##### 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 March 29, 2009
 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(State or other jurisdiction 
of incorporation or organization)
    
    51-0300558(I.R.S Employer
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
 Yes o No o
 (Check one):
 Large accelerated filer: þ
    
    Accelerated filer: o
    
    Non-accelerated filer: o
    
    Smaller reporting company: o
 o þ




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##### 



PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets March 29, 2009 and June 29, 2008
    
    
    3Condensed Consolidated Statements of Operations Three and Nine months ended March 29,
2009 and March 30, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows Nine months ended March 29, 2009 and
March 30, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    34Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 6. Exhibits
    
    
    49Signatures
    
    
    50Exhibit 10.4Exhibit 31AExhibit 31BExhibit 32
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
   March 29,
    
    
    June 29,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    276,564
    
    
    $
    217,017Investments
    
    
    26,142
    
    
    
    133,182Accounts and other receivables, net of allowance for doubtful accounts
of $1,601 and $1,753 as of March 29, 2009 and June 29, 2008,
respectively
    
    
    49,408
    
    
    
    61,634Inventories
    
    
    9,897
    
    
    
    19,336Prepaid income taxes
    
    
    12,432
    
    
    
    26Other prepaid expenses
    
    
    6,052
    
    
    
    5,079Deferred income taxes
    
    
    17,430
    
    
    
    20,773Total current assets
    
    
    397,925
    
    
    
    457,047Property and equipment, net
    
    
    76,390
    
    
    
    73,580Investments
    
    
    
    
    
    
    150Note receivable
    
    
    15,021
    
    
    
    Goodwill
    
    
    87,840
    
    
    
    87,843Intangible assets, net
    
    
    48,447
    
    
    
    67,299Deferred income taxes
    
    
    14,288
    
    
    
    5,481Other assets
    
    
    8,674
    
    
    
    7,656Total assets
    
    $
    648,585
    
    
    $
    699,056Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    18,086
    
    
    $
    23,714Accrued liabilities
    
    
    28,016
    
    
    
    26,363Income taxes payable
    
    
    
    
    
    
    37,528Total current liabilities
    
    
    46,102
    
    
    
    87,605Other liabilities
    
    
    4,353
    
    
    
    3,633Accrued taxes
    
    
    29,774
    
    
    
    31,979Total liabilities
    
    
    80,229
    
    
    
    123,217Commitments and contingencies (Note 7)Subsequent event (Note 12)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; 89,145,438
and 88,113,322 issued at March 29, 2009 and June 29, 2008, respectively
    
    
    8,915
    
    
    
    8,811Additional paid-in capital
    
    
    1,101,741
    
    
    
    1,080,722Accumulated deficit
    
    
    (391,561
    )
    
    
    (403,614
    )Accumulated other comprehensive (loss) income
    
    
    (739
    )
    
    
    7Treasury stock, at cost; 8,550,971 and 5,660,337 shares at March 29, 2009
and June 29, 2008, respectively
    
    
    (150,000
    )
    
    
    (110,087
    )Total stockholders equity
    
    
    568,356
    
    
    
    575,839Total liabilities and stockholders equity
    
    $
    648,585
    
    
    $
    699,056
   3




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Three Months Ended
    
    
    Nine Months EndedMarch 29,
    
    
    March 30,
    
    
    March 29,
    
    
    March 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues
    
    $
    78,568
    
    
    $
    127,846
    
    
    $
    298,925
    
    
    $
    375,538Cost of sales
    
    
    31,766
    
    
    
    47,817
    
    
    
    116,186
    
    
    
    145,840Gross profit
    
    
    46,802
    
    
    
    80,029
    
    
    
    182,739
    
    
    
    229,698Operating expenses:Engineering and development
    
    
    33,409
    
    
    
    33,031
    
    
    
    99,293
    
    
    
    95,795Selling and marketing
    
    
    13,775
    
    
    
    15,613
    
    
    
    41,561
    
    
    
    42,257General and administrative
    
    
    7,324
    
    
    
    9,657
    
    
    
    26,288
    
    
    
    27,034Amortization of other intangible assets
    
    
    699
    
    
    
    2,253
    
    
    
    4,637
    
    
    
    7,171Total operating expenses
    
    
    55,207
    
    
    
    60,554
    
    
    
    171,779
    
    
    
    172,257Operating (loss) income
    
    
    (8,405
    )
    
    
    19,475
    
    
    
    10,960
    
    
    
    57,441Nonoperating income, net:Interest income
    
    
    613
    
    
    
    2,858
    
    
    
    3,686
    
    
    
    9,654Interest expense
    
    
    7
    
    
    
    (14
    )
    
    
    (29
    )
    
    
    (25
    )Other income, net
    
    
    168
    
    
    
    8
    
    
    
    365
    
    
    
    69Total nonoperating income, net
    
    
    788
    
    
    
    2,852
    
    
    
    4,022
    
    
    
    9,698(Loss) income before income taxes
    
    
    (7,617
    )
    
    
    22,327
    
    
    
    14,982
    
    
    
    67,139Income tax (benefit) provision
    
    
    (1,652
    )
    
    
    6,806
    
    
    
    2,929
    
    
    
    23,803Net (loss) income
    
    $
    (5,965
    )
    
    $
    15,521
    
    
    $
    12,053
    
    
    $
    43,336Net (loss) income per share:Basic
    
    $
    (0.07
    )
    
    $
    0.19
    
    
    $
    0.15
    
    
    $
    0.53Diluted
    
    $
    (0.07
    )
    
    $
    0.19
    
    
    $
    0.15
    
    
    $
    0.52Number of shares used in per share computations:Basic
    
    
    80,541
    
    
    
    82,119
    
    
    
    80,444
    
    
    
    82,152Diluted
    
    
    80,541
    
    
    
    83,712
    
    
    
    82,004
    
    
    
    84,103
   4




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Nine Months EndedMarch 29,
    
    
    March 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    12,053
    
    
    $
    43,336Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    16,874
    
    
    
    14,049Share-based compensation expense
    
    
    17,935
    
    
    
    21,122Amortization of intangible assets
    
    
    18,828
    
    
    
    25,482Impairment of intangible assets
    
    
    
    
    
    
    3,097Accrued interest income, net
    
    
    895
    
    
    
    (Gain) loss on disposal of property and equipment
    
    
    (91
    )
    
    
    116Deferred income taxes
    
    
    (3,431
    )
    
    
    (5,864
    )Excess tax benefit from share-based compensation
    
    
    (190
    )
    
    
    (1,252
    )Foreign currency adjustments
    
    
    (161
    )
    
    
    (75
    )Changes in assets and liabilities:Accounts and other receivables
    
    
    12,207
    
    
    
    62Inventories
    
    
    9,392
    
    
    
    13,231Prepaid expenses and other assets
    
    
    (626
    )
    
    
    (7,108
    )Accounts payable, accrued liabilities, and other liabilities
    
    
    (4,345
    )
    
    
    (126
    )Accrued taxes
    
    
    (2,205
    )
    
    
    573Income taxes payable and prepaid income taxes
    
    
    (50,669
    )
    
    
    8,469Net cash provided by operating activities
    
    
    26,466
    
    
    
    115,112Cash flows from investing activities:Net proceeds from sale of property and equipment
    
    
    55
    
    
    
    20Additions to property and equipment
    
    
    (19,183
    )
    
    
    (18,538
    )Investment in privately-held company
    
    
    (947
    )
    
    
    (2,500
    )Purchases of investments
    
    
    (97,715
    )
    
    
    (687,706
    )Maturities of investments
    
    
    204,010
    
    
    
    730,388Issuance of note receivable
    
    
    (15,000
    )
    
    
    Net cash provided by investing activities
    
    
    71,220
    
    
    
    21,664Cash flows from financing activities:Repurchase of common stock
    
    
    (39,913
    )
    
    
    (40,000
    )Tax withholding payments reimbursed by common stock
    
    
    (2,436
    )
    
    
    (2,338
    )Proceeds from issuance of common stock under stock plans
    
    
    4,150
    
    
    
    7,731Excess tax benefit from share-based compensation expense
    
    
    190
    
    
    
    1,252Net cash used in financing activities
    
    
    (38,009
    )
    
    
    (33,355
    )Effect of exchange rates on cash and cash equivalents
    
    
    (130
    )
    
    
    (9
    )Net increase in cash and cash equivalents
    
    
    59,547
    
    
    
    103,412Cash and cash equivalents at beginning of period
    
    
    217,017
    
    
    
    69,036Cash and cash equivalents at end of period
    
    $
    276,564
    
    
    $
    172,448
   5




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Basis of Presentation
   Supplemental Cash Flow Information
 Nine Months EndedMarch 29,
    
    
    March 30,2009
    
    
    2008(in thousands)Cash paid during the period for:Interest
    
    $
    9
    
    
    $
    25Income taxes
    
    $
    60,999
    
    
    $
    25,360Non-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
    
    $
    1,163
    
    
    $
    78
 Recently Adopted Accounting Standards
 .
   6




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Recently Issued Accounting Standards
        7




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8




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Investments
   Gross
    
    
    GrossUnrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)March 29, 2009Municipal bonds
    
    $
    152
    
    
    $
    2
    
    
    $
    
    
    
    $
    154U.S. Government securities
    
    
    12,200
    
    
    
    32
    
    
    
    
    
    
    
    12,232U.S. Government sponsored entity securities
    
    
    13,790
    
    
    
    59
    
    
    
    
    
    
    
    13,849$
    26,142
    
    
    $
    93
    
    
    $
    
    
    
    $
    26,235June 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
  March 29,
    
    
    June 29,2009
    
    
    2008(in thousands)Short-term investments (maturities less than one year)
    
    $
    26,142
    
    
    $
    133,182Long-term investments (maturities of one to five years)
    
    
    
    
    
    
    150$
    26,142
    
    
    $
    133,332
 Inventories
  March 29,
    
    
    June 29,2009
    
    
    2008(in thousands)Raw materials
    
    $
    3,906
    
    
    $
    4,090Finished goods
    
    
    5,991
    
    
    
    15,246$
    9,897
    
    
    $
    19,336
 Note Receivable
   9




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March 29,
    
    
    June 29,2009
    
    
    2008(in thousands)Note receivable, issued March 19, 2009
    
    $
    15,000
    
    
    $
    Accrued interest on note receivable
    
    
    21
    
    
    
    $
    15,021
    
    
    $
    
 Goodwill and Intangible Assets, net
    March 29,
    
    
    June 29,2009
    
    
    2008(in thousands)Intangible assets subject to amortization:Core technology and patents
    
    $
    92,254
    
    
    $
    92,272Accumulated amortization, core technology and patents
    
    
    (80,689
    )
    
    
    (75,607
    )Developed technology
    
    
    77,313
    
    
    
    77,313Accumulated amortization, developed technology
    
    
    (43,063
    )
    
    
    (32,788
    )Customer relationships
    
    
    38,670
    
    
    
    38,674Accumulated amortization, customer relationships
    
    
    (37,066
    )
    
    
    (34,047
    )Tradename
    
    
    4,641
    
    
    
    4,643Accumulated amortization, tradename
    
    
    (3,613
    )
    
    
    (3,161
    )$
    48,447
    
    
    $
    67,299
     10




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(in thousands)2009 (remaining 3 months)
    
    $
    5,4282010
    
    
    21,7142011
    
    
    17,7202012
    
    
    3,5852013
    
    
    Thereafter
    
    
    $
    48,447
 Accrued Liabilities
  March 29,
    
    
    June 29,2009
    
    
    2008(in thousands)Payroll and related costs
    
    $
    13,286
    
    
    $
    11,792Warranty liability
    
    
    3,122
    
    
    
    4,174Deferred revenue and accrued rebates
    
    
    3,144
    
    
    
    4,848Other
    
    
    8,464
    
    
    
    5,549$
    28,016
    
    
    $
    26,363
  (in thousands)Balance as of June 29, 2008
    
    $
    4,174Accrual for warranties issued
    
    
    853Changes to pre-existing warranties (including changes in estimates)
    
    
    (455
    )Settlements made (in cash or in kind)
    
    
    (1,450
    )Balance as of March 29, 2009
    
    $
    3,122
 Commitments and Contingencies
 Litigation
   11




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12




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Other Commitments and Contingencies
   Treasury Stock
   Stock-Based Compensation
   13




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Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMarch 29,
    
    
    March 30,
    
    
    March 29,
    
    
    March 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Total cost of
stock-based payment
plans during the
period
    
    $
    5,368
    
    
    $
    7,037
    
    
    $
    17,886
    
    
    $
    21,087Amounts capitalized
in inventory during
the period
    
    
    (117
    )
    
    
    (126
    )
    
    
    (461
    )
    
    
    (402
    )Amounts recognized
in income for
amounts previously
capitalized in
inventory
    
    
    165
    
    
    
    120
    
    
    
    510
    
    
    
    437Amounts charged
against income,
before income tax
benefit
    
    $
    5,416
    
    
    $
    7,031
    
    
    $
    17,935
    
    
    $
    21,122Amount of related
income tax
(expense) benefit
recognized in
income
    
    $
    (742
    )
    
    $
    1,799
    
    
    $
    2,748
    
    
    $
    5,412
   Three Months Ended
    
    Nine Months EndedMarch 29,
    
    March 30,
    
    March 29,
    
    March 30,2009
    
    2008
    
    2009
    
    2008Expected volatility
    
    53%
    
    20%  21%
    
    42%  53%
    
    20%  37%Weighted average expected volatility
    
    53%
    
    20%
    
    44%
    
    29%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
    
    1.28%  1.76%
    
    1.75%  2.24%
    
    1.12%  3.02 %
    
    1.75%  4.17 %
  Three Months Ended
    
    
    Nine Months EndedMarch 29,
    
    
    March 30,
    
    
    March 29,
    
    
    March 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Expected 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
    %
  14




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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
    
    
    171,000
    
    
    $
    11.31Options exercised
    
    
    (271,400
    )
    
    $
    5.47Options canceled
    
    
    (1,266,031
    )
    
    $
    25.12Options forfeited
    
    
    (299,948
    )
    
    $
    16.37Options outstanding at March 29, 2009
    
    
    12,411,672
    
    
    $
    21.51
    
    
    
    3.36
    
    
    $
    0.68Options vested and expected to vest at March 29, 2009
    
    
    12,328,178
    
    
    $
    21.55
    
    
    
    3.35
    
    
    $
    0.68Options exercisable at March 29, 2009
    
    
    10,968,967
    
    
    $
    22.22
    
    
    
    3.21
    
    
    $
    0.64
  WeightedAverage GrantNumber of
    
    
    Date FairAwards
    
    
    ValueAwards outstanding and unvested at June 29, 2008
    
    
    2,135,765
    
    
    $
    18.07Awards granted
    
    
    1,627,100
    
    
    $
    9.17Awards vested
    
    
    (655,579
    )
    
    $
    18.27Awards forfeited
    
    
    (209,040
    )
    
    $
    18.07Awards outstanding and unvested at March 29, 2009
    
    
    2,898,246
    
    
    $
    13.03
       15




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Income Taxes
     16




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##### Table of Contents



Net (Loss) Income Per Share
   Three Months Ended
    
    
    Nine Months EndedMarch 29,
    
    
    March 30,
    
    
    March 29,
    
    
    March 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except per
    
    
    (in thousands, except pershare data)
    
    
    share data)Numerator  Net (loss) income
    
    $
    (5,965
    )
    
    $
    15,521
    
    
    $
    12,053
    
    
    $
    43,336Denominator:Denominator for basic net (loss)
income per share  weighted
average shares outstanding
    
    
    80,541
    
    
    
    82,119
    
    
    
    80,444
    
    
    
    82,152Effect of dilutive securities:Dilutive options outstanding,
unvested stock and ESPP
    
    
    
    
    
    
    1,593
    
    
    
    1,560
    
    
    
    1,951Denominator for diluted net
(loss) income per share 
adjusted weighted average shares
outstanding
    
    
    80,541
    
    
    
    83,712
    
    
    
    82,004
    
    
    
    84,103Basic net (loss) income per share
    
    $
    (0.07
    )
    
    $
    0.19
    
    
    $
    0.15
    
    
    $
    0.53Diluted net (loss) income per share
    
    $
    (0.07
    )
    
    $
    0.19
    
    
    $
    0.15
    
    
    $
    0.52Antidilutive options and unvested
stock excluded from the
computations
    
    
    14,150
    
    
    
    11,016
    
    
    
    13,267
    
    
    
    9,892Average market price of common stock
    
    $
    6.01
    
    
    $
    15.32
    
    
    $
    8.68
    
    
    $
    17.99
  Subsequent event
   17




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
    18




---



##### Table of Contents



Executive Overview
  ® ®
 ® ®
      19




---



##### Table of Contents



Global Initiatives
   Results of Operations
  Percentage of Net Revenues
    
    
    Percentage of Net RevenuesThree Months Ended
    
    
    Nine Months EndedMarch 29,
    
    
    March 30,
    
    
    March 29,
    
    
    March 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    40.4
    
    
    
    37.4
    
    
    
    38.9
    
    
    
    38.8Gross profit
    
    
    59.6
    
    
    
    62.6
    
    
    
    61.1
    
    
    
    61.2Operating expenses:Engineering and development
    
    
    42.5
    
    
    
    25.8
    
    
    
    33.2
    
    
    
    25.5Selling and marketing
    
    
    17.6
    
    
    
    12.2
    
    
    
    13.9
    
    
    
    11.3General and administrative
    
    
    9.3
    
    
    
    7.6
    
    
    
    8.8
    
    
    
    7.2Amortization of other intangible
assets
    
    
    0.9
    
    
    
    1.8
    
    
    
    1.5
    
    
    
    1.9Total operating expenses
    
    
    70.3
    
    
    
    47.4
    
    
    
    57.4
    
    
    
    45.9Operating (loss) income
    
    
    (10.7
    )
    
    
    15.2
    
    
    
    3.7
    
    
    
    15.3Nonoperating income, net:Interest income
    
    
    0.8
    
    
    
    2.2
    
    
    
    1.2
    
    
    
    2.6Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income, net
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    Total nonoperating income, net
    
    
    1.0
    
    
    
    2.2
    
    
    
    1.3
    
    
    
    2.6(Loss) income before income taxes
    
    
    (9.7
    )
    
    
    17.4
    
    
    
    5.0
    
    
    
    17.9Income tax (benefit) provision
    
    
    (2.1
    )
    
    
    5.3
    
    
    
    1.0
    
    
    
    6.4Net (loss) income
    
    
    (7.6
    )%
    
    
    12.1
    %
    
    
    4.0
    %
    
    
    11.5
    %
  20




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##### Table of Contents



Three months ended March 29, 2009, compared to three months ended March 30, 2008
 Net Revenues.
 Net Revenues by Product Line
  Net Revenues by Product LineThree Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of Net
    
    
    March 30,
    
    
    of Net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeHost Server Products
    
    $
    59,009
    
    
    
    75
    %
    
    $
    85,083
    
    
    
    67
    %
    
    $
    (26,074
    )
    
    
    (31
    )%Embedded Storage Products
    
    
    19,385
    
    
    
    25
    %
    
    
    42,493
    
    
    
    33
    %
    
    
    (23,108
    )
    
    
    (54
    )%Other
    
    
    174
    
    
    
    
    
    
    
    270
    
    
    
    
    
    
    
    (96
    )
    
    
    (36
    )%Total net revenues
    
    $
    78,568
    
    
    
    100
    %
    
    $
    127,846
    
    
    
    100
    %
    
    $
    (49,278
    )
    
    
    (39
    )%
   ® ®
  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
    
    
    EndedMarch 29, 2009
    
    
    March 30, 2008
    
    
    March 29, 2009
    
    
    March 30, 2008Net revenue percentage (1) :OEM:EMC
    
    
    
    
    
    
    
    
    
    
    14
    %
    
    
    16
    %Hewlett-Packard
    
    
    17
    %
    
    
    14
    %
    
    
    17
    %
    
    
    14
    %IBM
    
    
    24
    %
    
    
    17
    %
    
    
    32
    %
    
    
    25
    %Other:Info X
    
    
    
    
    
    
    11
    %
    
    
    
    
    
    
    
 
 (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.  21




---



##### Table of Contents



Net Revenues by Sales Channel
  Net Revenues by Sales ChannelThree Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of Net
    
    
    March 30,
    
    
    of Net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeOEM
    
    $
    67,741
    
    
    
    86
    %
    
    $
    99,221
    
    
    
    78
    %
    
    $
    (31,480
    )
    
    
    (32
    )%Distribution
    
    
    10,885
    
    
    
    14
    %
    
    
    28,626
    
    
    
    22
    %
    
    
    (17,741
    )
    
    
    (62
    )%Other
    
    
    (58
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (57
    )
    
    nmTotal net revenues
    
    $
    78,568
    
    
    
    100
    %
    
    $
    127,846
    
    
    
    100
    %
    
    $
    (49,278
    )
    
    
    (39
    )%
 
 nm
    
     not meaningful   22




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##### Table of Contents



Net Revenues by Geographic Territory
  Net United States and International RevenuesThree Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of net
    
    
    March 30,
    
    
    of net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeUnited States
    
    $
    28,304
    
    
    
    36
    %
    
    $
    49,357
    
    
    
    39
    %
    
    $
    (21,053
    )
    
    
    (43
    )%Asia Pacific
    
    
    25,561
    
    
    
    33
    %
    
    
    32,596
    
    
    
    25
    %
    
    
    (7,035
    )
    
    
    (22
    )%Europe, Middle
East, Africa and
rest of the world
    
    
    24,703
    
    
    
    31
    %
    
    
    45,893
    
    
    
    36
    %
    
    
    (21,190
    )
    
    
    (46
    )%Total net revenues
    
    $
    78,568
    
    
    
    100
    %
    
    $
    127,846
    
    
    
    100
    %
    
    $
    (49,278
    )
    
    
    (39
    )%
  Gross Profit.
 Gross ProfitThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$46,802
    
    60%
    
    $80,029
    
    63%
    
    $(33,227)
    
    (3)%
  Engineering and Development.
 Engineering and DevelopmentThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$33,409
    
    43%
    
    $33,031
    
    26%
    
    $378
    
    17%
   23




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##### Table of Contents



Selling and Marketing.
 Selling and MarketingThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$13,775
    
    18%
    
    $15,613
    
    12%
    
    $(1,838)
    
    5%
  General and Administrative.
 General and AdministrativeThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$7,324
    
    9%
    
    $9,657
    
    8%
    
    $(2,333)
    
    2%
   24




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##### Table of Contents



Amortization of Other Intangible Assets.
 Amortization of Other Intangible AssetsThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$699
    
    1%
    
    $2,253
    
    2%
    
    $(1,554)
    
    (1)%
  Nonoperating Income, net.
 Nonoperating Income, netThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$788
    
    1%
    
    $2,852
    
    2%
    
    $(2,064)
    
    (1)%
  Income Taxes
 Income TaxesThree Months Ended
    
    Percentage of Net
    
    Three Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$(1,652)
    
    (2)%
    
    $6,806
    
    5%
    
    $(8,458)
    
    (7)%
  Nine months ended March 29, 2009, compared to nine months ended March 30, 2008
 Net Revenues.
  25




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##### Table of Contents



Net Revenues by Product Line
  Net Revenues by Product LineNine Months
    
    
    
    
    
    
    Nine MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of Net
    
    
    March 30,
    
    
    of Net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeHost Server Products
    
    $
    221,275
    
    
    
    74
    %
    
    $
    268,286
    
    
    
    72
    %
    
    $
    (47,011
    )
    
    
    (18
    )%Embedded Storage Products
    
    
    77,203
    
    
    
    26
    %
    
    
    106,564
    
    
    
    28
    %
    
    
    (29,361
    )
    
    
    (28
    )%Other
    
    
    447
    
    
    
    
    
    
    
    688
    
    
    
    
    
    
    
    (241
    )
    
    
    (35
    )%Total net revenues
    
    $
    298,925
    
    
    
    100
    %
    
    $
    375,538
    
    
    
    100
    %
    
    $
    (76,613
    )
    
    
    (20
    )%
    Net Revenues by Major Customers
  Net Revenues by Major CustomersDirect Revenues
    
    
    Total Direct and Indirect Revenues (2)Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMarch 29, 2009
    
    
    March 30, 2008
    
    
    March 29, 2009
    
    
    March 30, 2008Net revenue percentage (1):OEM:EMC
    
    
    
    
    
    
    
    
    
    
    14
    %
    
    
    19
    %Hewlett-Packard
    
    
    17
    %
    
    
    14
    %
    
    
    17
    %
    
    
    14
    %IBM
    
    
    23
    %
    
    
    20
    %
    
    
    30
    %
    
    
    28
    %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.   26




---



##### Table of Contents



Net Revenues by Sales Channel
  Net Revenues by Sales ChannelNine Months
    
    
    
    
    
    
    Nine MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of Net
    
    
    March 30,
    
    
    of Net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeOEM
    
    $
    242,662
    
    
    
    81
    %
    
    $
    278,100
    
    
    
    74
    %
    
    $
    (35,438
    )
    
    
    (13
    )%Distribution
    
    
    56,176
    
    
    
    19
    %
    
    
    97,099
    
    
    
    26
    %
    
    
    (40,923
    )
    
    
    (42
    )%Other
    
    
    87
    
    
    
    
    
    
    
    339
    
    
    
    
    
    
    
    (252
    )
    
    
    (74
    )%Total net revenues
    
    $
    298,925
    
    
    
    100
    %
    
    $
    375,538
    
    
    
    100
    %
    
    $
    (76,613
    )
    
    
    (20
    )%
  Net Revenues by Geographic Territory
  Net United States and International RevenuesNine Months
    
    
    
    
    
    
    Nine MonthsEnded
    
    
    Percentage
    
    
    Ended
    
    
    PercentageMarch 29,
    
    
    of Net
    
    
    March 30,
    
    
    of Net
    
    
    Increase/
    
    
    Percentage(in thousands)
    
    2009
    
    
    Revenues
    
    
    2008
    
    
    Revenues
    
    
    (Decrease)
    
    
    ChangeUnited States
    
    $
    109,602
    
    
    
    37
    %
    
    $
    151,009
    
    
    
    40
    %
    
    $
    (41,407
    )
    
    
    (27
    )%Asia Pacific
    
    
    86,119
    
    
    
    29
    %
    
    
    96,907
    
    
    
    26
    %
    
    
    (10,788
    )
    
    
    (11
    )%Europe, Middle East, Africa and rest of the world
    
    
    103,204
    
    
    
    34
    %
    
    
    127,622
    
    
    
    34
    %
    
    
    (24,418
    )
    
    
    (19
    )%Total net revenues
    
    $
    298,925
    
    
    
    100
    %
    
    $
    375,538
    
    
    
    100
    %
    
    $
    (76,613
    )
    
    
    (20
    )%
   27




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##### Table of Contents



Gross Profit.
 Gross ProfitNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$182,739
    
    61%
    
    $229,698
    
    61%
    
    $(46,959)
    
    %
  Engineering and Development.
 Engineering and DevelopmentNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$99,293
    
    33%
    
    $95,795
    
    26%
    
    $3,498
    
    8%
  Selling and Marketing.
 Selling and MarketingNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$41,561
    
    14%
    
    $42,257
    
    11%
    
    $(696)
    
    3%
  28




---



##### Table of Contents



General and Administrative.
 General and AdministrativeNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$26,288
    
    9%
    
    $27,034
    
    7%
    
    $(746)
    
    2%
  Amortization of Other Intangible Assets.
 Amortization of Other Intangible AssetsNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$4,637
    
    2%
    
    $7,171
    
    2%
    
    $(2,534)
    
    
  Nonoperating Income, net.
 Nonoperating Income, netNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$4,022
    
    1%
    
    $9,698
    
    3%
    
    $(5,676)
    
    (1)%
   29




---



##### Table of Contents



Income Taxes
 Income TaxesNine Months Ended
    
    Percentage of Net
    
    Nine Months Ended
    
    Percentage of Net
    
    Increase/
    
    PercentageMarch 29, 2009
    
    Revenues
    
    March 30, 2008
    
    Revenues
    
    (Decrease)
    
    Points Change$2,929
    
    1%
    
    $23,803
    
    6%
    
    $(20,874)
    
    (5)%
  Critical Accounting Policies
   Revenue Recognition.
 Warranty.
  30




---



##### Table of Contents



Allowance for Doubtful Accounts
 Intangible Assets and Other Long-Lived Assets
 Inventories
 Goodwill
   Income Taxes
  31




---



##### Table of Contents



Stock-Based Compensation
 Recently Adopted and Recently Issued Accounting Standards
  Liquidity and Capital Resources
     32




---



##### Table of Contents



Payments Due by PeriodTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter(In thousands)Leases (1)
    
    $
    18,944
    
    
    $
    1,460
    
    
    $
    6,079
    
    
    $
    5,931
    
    
    $
    3,872
    
    
    $
    1,602
    
    
    
    Purchase commitments (2)
    
    
    32,734
    
    
    
    30,983
    
    
    
    1,167
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    Other commitments (3)
    
    
    11,051
    
    
    
    8,788
    
    
    
    1,254
    
    
    
    1,005
    
    
    
    4
    
    
    
    
    
    
    
    Total
    
    $
    62,729
    
    
    $
    41,231
    
    
    $
    8,500
    
    
    $
    7,520
    
    
    $
    3,876
    
    
    $
    1,602
    
    
    $
    
 
 (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 $29.8 million of unrecognized tax benefits under FIN 48 for which we cannot make
a reasonably reliable estimate of the period of payment. See Note 10 to our condensed
consolidated financial statements. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
    33




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##### Table of Contents



Item 4. Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Litigation
   34




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##### Table of Contents



35




---



##### Table of Contents



Item 1A. Risk Factors
 Broadcoms unsolicited acquisition proposal may be disruptive to our business and threatens to
adversely affect our operations and results.
    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.
  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.
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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, occurs more
slowly than we anticipate, or declines.
  Because a significant portion of our revenues is generated from sales to a limited number of
customers, none of which are subject to 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 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;
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
    
    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;
    
    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.
  A number of factors including 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.
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Our industry is subject to rapid technological change, thus our results of operations could be
adversely affected if we are unable to 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.
  The timing of migration of our customers toward newer product platforms varies and 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 to successfully
market and sell systems that incorporate new technologies could adversely affect our business.
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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.
  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;
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
    
    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.
  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 constitute 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;
 
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
    
    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.
   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.
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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;
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
    
    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;
    
    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 become more costly or less profitable than
originally 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;
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
    
    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.
  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;
    
    Events affecting other companies that investors deem to be comparable to us; and
    
    Offers to buy the Company for a premium over recent trading price.
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Terrorist activities and resulting military and other actions could adversely affect our business.
  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 provisions of Delaware law could
adversely affect the performance of our stock.
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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.
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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.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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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.Exhibit 10.1
    
    Form of Key Employee Retention Agreement, incorporated by
reference to Exhibit 10.1 to the Companys Form 8-K filed
with the Securities and Exchange Commission on January 16,
2009.Exhibit 10.2
    
    Form of Amendment to Non-Qualified Stock Option Agreement
incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009.Exhibit 10.3
    
    Form of Amendment to Restricted Stock Award Agreement
incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009.Exhibit 10.4
    
    Emulex Corporation Change in Control Retention 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.
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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




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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
    
    Form of Key Employee Retention Agreement, incorporated by
reference to Exhibit 10.1 to the Companys Form 8-K filed
with the Securities and Exchange Commission on January 16,
2009.Exhibit 10.2
    
    Form of Amendment to Non-Qualified Stock Option Agreement
incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009.Exhibit 10.3
    
    Form of Amendment to Restricted Stock Award Agreement
incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed with the Securities and Exchange Commission on
January 16, 2009.Exhibit 10.4
    
    Emulex Corporation Change in Control Retention 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