computations
    
    
    10,299
    
    
    
    8,486Average market price of common stock
    
    $
    16.17
    
    
    $
    19.88
 The antidilutive options were excluded from the computation of diluted net income per share
because the options exercise price was greater than the average market price of the common
shares during the three months ended October 1, 2006 and October 2, 2005.10.
    
    Subsequent EventOn October 2, 2006, the Company completed its acquisition of Sierra Logic, Inc. (Sierra Logic),
a privately held designer of semiconductors for storage networking equipment located in
Roseville, California, for up to approximately $180.0 million in cash, assumed debt, assumed
stock options, and employee equity incentive compensation. The acquisition solidifies the
Companys embedded multiprotocol strategy in the end-to-end embedded storage components market.
 11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
   12




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Executive Overview
    www.emulex.com
 13




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##### Table of Contents



Results of Operations
  Percentage of Net RevenuesThree months endedOctober 1,
    
    October 2,2006
    
    2005Net revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    40.2
    
    
    
    40.0Gross profit
    
    
    59.8
    
    
    
    60.0Operating expenses:Engineering and development
    
    
    24.7
    
    
    
    21.0Selling and marketing
    
    
    10.0
    
    
    
    7.6General and administrative
    
    
    6.0
    
    
    
    5.7Amortization of other intangible assets
    
    
    2.8
    
    
    
    2.6In-process research and development
    
    
    (0.9
    )
    
    
    Total operating expenses
    
    
    42.6
    
    
    
    36.9Operating income
    
    
    17.2
    
    
    
    23.1Nonoperating income, net:Interest income
    
    
    7.3
    
    
    
    3.6Interest expense
    
    
    (0.6
    )
    
    
    (0.6
    )Other income (expense), net
    
    
    0.8
    
    
    
    Total nonoperating income, net
    
    
    7.5
    
    
    
    3.0Income before income taxes
    
    
    24.7
    
    
    
    26.1Income tax provision
    
    
    10.1
    
    
    
    10.4Net income
    
    
    14.6
    %
    
    
    15.7
    %
 Three months ended October 1, 2006, compared to three months ended October 2, 2005
 Net Revenues.
  Net Revenues by Product LineThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageOctober 1,
    
    of Net
    
    October 2,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2006
    
    Revenues
    
    2005
    
    Revenues
    
    (Decrease)
    
    ChangeFibre Channel
    
    $
    101,734
    
    
    
    99
    %
    
    $
    104,349
    
    
    
    100%
    
    
    ($
    2,615
    )
    
    
    (3
    %)IP networking
    
    
    584
    
    
    
    1
    %
    
    
    28
    
    
    
    
    
    
    
    556
    
    
    
    1,986
    %Other
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    (100
    %)Total net revenues
    
    $
    102,318
    
    
    
    100
    %
    
    $
    104,379
    
    
    
    100%
    
    
    ($
    2,061
    )
    
    
    (2
    %)
 14




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##### Table of Contents



Net Revenues by Major CustomersDirect Revenues
    
    Total Direct and Indirect Revenues (2)Three Months
    
    Three Months
    
    Three Months
    
    Three MonthsEnded
    
    Ended
    
    Ended
    
    EndedOctober 1, 2006
    
    October 2, 2005
    
    October 1, 2006
    
    October 2, 2005Net revenue percentage (1) :OEM:EMC
    
    
    
    
    
    
    
    
    
    
    22
    %
    
    
    26
    %Hewlett-Packard
    
    
    12
    %
    
    
    10
    %
    
    
    12
    %
    
    
    10
    %IBM
    
    
    26
    %
    
    
    26
    %
    
    
    26
    %
    
    
    26
    %Other:Info X
    
    
    21
    %
    
    
    24
    %
    
    
    
    
    
    
    
 
 (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.   Net Revenues by Sales ChannelThree MonthsEnded
    
    Percentage
    
    Three Months Ended
    
    PercentageOctober 1,
    
    of Net
    
    October 2,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2006
    
    Revenues
    
    2005
    
    Revenues
    
    (Decrease)
    
    ChangeOEM
    
    $
    67,577
    
    
    
    66
    %
    
    $
    61,752
    
    
    
    59
    %
    
    $
    5,825
    
    
    
    9
    %Distribution
    
    
    34,610
    
    
    
    34
    %
    
    
    42,618
    
    
    
    41
    %
    
    
    (8,008
    )
    
    
    (19
    %)Other
    
    
    131
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    122
    
    
    
    1,356
    %Total net revenues
    
    $
    102,318
    
    
    
    100
    %
    
    $
    104,379
    
    
    
    100
    %
    
    ($
    2,061
    )
    
    
    (2
    %)
 15




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##### Table of Contents



Net Domestic and International RevenuesThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageOctober 1,
    
    of Net
    
    October 2,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2006
    
    Revenues
    
    2005
    
    Revenues
    
    (Decrease)
    
    ChangeDomestic
    
    $
    53,739
    
    
    
    53
    %
    
    $
    57,327
    
    
    
    55
    %
    
    
    ($3,588
    )
    
    
    (6
    %)Pacific Rim
    
    
    13,240
    
    
    
    13
    %
    
    
    16,092
    
    
    
    15
    %
    
    
    (2,852
    )
    
    
    (18
    %)Europe and rest of
the world
    
    
    35,339
    
    
    
    34
    %
    
    
    30,960
    
    
    
    30
    %
    
    
    4,379
    
    
    
    14
    %Total net revenues
    
    $
    102,318
    
    
    
    100
    %
    
    $
    104,379
    
    
    
    100
    %
    
    
    ($2,061
    )
    
    
    (2
    %)
  Gross Profit.
 Engineering and Development.
 16




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##### Table of Contents



Selling and Marketing.
 General and Administrative.
 Amortization of Other Intangible Assets.
 In-Process Research and Development.
 Nonoperating Income, net.
 Income Taxes
 17




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
 Warranty.
 Allowance for Doubtful Accounts
 Intangible assets and Other Long-Lived Assets .
 18




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##### Table of Contents



Inventories .
 Income Taxes
 Stock-Based Compensation
 Liquidity and Capital Resources
   19




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Payments Due by Period(in thousands)Less than
    
    13
    
    45
    
    After 5Total
    
    1 Year (2)
    
    Years (3)
    
    Years (4)
    
    YearsConvertible subordinated
notes and interest (1)
    
    $
    236,295
    
    
    $
    236,295
    
    
    $
    
    
    
    $
    
    
    
    $
    Leases
    
    
    13,203
    
    
    
    2,335
    
    
    
    5,077
    
    
    
    4,853
    
    
    
    938Inventory purchase commitments
    
    
    30,554
    
    
    
    30,554
    
    
    
    
    
    
    
    
    
    
    
    Other commitments
    
    
    1,957
    
    
    
    1,957
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    282,009
    
    
    $
    271,141
    
    
    $
    5,077
    
    
    $
    4,853
    
    
    $
    938
 
 (1)
    
    The principal payment related to the remaining outstanding 0.25% contingent convertible
subordinated notes of approximately $236.3 million is shown as a payment in the period for fiscal
year ending July 1, 2007 above as holders of these 20 year notes may require us to purchase the
notes for cash by giving us written notice as early as 20 business days prior to each of December
15, 2006, December 15, 2008, December 15, 2013, and December 15, 2018.(2)
    
    Fiscal year ending July 1, 2007.(3)
    
    Fiscal years ending June 29, 2008 and June 28, 2009.(4)
    
    Fiscal years ending June 27, 2010 and June 26, 2011. 20




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Sensitivity
   
 Item 4.
Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Litigation
  21




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##### Table of Contents



Item 1A. Risk Factors
  Potential acquisitions or strategic investments may be more costly or less profitable than
anticipated and may adversely affect the price of our company 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;
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##### Table of Contents




    
    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.
  Our acquisition of Aarohi Communications, Inc. on May 1, 2006, as well as our recently completed
acquisition of Sierra Logic, Inc. on October 2, 2006, involve numerous risks which may have a
material adverse effect on our business and operating results.
  
    
    difficulties and expenses in assimilating and retaining employees, including
integrating teams that have not previously worked together;
    
    difficulties in creating and maintaining uniform standards, controls, procedures, and
policies;
    
    different geographic locations of the principal operations of Emulex, Aarohi and Sierra
Logic and difficulties relating to management of the former Aarohi operations and personnel
in India;
    
    currency conversion exposure for payroll and other expenses of Aarohis principal
product development facility in Bangalore, India;
    
    difficulties in driving cost efficiencies in Aarohis principal product development
facility in Bangalore, India;
    
    potential adverse reactions of existing customers and strategic relationship partners;
and
    
    difficulties with integrating acquired technology into our existing technology in a
timely and efficient manner that would allow us to fully realize the benefits of this
acquisition.
   A downturn in information technology spending in general, or spending on computer and storage
systems in particular, could adversely affect our revenues and results of operations.
  23




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##### Table of Contents



A significant portion of our business depends upon the continued growth of the Fibre Channel
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 are 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.
    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.
  24




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##### 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 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 growth;
    
    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 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 and slower than expected market growth, with resulting
changes in customer technology budgeting and spending;
    
    changes in technology, industry standards or consumer preferences;
    
    seasonality; and
    
    changes in our accounting or other policies resulting from the adoption of new laws,
regulations or pronouncements.
 25




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##### Table of Contents



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 stock price and financial condition.
  The migration of our customers toward newer product platforms may have a significant adverse
effect.
  26




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##### Table of Contents



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 could be negatively affected.
  Advancement of storage disk capacity technology may not allow for additional revenue growth.
  A decrease in the average unit selling prices and/or an increase in the manufactured cost of our
products 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;
 27




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##### Table of Contents




    
    undetected errors or failures in software, firmware, and hardware;
    
    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.
  ® TM
 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 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;
 28




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##### Table of Contents




    
    environmental, tax or legislative changes in the location where our products are
produced or delivered, including implementation of European Union Directives 2002/95/EC
(RoHS) and 2002/96/EC (WEEE), with the RoHS directive limiting the concentration of certain
materials (lead, chromium, etc.) that may be contained in electronic products placed on the
European market after July 1, 2006, and the WEEE directive requiring certain recycling
markings and recycling procedures for electronic products placed on the European market
after August 13, 2005;
    
    difficulties associated with foreign operations; and
    
    market shortages.
    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.
  29




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##### 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;
    
    costs and risks of localizing products for foreign countries;
    
    longer accounts receivable payment cycles;
    
    changes in the value of local currencies relative to our functional currency;
    
    import and export restrictions;
    
    loss of tax benefits, or increases in tax expenses, due to international production;
    
    general economic and social conditions within foreign countries;
    
    taxation in multiple jurisdictions; and
    
    political instability, war or terrorism.
 30
    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.
  Our corporate offices and principal product development facilities are located in a region that is
subject to earthquakes and other natural disasters.
   31
    Table of Contents  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.
  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.
 32
    Table of Contents  Conversion of our outstanding notes would dilute the ownership interest of existing stockholders.
 Changes in
laws, regulations, and financial accounting standards may affect our reported results of
operations .
 33
    Table of Contents  Item 6. Exhibits
 Exhibit 2.1
    
    Agreement and Plan of Merger, dated August 29, 2006, relating to the Companys
acquisition of Sierra Logic, Inc. (incorporated by reference to Exhibit 2.1 to the
Companys Current Report on Form 8-K filed on August 29, 2006)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
3.1 to the Companys Current Report on Form 8-K filed on August 30, 2005).Exhibit 3.4
    
    Certificate of Designations of Series A Junior Participating Preferred Stock
(incorporated by reference to Exhibit 4 to the Companys Current Report on Form 8-K
filed February 2, 1989).Exhibit 4.1
    
    Rights Agreement dated January 19, 1989, as amended (incorporated by reference
to Exhibit 4 to the Companys Current Report on Form 8-K filed February 2, 1989).Exhibit 4.2
    
    Certificate regarding extension of Final Expiration Date of Rights Agreement
dated January 18, 1999 (incorporated by reference to Exhibit 4.2 of Amendment No. 2 to
the Registration Statement on Form S-3, filed on May 17, 1999).Exhibit 4.3
    
    Form of 0.25% Convertible Subordinated Note due December 15, 2023 (incorporated
by reference to Exhibit 4.6 to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2003).Exhibit 4.4
    
    Indenture between the Company, as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee, dated December 12, 2003, related to the
Companys 0.25% Convertible Subordinated Notes due 2023 (incorporated by reference to
Exhibit 4.7 to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended December 28, 2003).Exhibit 4.5
    
    Registration Rights Agreement between the Company and Credit Suisse First Boston
Corporation dated December 12, 2003, related to the Companys 0.25% Convertible
Subordinated Notes due 2023 (incorporated by reference to Exhibit 4.8 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2003).Exhibit 10.1
    
    Executive Bonus Plan of Emulex Corporation, as amended (incorporated by
reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on
September 5, 2006)Exhibit 10.2
    
    Amendment No. 4 to Sublease Agreement by and between Emulex Communications
Corporation and WJ Communications Inc. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed on August 2, 2006)Exhibit 10.3
    
    Deed of Lease between Aarohi Communications Private Limited and M/s M.K.
Chakrapani & Co. relating to the Companys offices in Bangalore, India.Exhibit 10.4
    
    Key Employee Retention Agreement for James M. McCluney, as amended
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on September 5, 2006)Exhibit 10.5
    
    Key Employee Retention Agreement for Paul F. Folino, as amended (incorporated
by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on
September 5, 2006)
 34
    Table of Contents  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.
 
 *
    
    Indicates a management contract or compensation plan or arrangement. 35
    Table of Contents  SIGNATURES
   EMULEX CORPORATIONBy:
    /s/  James M. McCluneyJames M. McCluneyChief Executive Officer and President By:
    /s/  Michael J. RockenbachMichael J. RockenbachExecutive Vice President and Chief Financial Officer
(Principal Financial and Chief Accounting Officer) 36
    Table of Contents  Exhibit 2.1
    
    Agreement and Plan of Merger, dated August 29, 2006, relating to the Companys
acquisition of Sierra Logic, Inc. (incorporated by reference to Exhibit 2.1 to the
Companys Current Report on Form 8-K filed on August 29, 2006)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
3.1 to the Companys Current Report on Form 8-K filed on August 30, 2005).Exhibit 3.4
    
    Certificate of Designations of Series A Junior Participating Preferred Stock
(incorporated by reference to Exhibit 4 to the Companys Current Report on Form 8-K
filed February 2, 1989).Exhibit 4.1
    
    Rights Agreement dated January 19, 1989, as amended (incorporated by reference
to Exhibit 4 to the Companys Current Report on Form 8-K filed February 2, 1989).Exhibit 4.2
    
    Certificate regarding extension of Final Expiration Date of Rights Agreement
dated January 18, 1999 (incorporated by reference to Exhibit 4.2 of Amendment No. 2 to
the Registration Statement on Form S-3, filed on May 17, 1999).Exhibit 4.3
    
    Form of 0.25% Convertible Subordinated Note due December 15, 2023 (incorporated
by reference to Exhibit 4.6 to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2003).Exhibit 4.4
    
    Indenture between the Company, as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee, dated December 12, 2003, related to the
Companys 0.25% Convertible Subordinated Notes due 2023 (incorporated by reference to
Exhibit 4.7 to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended December 28, 2003).Exhibit 4.5
    
    Registration Rights Agreement between the Company and Credit Suisse First Boston
Corporation dated December 12, 2003, related to the Companys 0.25% Convertible
Subordinated Notes due 2023 (incorporated by reference to Exhibit 4.8 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2003).Exhibit 10.1
    
    Executive Bonus Plan of Emulex Corporation, as amended (incorporated by
reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on
September 5, 2006)Exhibit 10.2
    
    Amendment No. 4 to Sublease Agreement by and between Emulex Communications
Corporation and WJ Communications Inc. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed on August 2, 2006)Exhibit 10.3
    
    Deed of Lease between Aarohi Communications Private Limited and M/s M.K.
Chakrapani & Co. relating to the Companys offices in Bangalore, India.Exhibit 10.4
    
    Key Employee Retention Agreement for James M. McCluney, as amended
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on September 5, 2006)Exhibit 10.5
    
    Key Employee Retention Agreement for Paul F. Folino, as amended (incorporated
by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on
September 5, 2006)
    Table of Contents  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.
 
 *
    
    Indicates a management contract or compensation plan or arrangement.