##### 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 September 30, 2007
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 Commission File No. 001-31353
 EMULEX CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    51-0300558(State or other jurisdiction
    
    (I.R.S Employerof incorporation or organization)
    
    Identification No.)3333 Susan StreetCosta Mesa, California
    
    92626(Address of principal executive offices)
    
    (Zip Code)
 (714) 662-5600  Registrants telephone number, including area code
 
 þ o
 
 þ o o
 o þ




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PAGEPart I FINANCIAL INFORMATIONItem 1 Financial Statements (unaudited)Condensed Consolidated Balance Sheets September 30, 2007, and July 1, 2007
    
    
    2Condensed Consolidated Statements of Income Three months ended September 30, 2007, and
October 1, 2006
    
    
    3Condensed Consolidated Statements of Cash Flows Three months ended September 30, 2007, and
October 1, 2006
    
    
    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
    
    
    22Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 6. Exhibits
    
    
    35Signatures
    
    
    36EXHIBIT 10.2EXHIBIT 31.AEXHIBIT 31.BEXHIBIT 32
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 
 September 30,
    
    
    July 1,2007
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    105,460
    
    
    $
    69,036Investments
    
    
    169,247
    
    
    
    202,288Accounts and other receivables, net of
allowance for doubtful accounts of $1,902 as
of September 30, 2007 and July 1, 2007
    
    
    65,216
    
    
    
    67,529Inventories
    
    
    21,471
    
    
    
    28,973Prepaid expenses
    
    
    4,951
    
    
    
    4,114Deferred income taxes
    
    
    26,962
    
    
    
    27,114Total current assets
    
    
    393,307
    
    
    
    399,054Property and equipment, net
    
    
    65,979
    
    
    
    64,294Investments
    
    
    152
    
    
    
    Goodwill
    
    
    74,127
    
    
    
    62,347Intangible assets, net
    
    
    91,406
    
    
    
    108,342Deferred income taxes
    
    
    2,445
    
    
    
    Other assets
    
    
    13,301
    
    
    
    25,251Total assets
    
    $
    640,717
    
    
    $
    659,288Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    18,169
    
    
    $
    19,761Accrued liabilities
    
    
    28,565
    
    
    
    29,483Income taxes payable
    
    
    3,196
    
    
    
    21,096Total current liabilities
    
    
    49,930
    
    
    
    70,340Other liabilities
    
    
    1,898
    
    
    
    802Deferred income taxes
    
    
    
    
    
    
    6,239Accrued taxes
    
    
    22,556
    
    
    
    Total liabilities
    
    
    74,384
    
    
    
    77,381Commitments and contingencies (Note 6)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; 87,379,766 and 86,906,540
issued at September 30, 2007 and July 1,
2007, respectively
    
    
    8,738
    
    
    
    8,691Additional paid-in capital
    
    
    1,053,980
    
    
    
    1,045,221Accumulated deficit
    
    
    (386,372
    )
    
    
    (401,982
    )Accumulated other comprehensive income
    
    
    74
    
    
    
    64Treasury stock, at cost; 5,660,337 and
3,589,278 shares at September 30, 2007 and
July 1, 2007, respectively
    
    
    (110,087
    )
    
    
    (70,087
    )Total stockholders equity
    
    
    566,333
    
    
    
    581,907Total liabilities and stockholders equity
    
    $
    640,717
    
    
    $
    659,288
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Three Months EndedSeptember 30,
    
    
    October 1,2007
    
    
    2006Net revenues
    
    $
    117,070
    
    
    $
    102,318Cost of sales
    
    
    49,143
    
    
    
    41,119Gross profit
    
    
    67,927
    
    
    
    61,199Operating expenses:Engineering and development
    
    
    31,287
    
    
    
    25,311Selling and marketing
    
    
    12,904
    
    
    
    10,192General and administrative
    
    
    8,569
    
    
    
    6,160Amortization of other intangible assets
    
    
    2,638
    
    
    
    2,853In-process research and development
    
    
    
    
    
    
    (950
    )Total operating expenses
    
    
    55,398
    
    
    
    43,566Operating income
    
    
    12,529
    
    
    
    17,633Nonoperating income, net:Interest income
    
    
    3,309
    
    
    
    7,438Interest expense
    
    
    (4
    )
    
    
    (624
    )Other income, net
    
    
    61
    
    
    
    813Total nonoperating income, net
    
    
    3,366
    
    
    
    7,627Income before income taxes
    
    
    15,895
    
    
    
    25,260Income tax provision
    
    
    5,724
    
    
    
    10,298Net income
    
    $
    10,171
    
    
    $
    14,962Net income per share:Basic
    
    $
    0.12
    
    
    $
    0.18Diluted
    
    $
    0.12
    
    
    $
    0.17Number of shares used in per share computations:Basic
    
    
    82,767
    
    
    
    84,508Diluted
    
    
    84,828
    
    
    
    91,410
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Three Months EndedSeptember 30,
    
    
    October 1,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    10,171
    
    
    $
    14,962Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    4,555
    
    
    
    4,268Amortization of discount on convertible subordinated notes
    
    
    
    
    
    
    449Share-based compensation expense
    
    
    6,951
    
    
    
    6,001Amortization of intangible assets
    
    
    9,077
    
    
    
    6,743In-process research and development
    
    
    
    
    
    
    (950
    )Impairment of intangible assets
    
    
    3,097
    
    
    
    Loss on disposal of property and equipment
    
    
    43
    
    
    
    7Deferred income taxes
    
    
    (5,197
    )
    
    
    (676
    )Excess tax benefit from share-based compensation
    
    
    (403
    )
    
    
    (30
    )Foreign currency adjustments
    
    
    (62
    )
    
    
    37Changes in assets and liabilities:Accounts and other receivables
    
    
    2,313
    
    
    
    5,127Inventories
    
    
    7,498
    
    
    
    1,068Prepaid expenses and other assets
    
    
    (1,024
    )
    
    
    209Accounts payable, accrued liabilities, and other liabilities
    
    
    (2,594
    )
    
    
    5,743Income taxes payable
    
    
    10,689
    
    
    
    5,943Net cash provided by operating activities
    
    
    45,114
    
    
    
    48,901Cash flows from investing activities:Net proceeds from sale of property and equipment
    
    
    9
    
    
    
    3Additions to property and equipment
    
    
    (5,803
    )
    
    
    (2,155
    )Purchases of investments
    
    
    (360,449
    )
    
    
    (347,963
    )Maturities of investments
    
    
    393,338
    
    
    
    384,186Strategic
investment 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 investing activities
    
    
    27,095
    
    
    
    28,106Cash flows from financing activities:Proceeds from issuance of common stock under stock plans
    
    
    4,867
    
    
    
    4,309Repurchase of common stock
    
    
    (40,000
    )
    
    
    Tax withholding payments reimbursed by restricted stock
    
    
    (1,126
    )
    
    
    Excess tax benefits from share-based compensation expense
    
    
    403
    
    
    
    30Net cash (used in) provided by financing activities
    
    
    (35,856
    )
    
    
    4,339Effect of exchange rates on cash and cash equivalents
    
    
    71
    
    
    
    Net increase in cash and cash equivalents
    
    
    36,424
    
    
    
    81,346Cash and cash equivalents at beginning of period
    
    
    69,036
    
    
    
    224,292Cash and cash equivalents at end of period
    
    $
    105,460
    
    
    $
    305,638Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    4
    
    
    $
    1Income taxes
    
    
    233
    
    
    
    5,085Non-cash activities:Additional goodwill resulting from escrow release as required by the Sierra
Logic, Inc. acquisition agreement
    
    
    12,138
    
    
    
    Capital expenditures included in accounts payable in the Companys condensed
consolidated balance sheets
    
    
    489
    
    
    
    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,
results of operations, and cash flows. Interim results for the three months ended September 30,
2007, are not necessarily indicative of the results that may be expected for the year ending
June 29, 2008. 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
1, 2007.Recently Adopted Accounting StandardThe Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48), during the three months ended September
30, 2007. See Note 9.2.
    
    Business CombinationsSierra Logic, Inc.On October 2, 2006, the Company acquired 100% of the outstanding common shares of Sierra Logic,
Inc. (Sierra Logic), a privately-held supplier of embedded products for storage networking
equipment located in Roseville, California. The Company accounted for the acquisition using the
purchase method of accounting in accordance with SFAS No. 141, Business Combinations. The
aggregate purchase price to date is approximately $159.2 million, which includes approximately
$12.1 million released from escrow during the three months ended September 30, 2007, in
accordance with the acquisition agreement, and approximately $8.3 million in restricted stock,
which was issued upon acquisition and being recognized as post-acquisition compensation expense.
Approximately $12.1 million remains in escrow and deemed to be contingent consideration, and is
included in other assets. The contingent consideration relates to certain standard
representations and warranties defined in the escrow agreement and are expected to be resolved
within 18 months from the acquisition date.The Company has allocated the purchase price to the assets acquired and liabilities assumed at
estimated fair values. The excess of the purchase price over the aggregate fair values was
recorded as goodwill. This allocation is subject to revision as deferred taxes are based on
preliminary information and the final pre-acquisition tax returns are not yet complete.This acquisition has been included in the consolidated balance sheet of the Company and the
operating results have been included in the consolidated statement of income since the date of
acquisition.3.
    
    InventoriesInventories are summarized as follows:
 September 30,
    
    July 1,2007
    
    2007(in thousands)Raw materials
    
    $
    6,022
    
    
    $
    11,128Finished goods
    
    
    15,449
    
    
    
    17,845$
    21,471
    
    
    $
    28,973
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4.
    
    Goodwill and Intangible assets, netThe activity in goodwill during the three months ended September 30, 2007 is as follows:
 CarryingAmount(in thousands)Goodwill, as of July 1, 2007
    
    $
    62,347Escrow release as required by Sierra Logic acquisition agreement
    
    
    12,138Purchase price allocation refinements
    
    
    (270
    )Other
    
    
    (88
    )Goodwill, as of September 30, 2007
    
    $
    74,127
 Intangible assets, net, are as follows:
 September 30,
    
    
    July 1,2007
    
    
    2007(in thousands)Intangible assets subject to amortization:Core technology and patents
    
    $
    92,771
    
    
    $
    95,471Accumulated amortization, core technology and patents
    
    
    (68,345
    )
    
    
    (65,347
    )Developed technology
    
    
    81,721
    
    
    
    81,982Accumulated amortization, developed technology
    
    
    (26,669
    )
    
    
    (19,731
    )Customer relationships
    
    
    39,013
    
    
    
    40,608Accumulated amortization, customer relationships
    
    
    (29,189
    )
    
    
    (27,170
    )Tradename
    
    
    4,688
    
    
    
    4,896Accumulated amortization, tradename
    
    
    (2,701
    )
    
    
    (2,546
    )Covenants not-to-compete
    
    
    516
    
    
    
    3,575Accumulated amortization, covenants not-to-compete
    
    
    (399
    )
    
    
    (3,396
    )$
    91,406
    
    
    $
    108,342
 During the three months ended September 30, 2007, an impairment charge of approximately $3.1
million was recorded in accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets (SFAS No. 144). The impairment charge was related to a developed technology
intangible asset acquired from Aarohi Communications, Inc. (Aarohi). The initial value ascribed
to this developed technology intangible asset was based primarily on forecasted revenues from
products which the Company decided, during the three months ended September 30, 2007, to no
longer place into production. The Company recorded the impairment charge to reduce the carrying
value of this developed technology intangible asset to the estimated fair value of zero. This
impairment charge was recorded in cost of sales in the accompanying condensed consolidated
statements of income.The intangible assets subject to amortization are being amortized on a straight-line basis over
original lives ranging from approximately two years to seven years. Aggregated amortization
expense for intangible assets for the three months ended September 30, 2007 and October 1, 2006,
was approximately $9.1 million and $6.7 million, respectively.Amortization expense of approximately $6.4 million and $3.9 million related to core and developed
technology are included in cost of sales in the accompanying condensed consolidated statements of
income for the three months ended September 30, 2007 and October 1, 2006, respectively.The following table presents the estimated future aggregated amortization expense of intangible
assets as of September 30, 2007 (in thousands):
 2008 (remaining 9 months)
    
    $
    23,4092009
    
    
    24,6752010
    
    
    21,9212011
    
    
    17,8162012
    
    
    3,585Thereafter
    
    
    $
    91,406
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5.
    
    Accrued LiabilitiesComponents of accrued liabilities are as follows:
 September 30,
    
    July 1,2007
    
    2007(in thousands)Payroll and related costs
    
    $
    17,014
    
    
    $
    15,879Warranty reserves
    
    
    3,564
    
    
    
    3,832Deferred revenue and accrued rebates
    
    
    4,411
    
    
    
    3,724Accrued advertising and promotions
    
    
    1,113
    
    
    
    839Accrued property, sales, and franchise taxes
    
    
    1,355
    
    
    
    1,710Other
    
    
    1,108
    
    
    
    3,499$
    28,565
    
    
    $
    29,483
 The Company provides a warranty of between one and five years on its products. The Company
records a provision for estimated warranty-related costs at the time of sale based on historical
product return rates and the Companys estimates of expected future cost of fulfilling its
warranty obligations. Changes to the warranty reserve were:
 Three Months EndedSeptember 30,
    
    October 1,2007
    
    2006(in thousands)Balance at beginning of period
    
    $
    3,832
    
    
    $
    2,949Accrual for warranties issued
    
    
    875
    
    
    
    1,260Settlements made (in cash or in kind)
    
    
    (490
    )
    
    
    (830
    )Changes to pre-existing warranties (including changes in estimates)
    
    
    (653
    )
    
    
    Balance at end of period
    
    $
    3,564
    
    
    $
    3,379
 6.
    
    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 remained 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.
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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 class certification decision. On or about July 17, 2006, Emulex assigned
to the class action plaintiffs any IPO claims that Emulex (Vixel) had against RBC Dain Rauscher in
the IPO litigation, as required by the settlement agreement. On December 5, 2006, the Second
Circuit Court of Appeals issued a decision reversing Judge Scheindlins class certification
decision. On December 14, 2006, Judge Scheindlin issued an order to stay all proceedings pending
a decision from the Second Circuit on whether it will hear further argument. On about January 6,
2007, Emulex assigned to the class action plaintiffs any IPO claims
that Emulex (Vixel) had against
The Bear Stearns Companies Inc. and Bear Stearns & Co. Inc. in the IPO litigation, as required
by the settlement agreement. On April 6, 2007, the Second Circuit denied the plaintiffs
petition for rehearing of the decision denying class certification. During April 2007, counsel
for Emulex and other Issuers informed Judge Scheindlin that, in light of the Second Circuit
opinion, the settlement agreement could not be approved because the defined
settlement class, like the litigation class, did not meet the Second Circuit requirements for
certification. Judge Scheindlin held a conference on May 30, 2007 to consider issues relating to
the class definitions, the statute of limitations, settlement, and discovery. On June 25, 2007,
Judge Scheindlin signed a Stipulation and Order submitted by the parties which terminated the
June 10, 2004 Stipulation and Agreement of Settlement with Defendant Issuers and Individuals. On
June 26, 2007, a document production request from the plaintiffs to all 298 issuers (including
Vixel) was received, covering documents from each issuers inception through December 31, 2001.
In September 2007, due to the expiration of the tolling agreements, those officers and directors
who had entered tolling agreements with the plaintiffs agreed to extend those agreements until
August 27, 2010.In addition to the ongoing litigation discussed above, 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 the open 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 September 30,
2007, the Companys purchase obligation associated primarily with inventory was approximately
$40.5 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. It is not possible to predict the maximum potential
amount of future payments under these or similar agreements, due to the conditional nature of
the Companys obligations and the unique facts and circumstances involved in each particular
agreement.7.
    
    Treasury StockOn December 5, 2006, the Companys Board of Directors authorized the repurchase of up to $150
million of its outstanding common stock over the next two years. The Company may repurchase
shares from time-to-time in open market purchases or privately negotiated transactions. The
share repurchases will be financed by available cash balances and cash from operations. Since
the December 5, 2006 authorization date to the quarter ended September 30, 2007, the Company has
repurchased 5,660,337 shares of its common stock under this program for an aggregate purchase
price of approximately $110.1 million for an average of $19.45
per share. Through November 1, 2007, the Company has not purchased
any additional shares of its common stock under this
program.
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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. The Company adopted SFAS No. 123R
at the beginning of fiscal year 2006. Determining the fair value of options using the
Black-Scholes-Merton (Black-Scholes) model requires subjective assumptions, including future
stock price volatility and expected time until exercise, which affect the calculated fair value
on the grant date.As of September 30, 2007, the Company had five stock-based plans for employees and directors that
are open for future grant awards. In addition, the Company had six stock-based plans, including
four plans assumed in connection with prior acquisitions, each of which are closed for future
grants. Available for future award grants are 1,746,900 shares under the Equity Incentive Plan,
283,000 shares under the 1997 Stock Award Plan for Non-Employee Directors (Director Plan),
204,400 shares under the Aarohi Communications, Inc. 2001 Stock Option Plan (Aarohi Plan), 21,068
shares under the Sierra Logic, Inc. 2001 Stock Option Plan (Sierra Logic Plan), and 636,237
shares under the Employee Stock Purchase Plan (Purchase Plan).Aggregate amounts recognized in the condensed consolidated financial statements with respect to
these plans are as follows:
 Three Months Ended
    
    Three Months EndedSeptember 30,
    
    October 1,2007
    
    2006(in thousands)
    
    (in thousands)Total cost of stock-based payment plans during the period
    
    $
    6,947
    
    
    $
    5,987Amounts capitalized in inventory during the period
    
    
    (157
    )
    
    
    (121
    )Amounts recognized in income for amounts previously
capitalized in inventory
    
    
    161
    
    
    
    135Amounts charged against income, before income tax benefit
    
    $
    6,951
    
    
    $
    6,001Amount of related income tax benefit recognized in income
    
    $
    1,817
    
    
    $
    993
 The fair value of each stock option award and purchase under the Equity Incentive Plan, Director
Plan, Aarohi Plan, and Sierra Logic Plan (All Other Plans), and the Purchase Plan are estimated
on the date of grant using the Black-Scholes option-pricing model based on the market price of
the underlying common stock as of the date of grant, the expected term, stock price volatility
and expected risk-free interest rates. This model requires subjective assumptions, including
expected stock price volatility and expected time until exercise, which affect the calculated
fair value on the grant date, as well as the market price of the underlying common stock as of
the date of grant and expected risk-free interest rates. Expected volatilities are based on
methodologies utilizing equal weighting involving both historical periods equal to the expected
term and implied volatilities based on traded options to buy the Companys shares.The assumptions utilized to compute the fair value of stock option grants for the three months
ended September 30, 2007 and October 1, 2006 were:
 All Other Plans
    
    Purchase PlanSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,2007
    
    2006
    
    2007
    
    2006Expected volatility
    
    33%  34%
    
    35%  38%
    
    
    29
    %
    
    
    31
    %Weighted average expected volatility
    
    33%
    
    36%
    
    
    29
    %
    
    
    31
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Expected term (in years)
    
    2.41  4.41
    
    1.4  4.4
    
    
    0.5
    
    
    
    0.5Weighted average expected term (in years)
    
    3.25
    
    3.11
    
    
    0.5
    
    
    
    0.5Risk-free rate
    
    3.99%  4.17%
    
    4.58%  4.67%
    
    
    5.08
    %
    
    
    5.01
    %
 9




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##### Table of Contents



A summary of option activity under the plans for the three months ended September 30, 2007 is as
follows:
 WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicOptions
    
    Exercise Price
    
    Term (Years)
    
    Value(In millions)Options outstanding at July 1, 2007
    
    
    13,512,649
    
    
    $
    21.66Options granted
    
    
    136,500
    
    
    
    20.23Options exercised
    
    
    (238,315
    )
    
    
    11.27Options canceled
    
    
    (54,050
    )
    
    
    27.10Options forfeited
    
    
    (25,970
    )
    
    
    18.77Options outstanding at September 30, 2007
    
    
    13,330,814
    
    
    $
    21.82
    
    
    
    4.66
    
    
    $
    29.7Options vested and expected to vest at
September 30, 2007
    
    
    12,944,929
    
    
    $
    21.94
    
    
    
    4.64
    
    
    $
    28.8Options exercisable at September 30, 2007
    
    
    10,285,181
    
    
    $
    23.10
    
    
    
    4.43
    
    
    $
    22.5
 A summary of restricted stock activity for the three months ended September 30, 2007 is as
follows:
 WeightedAverage GrantNumber of
    
    Date FairShares
    
    ValueAwards outstanding and unvested at July 1, 2007
    
    
    1,314,776
    
    
    $
    18.22Awards granted
    
    
    656,675
    
    
    
    19.73Awards vested
    
    
    (153,100
    )
    
    
    16.64Awards canceled
    
    
    (4,000
    )
    
    
    19.11Awards outstanding and unvested at September 30, 2007
    
    
    1,814,351
    
    
    $
    18.90
 As of September 30, 2007, there was approximately $27.6 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 1.35 years.The weighted average fair value of option and restricted stock awards granted during the three
months ended September 30, 2007 and October 1, 2006 were approximately $17.33 and $12.81,
respectively. The total intrinsic value of stock options exercised during the three months ended
September 30, 2007 and October 1, 2006 were approximately $2.09 million and $0.5 million,
respectively. The total fair value of restricted stock awards vested during the three months
ended September 30, 2007 was approximately $2.9 million, and there were no shares vested during
the three months ended October 1, 2006.Cash received from share option exercises under stock-based plans for the three months ended
September 30, 2007 and October 1, 2006 were approximately $2.7 million and $4.3 million,
respectively. The actual tax benefit realized for the tax deductions from option exercise of
stock-based plans totaled approximately $1.9 million and $0.2 million for the three months ended
September 30, 2007 and October 1, 2006, respectively.As of September 30, 2007, the amount of shares authorized under the Purchase Plan, the Equity
Incentive Plan, the Directors Plan, the Aarohi Plan, and the Sierra Logic Plan are sufficient to
cover future stock option exercises.9.
    
    Income TaxesIn July 2006, the FASB issued FIN 48. FIN 48 prescribes a comprehensive model for how a company
should recognize, measure, present, and disclose in its financial statements uncertain tax
positions that the company has taken or expects to take on a tax return.FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is
more likely than not that the position is sustainable, based on its technical merits. The tax
benefit of a qualifying position is the
largest amount of tax benefit that is greater than 50 percent likely of being realized upon
settlement with a taxing authority having full knowledge of all relevant information.
 10




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A tax benefit from an uncertain position was previously recognized if it was probable of being
sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as noncurrent
unless the liability is expected to be settled in cash within 12 months of the reporting date.
FIN 48 was effective for the Company as of July 2, 2007, the beginning of the current fiscal
year.In connection with the Companys adoption of FIN 48, as of July 2, 2007, the Company recorded a
net increase to retained earnings of approximately $5.4 million related to the measurement of
uncertain tax positions the Company had taken. In addition, the Company recorded a decrease to
additional paid-in-capital of approximately $3.1 million associated with uncertain tax positions
related to stock options. Furthermore, the Company recorded a net decrease to goodwill,
identifiable intangibles, and associated deferred tax liabilities of
approximately $2.9 million. The Company reclassified tax
liabilities from income taxes payable to accrued taxes upon adoption
of FIN 48.As of September 30, 2007, the Company had total unrecognized tax benefits of approximately $22.6
million compared to approximately $24.7 million immediately after the adoption of FIN 48 on July
2, 2007. If fully recognized, approximately $16.0 million of the
$22.6 million would impact the
Companys effective tax rate. The Company does not reasonably estimate that the liability for
unrecognized tax benefits will change significantly within the next 12 months.The audit of the Companys fiscal 2004 Federal income tax return was completed in a prior fiscal
year. The Company is currently under audit by various state taxing
authorities, but not any
foreign taxing authorities. The Company does not believe that the resolution of these audits will
have a material effect on its financial statements.The Company recognizes accrued interest and penalties related to unrecognized tax benefits in
income tax expense. The Company had accrued approximately $0.7 million in interest and
penalties related to unrecognized tax benefits accrued as of September 30, 2007 and
July 2, 2007 (post FIN 48 adoption).10.
    
    Net Income Per ShareBasic net income per share for the three months ended September 30, 2007 and October 1, 2006, was
computed by dividing net income by the weighted average number of common shares outstanding
during the period.Diluted net income per share was computed by dividing adjusted net income by the weighted average
number of common shares outstanding during the period increased to include, if dilutive, the
number of additional common shares that would be outstanding if the dilutive potential common
shares from stock option plans and convertible subordinated notes had been issued. The dilutive
effect of outstanding stock options is reflected in diluted net income per share by application
of the treasury stock method. The dilutive effect of convertible subordinated notes is reflected
in diluted net income per share by application of the if-converted method. The following table
sets forth the computation of basic and diluted net income per share:
 Three Months EndedSeptember 30,
    
    October 1,2007
    
    2006(in thousands except per share data)Numerator:Net income
    
    $
    10,171
    
    
    $
    14,962Adjustment for interest expense on convertible subordinated notes, net of tax
    
    
    
    
    
    
    369Numerator for diluted net income per share
    
    $
    10,171
    
    
    $
    15,331Denominator:Denominator for basic net income per share weighted average shares
outstanding
    
    
    82,767
    
    
    
    84,508Effect of dilutive securities:Dilutive options outstanding and restricted stock
    
    
    2,061
    
    
    
    1,439Dilutive common shares from assumed conversion of convertible subordinated
notes
    
    
    
    
    
    
    5,463Denominator for diluted net income per share  adjusted weighted average
shares outstanding
    
    
    84,828
    
    
    
    91,410Basic net income per share
    
    $
    0.12
    
    
    $
    0.18Diluted net income per share
    
    $
    0.12
    
    
    $
    0.17Antidilutive options excluded from the computations
    
    
    7,796
    
    
    
    10,299Average market price of common stock
    
    $
    19.95
    
    
    $
    16.17
 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 periods presented.
 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
     13




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##### Table of Contents



www.emulex.com
 Results of Operations
  Percentage of Net RevenuesThree months endedSeptember 30,
    
    October 1,2007
    
    2006Net revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    42.0
    
    
    
    40.2Gross profit
    
    
    58.0
    
    
    
    59.8Operating expenses:Engineering and development
    
    
    26.7
    
    
    
    24.7Selling and marketing
    
    
    11.0
    
    
    
    10.0General and administrative
    
    
    7.3
    
    
    
    6.0Amortization of other intangible assets
    
    
    2.3
    
    
    
    2.8In-process research and development
    
    
    
    
    
    
    (0.9
    )Total operating expenses
    
    
    47.3
    
    
    
    42.6Operating income
    
    
    10.7
    
    
    
    17.2Nonoperating income, net:Interest income
    
    
    2.8
    
    
    
    7.3Interest expense
    
    
    (0.0
    )
    
    
    (0.6
    )Other income, net
    
    
    0.1
    
    
    
    0.8Total nonoperating income, net
    
    
    2.9
    
    
    
    7.5Income before income taxes
    
    
    13.6
    
    
    
    24.7Income tax provision
    
    
    4.9
    
    
    
    10.1Net income
    
    
    8.7
    %
    
    
    14.6
    %
 Three months ended September 30, 2007, compared to three months ended October 1, 2006
 Net Revenues.
 14




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##### Table of Contents



Net Revenues by Product Line
  Net Revenues by Product LineThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageSeptember 30,
    
    of Net
    
    October 1,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2007
    
    Revenues
    
    2006
    
    Revenues
    
    (Decrease)
    
    ChangeHost Server Products
    
    $
    88,769
    
    
    
    76
    %
    
    $
    86,234
    
    
    
    84
    %
    
    $
    2,535
    
    
    
    3
    %Embedded Storage Products
    
    
    27,996
    
    
    
    24
    %
    
    
    15,696
    
    
    
    15
    %
    
    
    12,300
    
    
    
    78
    %Intelligent Network Products
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    nmOther
    
    
    196
    
    
    
    
    
    
    
    388
    
    
    
    1
    %
    
    
    (192
    )
    
    
    (49
    %)Total net revenues
    
    $
    117,070
    
    
    
    100
    %
    
    $
    102,318
    
    
    
    100
    %
    
    $
    14,752
    
    
    
    14
    %
 
 Not meaningful (nm).    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
    
    EndedSeptember 30, 2007
    
    October 1, 2006
    
    September 30, 2007
    
    October 1, 2006Net revenue
percentage (1) :OEM:EMC
    
    
    
    
    
    
    
    
    
    
    22
    %
    
    
    22
    %Hewlett-Packard
    
    
    14
    %
    
    
    12
    %
    
    
    15
    %
    
    
    12
    %IBM
    
    
    20
    %
    
    
    26
    %
    
    
    28
    %
    
    
    26
    %Distribution
and other:Info X
    
    
    18
    %
    
    
    21
    %
    
    
    
    
    
    
    
 
 (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. 15




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##### Table of Contents



Net Revenues by Sales Channel
  Net Revenues by Sales ChannelThree Months
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageSeptember 30,
    
    of Net
    
    October 1,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2007
    
    Revenues
    
    2006
    
    Revenues
    
    (Decrease)
    
    ChangeOEM
    
    $
    82,565
    
    
    
    71
    %
    
    $
    67,577
    
    
    
    66
    %
    
    $
    14,988
    
    
    
    22
    %Distribution
    
    
    34,362
    
    
    
    29
    %
    
    
    34,610
    
    
    
    34
    %
    
    
    (248
    )
    
    
    (1
    %)Other
    
    
    143
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    12
    
    
    
    9
    %Total net revenues
    
    $
    117,070
    
    
    
    100
    %
    
    $
    102,318
    
    
    
    100
    %
    
    $
    14,752
    
    
    
    14
    %
  Net Revenues by Geographic Territory
  Net Domestic and International RevenuesThree Months
    
    
    
    
    
    Three MonthsEnded
    
    Percentage
    
    Ended
    
    PercentageSeptember 30,
    
    of Net
    
    October 1,
    
    of Net
    
    Increase/
    
    Percentage(in thousands)
    
    2007
    
    Revenues
    
    2006
    
    Revenues
    
    (Decrease)
    
    ChangeDomestic
    
    $
    49,471
    
    
    
    42
    %
    
    $
    53,739
    
    
    
    53
    %
    
    
    ($4,268
    )
    
    
    (8
    %)Pacific Rim
    
    
    31,344
    
    
    
    27
    %
    
    
    13,240
    
    
    
    13
    %
    
    
    18,104
    
    
    
    137
    %Europe and rest of the world
    
    
    36,255
    
    
    
    31
    %
    
    
    35,339
    
    
    
    34
    %
    
    
    916
    
    
    
    3
    %Total net revenues
    
    $
    117,070
    
    
    
    100
    %
    
    $
    102,318
    
    
    
    100
    %
    
    $
    14,752
    
    
    
    14
    %
  Gross Profit.
 16




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##### Table of Contents



Engineering and Development.
 Selling and Marketing.
 General and Administrative.
 17




---



##### Table of Contents



Amortization of Other Intangible Assets.
 In-Process Research and Development.
 Nonoperating
Income, Net.
 Income Taxes
 Critical Accounting Policies
   18




---



##### Table of Contents



Revenue Recognition.
 Warranty.
 Allowance for Doubtful Accounts
 Intangible Assets and Other Long-Lived Assets
 Inventories
 Goodwill
  19




---



##### Table of Contents



Income Taxes
  Stock-Based Compensation
 Liquidity and Capital Resources
  20




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##### Table of Contents



Payments Due by Period(in thousands)RemainingTotal
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    ThereafterLeases (1)
    
    $
    19,249
    
    
    $
    3,059
    
    
    $
    4,006
    
    
    $
    3,927
    
    
    $
    4,000
    
    
    $
    2,325
    
    
    $
    1,932Purchase commitments
    
    
    40,538
    
    
    
    38,933
    
    
    
    1,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other commitments (2)
    
    
    3,626
    
    
    
    3,513
    
    
    
    39
    
    
    
    39
    
    
    
    32
    
    
    
    3
    
    
    
    Total
    
    $
    63,413
    
    
    $
    45,505
    
    
    $
    5,650
    
    
    $
    3,966
    
    
    $
    4,032
    
    
    $
    2,328
    
    
    $
    1,932
 
 (1)
    
    Lease payments include common area maintenance (CAM) charges.(2)
    
    Consists primarily of commitments to purchase non-recurring engineering services but excludes
approximately $22.6 million of unrecognized tax benefits under FIN 48 for which we cannot make
a reasonably reliable estimate of the period of payment. See Note 9 to our
condensed consolidated financial statements. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Sensitivity
  21




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##### Table of Contents



Item 4. Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Litigation
   22




---



##### Table of Contents



Item 1A. Risk Factors
  Our markets are highly competitive and our business and results of operations may be adversely
affected by entry of new competitors into the markets, aggressive pricing, and the introduction or
expansion of competitive products and technologies.
   A 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.
  A significant portion of our business depends upon the continued growth of the storage networking
market, and our business will be adversely affected if such growth does not occur or occurs more
slowly than we anticipate.
  23




---



##### Table of Contents



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 operating results are difficult to forecast and could be adversely affected by many factors,
and our stock price may decline if our results fail to meet expectations.
  
    
    changes in the size, mix, timing and terms of OEM and/or other customer orders;
    
    changes in the sales and deployment cycles for our products and/or desired inventory
levels for our products;
    
    acquisitions or strategic investments by our customers, competitors or us;
    
    timing and market acceptance of new or enhanced product introductions by us, our OEM
customers and/or competitors;
 24




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##### Table of Contents




    
    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 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 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.
  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.
  25




---



##### Table of Contents



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.
  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.
  26




---



##### Table of Contents



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;
    
    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.
 27




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##### Table of Contents



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 exceed epidemic failure rates specified in agreements with our customers or that
may require us to make concessions or accommodations for continuing customer relationships;
    
    timeliness of product delivery;
    
    sole sourcing and components made by a small number of suppliers, including the inability
to obtain components and finished goods at reasonable cost from such sources and suppliers;
    
    financial stability and viability of our suppliers and electronics manufacturing service
(EMS) providers;
    
    changes in business strategies of our suppliers and EMS providers;
    
    increases in manufacturing costs due to lower volumes or more complex manufacturing
process than anticipated;
    
    disruption in shipping channels;
    
    natural disasters;
    
    inability or unwillingness of our suppliers or EMS providers to continue their business
with us;
    
    environmental, tax or legislative changes in the location where our products are produced
or delivered, including implementation of European Union Directive 2002/96/EC (WEEE), with
the WEEE
directive requiring certain recycling markings and recycling procedures for electronic
products placed on the European market;
    
    difficulties associated with international operations; and
    
    market shortages.
 28




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##### Table of Contents



If our intellectual property protections are inadequate, it could adversely affect our business.
      29




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##### Table of Contents



Third party claims of intellectual property infringement could adversely affect our business.
  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 international 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 international countries;
 
    
    taxation in multiple jurisdictions; and
    
    political instability, war or terrorism.
 30




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##### Table of Contents



Potential acquisitions or strategic investments may be more costly or less profitable than
anticipated and may adversely affect the price of our common stock.
  
    
    difficulties in the assimilation of the operations, technologies, products, and personnel
of the acquired company;
    
    purchased technology that is not adopted by customers in the way or the time frame we
anticipated;
    
    diversion of managements attention from other business concerns;
    
    risks of entering markets in which we have limited or no prior experience;
    
    risks associated with assuming the legal obligations of the acquired company;
    
    minority interest in a company, resulting from a strategic investment, that could have an
impact on our results;
    
    risks related to the effect that the acquired companys internal control processes might
have on our financial reporting and managements report on our internal controls over
financial reporting;
    
    potential loss of key employees of the company we invested in or acquired;
    
    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 acquisitions of Aarohi Communications, Inc. on May 1, 2006 and Sierra Logic, Inc. on October 2,
2006, involve numerous risks which may have a material adverse effect on our business and operating
results.
  
    
    complexities in creating and maintaining uniform standards, controls, procedures, and
policies;
 31




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##### Table of Contents




    
    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 with integrating acquired technology into our existing technology in a
timely and efficient manner that would allow us to fully realize the
benefits of these
acquisitions.
   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.
  32




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##### Table of Contents



Our corporate offices and principal product development facilities are located in regions that are
subject to earthquakes and other natural disasters.
   Our shareholder rights plan, certificate of incorporation and Delaware law could adversely affect
the performance of our stock.
  Our system of internal controls may be inadequate.
  Changes in laws, regulations, and financial accounting standards may affect our reported results of
operations.
  The final determination of our income tax liability may be materially different from our income tax
provisions and accruals.
  33




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##### Table of Contents



We may need additional capital in the future and such additional financing may not be available on
favorable terms.
  
    
    take advantage of unanticipated opportunities, including more rapid international
expansion or acquisitions of complementary businesses or technologies;
    
    develop new products or services;
    
    repay outstanding indebtedness; and
    
    respond to unanticipated competitive pressures.
  Global warming issues may cause us to alter the way we conduct our business.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Issuer Purchases of Equity Securities
 Total Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value of SharesTotal Number
    
    
    Average
    
    
    Part of Publicly
    
    
    that May Yet Beof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Purchased under thePeriod
    
    Purchased
    
    
    per Share
    
    
    Or Programs
    
    

Plans or ProgramsJuly 2
 July 29, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,913,000July 30  August 26, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,913,000August 27  September 30,
2007
    
    
    2,071,059
    
    
    $
    19.31
    
    
    
    2,071,059
    
    
    $
    39,913,000Total
    
    
    2,071,059
    
    
    $
    19.31
    
    
    
    2,071,059
    
    
    $
    39,913,000
 34




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##### Table of Contents



Item 6. Exhibits
 Exhibit 3.1
    
    Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the
Companys 1997 Annual Report on Form 10-K).Exhibit 3.2
    
    Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.4 to the Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2000).Exhibit 3.3
    
    Amended and restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed on August 29, 2007).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 10.1
    
    Description of Compensation for Certain Executive Officers (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed August 27, 2007).Exhibit 10.2
    
    Executive Bonus Plan of Emulex Corporation, as amended and restated effective August 22, 2007Exhibit 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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##### Table of Contents



SIGNATURES
   EMULEX CORPORATIONBy:
    /s/ James M. McCluneyJames M. McCluneyChief Executive Officer and PresidentBy:
    /s/ Michael J. RockenbachMichael J. RockenbachExecutive Vice President and Chief Financial Officer
(Principal Financial and Chief Accounting Officer) 36




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##### Table of Contents



Exhibit 3.1
    
    Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Companys
1997 Annual Report on Form 10-K).Exhibit 3.2
    
    Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference
to Exhibit 3.4 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2000).Exhibit 3.3
    
    Amended and restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed on August 29, 2007).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 10.1
    
    Description of Compensation for Certain
Executive Officers (incorporated by reference
to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed August 27, 2007).Exhibit 10.2
    
    Executive Bonus Plan of Emulex Corporation, as amended and restated effective August 22, 2007Exhibit 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.
 37