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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|          
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended July 3, 2005                                                      
|          
|or        
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission File No. 001-31353





EMULEX CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                        
|------------------------------------------------------------------ |  | ---------------------------------------
|Delaware                                                           |  | 51-0300558                             
|(State or other jurisdiction
    of incorporation or organization) |  | (I.R.S Employer
    Identification No.)
|3333 Susan Street
    Costa Mesa, California                       |  | 92626                                  
|(Address of principal executive offices)                           |  | (Zip Code)                             

(714) 662-5600


(Registrants telephone number, including area code)







Common Stock, Par Value $0.10 Per Share


Preferred Stock Purchase Rights


(Title of class)




NONE





þ o


þ o


þ






DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS



|                                                        |  |                                                                                           |  |  |  |  |  | 
|------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I                                                 
|PART II                                                
|EMULEX CORPORATION AND SUBSIDIARIES                    
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|                                                        |  | CONSOLIDATED BALANCE SHEETS                                                              
|                                                        |  | CONSOLIDATED STATEMENTS OF OPERATIONS                                                    
|                                                        |  | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY                                          
|                                                        |  | CONSOLIDATED STATEMENTS OF CASH FLOWS                                                    
|                                                        |  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 3, 2005, June 27, 2004, and June 29, 2003
|SCHEDULE OF EMULEX CORPORATION AND SUBSIDIARIES        
|VALUATION AND QUALIFYING ACCOUNTS AND RESERVES         
|EXHIBIT 10.24                                          
|EXHIBIT 10.25                                          
|EXHIBIT 10.26                                          
|EXHIBIT 21                                             
|EXHIBIT 23                                             
|EXHIBIT 31.A                                           
|EXHIBIT 31.B                                           
|EXHIBIT 32                                             



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##### Table of Contents






PART I


All references to years refer to our fiscal years ended
July 3, 2005, June 27, 2004, and June 29, 2003,
as applicable, unless the calendar year is specified. References
contained in this Annual Report to Emulex, the
Company, the Registrant, we,
our and us, refer to Emulex Corporation
and its subsidiaries.




|        |          
|------- | ---------
|Item I. | Business.

Introduction and Company History








tm tm tm


Industry Background




1



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| |                                   
| | ----------------------------------
| | The Emergence of Networked Storage





2



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##### Table of Contents





| |              
| | -------------
| | Fibre Channel





| |      
| | -----
| | iSCSI





| |                                                                         
| | ------------------------------------------------------------------------
| | Disk Interface Technologies and the Transition to Serial
    Storage I/O





3



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| |                                 
| | --------------------------------
| | Embedded Fibre Channel Solutions





tm tm




Our Products






| |                   
| | ------------------
| | Fibre Channel HBAs





4



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| |                   
| | ------------------
| | Fibre Channel IOCs







| |                                      
| | -------------------------------------
| | The Intel Joint Development Agreement

tm




| |                               
| | ------------------------------
| | Fibre Channel Storage Switches







5



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tm






| |                                        
| | ---------------------------------------
| | SAN Interconnect Solutions and Products







| |                                 
| | --------------------------------
| | IP Networking and Other Products





Intellectual Property






6



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Engineering and Development




Selling and Marketing




Order Backlog




Seasonality




Concentration of Customers, Revenue by Product Families and
Geographic Area




7



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Competition












Manufacturing and Suppliers




8



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Employees




Risk Factors




| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business depends upon the continued growth of the
    Fibre Channel storage networking market, and our business will
    be adversely affected if such growth does not occur or occurs
    more slowly than we anticipate.



9



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| |                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because a significant portion of our revenues are
    generated from sales to a limited number of customers, none of
    which are the subject of exclusive or long-term contracts, the
    loss of one or more of these customers, or our customers
    failure to make timely payments to us, could adversely affect
    our business.









| |                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our markets are highly competitive and our business and
    results of operations may be adversely affected by entry of new
    competitors into the markets, aggressive pricing and the
    introduction or expansion of competitive products and
    technologies.





10



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| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our operating results are difficult to forecast and could
    be adversely affected by many factors, and our stock price may
    decline if our results fail to meet expectations.





| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in the size, mix, timing and terms of OEM and other
    customer orders;                                                                                                                                                                     
|
| |  | changes in the sales and deployment cycles for our products
    and/or desired inventory levels for our products;                                                                                                                                    
|
| |  | acquisitions or strategic investments by our customers,
    competitors or us;                                                                                                                                                                       
|
| |  | the timing and market acceptance of new or enhanced product
    introductions by us, our OEM customers and/or competitors;                                                                                                                           
|
| |  | market share losses or difficulty in gaining incremental market
    share growth;                                                                                                                                                                    
|
| |  | fluctuations in product development, procurement, resource
    utilization and other operating expenses;                                                                                                                                             
|
| |  | component shortages;                                                                                                                                                                                                                                 
|
| |  | reduced demand from our customers if there is a shortage of, or
    difficulties in acquiring, components or other products, such as
    Fibre Channel disk drives, used in conjunction with our products
    in the deployment of systems;          
|
| |  | the 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/or                                                                                                                                                                                                                                  
|
| |  | changes in our accounting or other policies resulting from the
    adoption of new laws, regulations or pronouncements.                                                                                                                              



11



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| |                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our relatively small backlog of unfilled orders, possible
    customer delays or deferrals and our tendency to generate a
    large percentage of our quarterly sales near the end of the
    quarter contribute to possible fluctuations in our operating
    results that could have an adverse impact on our results of
    operations and stock price.





| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | Our industry is subject to rapid technological change, and
    we must keep pace with the changes to successfully
    compete.





| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have experienced losses in our history and may
    experience losses in our future that may adversely affect our
    stock price and financial condition.





| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | The migration of our customers toward newer product
    platforms may have a significant adverse effect.



12



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| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Any failure of our OEM customers to keep up with rapid
    technological change and successfully market and sell systems
    that incorporate new technologies could adversely affect our
    business.





| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rapid changes in the evolution of technology, including
    the unexpected extent or timing of the transition from HBA
    solutions or embedded switch box solutions to lower-priced ASIC
    solutions, could adversely affect our business.





| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | If customers elect to utilize lower-end HBAs in higher-end
    environments or applications, our business could be negatively
    affected.





| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 software, firmware and hardware;                                                                                           
|
| |  | changing OEM product specifications;                                                                                                                        
|
| |  | delays in the acceptance or shipment of products by OEM
    customers; and/or                                                                               

13



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| |   |                                                     
| | - | ----------------------------------------------------
| |  | changing market or competitive product requirements.





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Our joint development activities may result in products
    that are not commercially successful or that are not available
    in a timely fashion.



tm




| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A change in our business relationships with our
    third-party suppliers or our electronics manufacturing service
    providers could adversely affect our business.





| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | discontinued production by a supplier;                                                                           
|
| |  | required long-term purchase commitments;                                                                         
|
| |  | undetected errors, failures or production quality issues;                                                        
|
| |  | timeliness of product delivery;                                                                                  
|
| |  | sole sourcing;                                                                                                   
|
| |  | financial stability and viability of our suppliers and EMS
    providers;                                        
|
| |  | changes in business strategies of our suppliers and EMS
    providers;                                           
|
| |  | increases in manufacturing costs due to lower volumes or more
    complex manufacturing process than anticipated;
|
| |  | disruption in shipping channels;                                                                                 
|
| |  | natural disasters;                                                                                               
|
| |  | inability or unwillingness of our suppliers or EMS providers to
    continue their business with us;             
|
| |  | environmental, tax or legislative changes in the location where
    our products are produced;                   
|
| |  | difficulties associated with foreign operations; and/or                                                          
|
| |  | market shortages.                                                                                                



14



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | The inability or increased cost of attracting, motivating
    or retaining key managerial and technical personnel could
    adversely affect our business.



15



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| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Our international business activities subject us to risks
    that could adversely affect our business.





| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | the imposition of or changes in governmental controls, taxes,
    tariffs, trade restrictions and regulatory requirements;
|
| |  | the costs and risks of localizing products for foreign countries;                                                         
|
| |  | longer accounts receivable payment cycles;                                                                                
|
| |  | changes in the value of local currencies relative to our
    functional currency;                                         
|
| |  | import and export restrictions;                                                                                           
|
| |  | loss of tax benefits, or increases in tax expenses, due to
    international production;                                  
|
| |  | general economic and social conditions within foreign countries;                                                          
|
| |  | taxation in multiple jurisdictions; and/or                                                                                
|
| |  | political instability, war or terrorism.                                                                                  





| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Potential acquisitions or strategic investments may be
    more costly or less profitable than anticipated and may
    adversely affect the price of our company stock.



16



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| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                
|
| |  | the diversion of managements attention from other business
    concerns;                                                                                                                                             
|
| |  | risks of entering markets in which we have no or limited 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; and/or
|
| |  | the potential loss of key employees of the company we invested
    in or acquired.                                                                                                                                    





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | 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;                                                                                      
|
| |  | dilution resulting from conversion of outstanding convertible
    subordinated notes into shares of our common stock;   
|
| |  | general conditions in the computer, storage or communications
    markets; and/or                                       
|
| |  | events affecting other companies that investors deem to be
    comparable to us.                                        



17



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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 a region that is 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.



18



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| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Changes in laws, regulations and financial accounting
    standards may affect our reported results of operations.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The final determination of our income tax liability may be
    materially different from our income tax provisions and
    accruals.





| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We may need additional capital in the future and such
    additional financing may not be available on favorable
    terms.





| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | take advantage of unanticipated opportunities, including more
    rapid international expansion or acquisitions of complementary
    businesses or technologies;
|
| |  | develop new products or services;                                                                                                                               
|
| |  | repay outstanding indebtedness; and/or                                                                                                                          
|
| |  | respond to unanticipated competitive pressures.                                                                                                                 





19



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| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Conversion of our outstanding notes would dilute the
    ownership interest of existing stockholders.

Changes
in laws, regulations and financial accounting standards may
affect our reported results of operations .


Executive Officers of the Registrant




|                      |  |                                                                                |  |     |    | 
|--------------------- |  | ------------------------------------------------------------------------------ |  | --- | -- | 
|Name                  |  | Position                                                                       |  | Age |   
|                      |  |                                                                                |  |     |   
|Paul F. Folino        |  | Chairman of the Board and Chief Executive Officer                              |  |     | 60 | 
|James M. McCluney     |  | President and Chief Operating Officer                                          |  |     | 54 | 
|Kirk D. Roller(1)(2)  |  | President, Worldwide Sales                                                     |  |     | 43 | 
|William F. Gill(1)    |  | Executive Vice President, Worldwide Sales                                      |  |     | 48 | 
|Sadie A. Herrera(1)   |  | Executive Vice President, Human Resources and Facilities                       |  |     | 56 | 
|Marshall D. Lee(1)    |  | Executive Vice President, Engineering                                          |  |     | 49 | 
|Karen Mulvany(1)      |  | Executive Vice President, Business Planning and Development                    |  |     | 48 | 
|Michael J. Rockenbach |  | Executive Vice President, Chief Financial Officer, Secretary and
    Treasurer |  |     | 44 | 
|Michael E. Smith(1)   |  | Executive Vice President, Worldwide Marketing                                  |  |     | 44 | 
|Randall G. Wick(1)    |  | Vice President, General Counsel                                                |  |     | 52 | 






|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These persons serve in the indicated capacities as officers of
    the Registrants principal operating subsidiaries; they are
    not officers of the Registrant.
|   
|(2) | Mr. Roller retired from the Company effective July 1,
    2005.                                                                                                   

Mr. Folino


Mr. McCluney


Mr. Roller


Mr. Gill


20



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Ms. Herrera


Mr. Lee


Ms. Mulvany


Mr. Rockenbach


Mr. Smith 1 2


Mr. Wick






|        |            
|------- | -----------
|Item 2. | Properties.





21



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|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.









Vixel
Corporation. v. Brocade Communications Systems, Inc.,




22



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Russell
Fink v. Vixel Corporation, et al., Fink v. Vixel Fink v. Vixel






23



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|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.



24



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PART II




|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.

Principal Market and Prices




|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|2005           |  |      |       |  |     |   |       | 
|Fourth Quarter |  | $    | 19.86 |  |     | $ | 15.06 | 
|Third Quarter  |  |      | 18.85 |  |     |   | 15.35 | 
|Second Quarter |  |      | 16.25 |  |     |   | 10.00 | 
|First Quarter  |  |      | 14.91 |  |     |   | 9.26  | 
|              
|2004           |  |      |       |  |     |   |       | 
|Fourth Quarter |  | $    | 22.80 |  |     | $ | 14.90 | 
|Third Quarter  |  |      | 31.30 |  |     |   | 20.35 | 
|Second Quarter |  |      | 29.94 |  |     |   | 23.85 | 
|First Quarter  |  |      | 28.00 |  |     |   | 19.70 | 

Number of Common Stockholders




Dividends






Issuer Purchases of Equity Securities








|        |                                      
|------- | -------------------------------------
|Item 6. | Selected Consolidated Financial Data.



25



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Selected Consolidated Statement of Operations Data


|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |         |        |         |         | 
|------------------------------------------------ | ---------------------------------------------------- | ------------------------------------- | ------------------------- | ------------ | -------- | ------- | -------- | -------- | ------ | ------- | -------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | 
|                                                 |                                                      | Year Ended                            |                          
|                                                 |                                                      |                                       |                          
|                                                 |                                                      | July 3,                               |                           |              | June 27, |         |          | June 29, |        |         | June 30, |         |        | July 1, |         
|                                                 |                                                      | 2005                                  |                           |              | 2004     |         |          | 2003     |        |         | 2002     |         |        | 2001    |         
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      | (In thousands, except per share data) |                          
|Net revenues:                                    |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |        
|                                                 | Fibre Channel                                        |                                       | $                         | 375,569      |          |         | $        | 363,871  |        |         | $        | 304,596 |        |         | $        | 247,705 |        |         | $       | 234,020 |       
|                                                 | IP networking                                        |                                       |                           | 65           |          |         |          | 529      |        |         |          | 2,408   |        |         |          | 4,242   |        |         |         | 1,567   |       
|                                                 | Other                                                |                                       |                           | 19           |          |         |          | 22       |        |         |          | 1,204   |        |         |          | 2,794   |        |         |         | 9,720   |       
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      |                                       | Total net revenues        |              |          | 375,653 |          |          |        | 364,422 |          |         |        | 308,208 |          |         |        | 254,741 |         |         |        | 245,307 |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 | Cost of sales                                        |                                       |                           | 139,682      |          |         |          | 131,803  |        |         |          | 112,040 |        |         |          | 122,871 |        |         |         | 120,812 |       
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      |                                       |                           | Gross profit |          |         | 235,971  |          |        |         | 232,619  |         |        |         | 196,168  |         |        |         | 131,870 |         |        |         | 124,495 | 
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Operating expenses:                              |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |        
|                                                 | Engineering and development                          |                                       |                           | 79,971       |          |         |          | 73,211   |        |         |          | 61,257  |        |         |          | 47,560  |        |         |         | 27,002  |       
|                                                 | Selling and marketing                                |                                       |                           | 32,441       |          |         |          | 28,035   |        |         |          | 18,994  |        |         |          | 19,462  |        |         |         | 16,734  |       
|                                                 | General and administrative                           |                                       |                           | 11,636       |          |         |          | 18,815   |        |         |          | 40,291  |        |         |          | 12,983  |        |         |         | 12,111  |       
|                                                 | Amortization of goodwill and other intangibles       |                                       |                           | 26,162       |          |         |          | 19,093   |        |         |          | 5,807   |        |         |          | 156,209 |        |         |         | 52,085  |       
|                                                 | Impairment of goodwill                               |                                       |                           | 1,096        |          |         |          | 583,499  |        |         |          |        |        |         |          |        |        |         |         |        |       
|                                                 | In-process research and development                  |                                       |                           |             |          |         |          | 11,400   |        |         |          |        |        |         |          |        |        |         |         | 22,280  |       
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      |                                       | Total operating expenses  |              |          | 151,306 |          |          |        | 734,053 |          |         |        | 126,349 |          |         |        | 236,214 |         |         |        | 130,212 |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Operating income (loss)                          |                                                      |                                       | 84,665                    |              |          |         | (501,434 | )        |        |         | 69,819   |         |        |         | (104,344 | )       |        |         | (5,717  | )      
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Nonoperating income:                             |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |        
|                                                 | Interest income                                      |                                       |                           | 13,106       |          |         |          | 9,149    |        |         |          | 12,991  |        |         |          | 11,239  |        |         |         | 12,539  |       
|                                                 | Interest expense                                     |                                       |                           | (4,202       | )        |         |          | (4,754   | )      |         |          | (5,510  | )      |         |          | (3,396  | )      |         |         | (1      | )     
|                                                 | Gain on repurchase of convertible subordinated notes |                                       |                           | 20,514       |          |         |          | 2,670    |        |         |          | 28,729  |        |         |          |        |        |         |         |        |       
|                                                 | Other income (expense), net                          |                                       |                           | (2,273       | )        |         |          | 109      |        |         |          | (78     | )      |         |          | (26     | )      |         |         | 1,763   |       
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      |                                       | Total nonoperating income |              |          | 27,145  |          |          |        | 7,174   |          |         |        | 36,132  |          |         |        | 7,817   |         |         |        | 14,301  |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Income (loss) before income taxes                |                                                      |                                       | 111,810                   |              |          |         | (494,260 | )        |        |         | 105,951  |         |        |         | (96,527  | )       |        |         | 8,584   |        
|Income tax provision (benefit)                   |                                                      |                                       | 40,221                    |              |          |         | 38,062   |          |        |         | 40,262   |         |        |         | (293     | )       |        |         | 32,187  |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Net income (loss)                                |                                                      | $                                     | 71,589                    |              |          | $       | (532,322 | )        |        | $       | 65,689   |         |        | $       | (96,234  | )       |        | $       | (23,603 | )      
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Net income (loss) per share:                     |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |        
|                                                 |                                                      | Basic                                 |                           | $            | 0.86     |         |          | $        | (6.47  | )       |          | $       | 0.80   |         |          | $       | (1.18  | )       |         | $       | (0.31  | )      
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      | Diluted                               |                           | $            | 0.80     |         |          | $        | (6.47  | )       |          | $       | 0.79   |         |          | $       | (1.18  | )       |         | $       | (0.31  | )      
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|Number of shares used in per share computations: |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |          |         |        |         |         |        
|                                                 |                                                      | Basic                                 |                           |              | 82,819   |         |          |          | 82,293 |         |          |         | 82,051 |         |          |         | 81,487 |         |         |         | 76,122 |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         
|                                                 |                                                      | Diluted                               |                           |              | 92,970   |         |          |          | 82,293 |         |          |         | 87,914 |         |          |         | 81,487 |         |         |         | 76,122 |        
|                                                 |                                                      |                                       |                           |              |          |         |          |          |        |         |          |         |        |         |         

26



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##### Table of Contents



Selected Consolidated Balance Sheet Data


|                                        |  |                |          |   |          |   |          |          |  |   |           |   |  |         |           |   |  |   |         | 
|--------------------------------------- |  | -------------- | -------- | - | -------- | - | -------- | -------- |  | - | --------- | - |  | ------- | --------- | - |  | - | ------- | 
|                                        |  | Year Ended     |         
|                                        |  |                |         
|                                        |  | July 3,        |          |   | June 27, |   |          | June 29, |  |   | June 30,  |   |  | July 1, |          
|                                        |  | 2005           |          |   | 2004     |   |          | 2003     |  |   | 2002      |   |  | 2001    |          
|                                        |  |                |          |   |          |   |          |          |  |   |           |   |  |         |          
|                                        |  | (In thousands) |         
|Total current assets                    |  | $              | 584,457  |   |          | $ | 541,326  |          |  | $ | 498,232   |   |  | $       | 597,566   |   |  | $ | 267,636 | 
|Total current liabilities               |  |                | 76,644   |   |          |   | 54,496   |          |  |   | 75,061    |   |  |         | 39,360    |   |  |   | 41,302  | 
|                                        |  |                |          |   |          |   |          |          |  |   |           |   |  |         |          
|Working capital                         |  |                | 507,813  |   |          |   | 486,830  |          |  |   | 423,171   |   |  |         | 558,206   |   |  |   | 226,334 | 
|Total assets                            |  |                | 801,781  |   |          |   | 972,981  |          |  |   | 1,189,769 |   |  |         | 1,207,364 |   |  |   | 918,014 | 
|Convertible subordinated notes          |  |                | 233,382  |   |          |   | 524,845  |          |  |   | 208,518   |   |  |         | 345,000   |   |  |   |        | 
|Retained earnings (accumulated deficit) |  |                | (471,867 | ) |          |   | (543,456 | )        |  |   | (11,134   | ) |  |         | (76,823   | ) |  |   | 19,411  | 
|Total stockholders equity              |  |                | 477,591  |   |          |   | 393,154  |          |  |   | 901,930   |   |  |         | 823,004   |   |  |   | 876,686 | 



|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

Forward-Looking Statements






27



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Executive Overview








Business Combination




28



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Convertible Subordinated Notes Offering




Results of Operations for Emulex Corporation and
Subsidiaries




|                        |                                     |                            |      |       |       |  |        |       |       |  |      |      |       | 
|----------------------- | ----------------------------------- | -------------------------- | ---- | ----- | ----- |  | ------ | ----- | ----- |  | ---- | ---- | ----- | 
|                        |                                     | Percentage of Net Revenues |     
|                        |                                     |                            |     
|                        |                                     | 2005                       |      |       | 2004  |  |        | 2003  |      
|                        |                                     |                            |      |       |       |  |        |       |      
|Net revenues:           |                                     |                            |      |       |       |  |        |       |       |  |      |     
|                        | Fibre Channel                       |                            |      | 100.0 | %     |  |        | 99.9  | %     |  |      | 98.8 | %    
|                        | IP networking                       |                            |      |      |       |  |        | 0.1   |       |  |      | 0.8  |      
|                        | Other                               |                            |      |      |       |  |        | 0.0   |       |  |      | 0.4  |      
|                        |                                     |                            |      |       |       |  |        |       |      
|                        |                                     | Total net revenues         |      |       | 100.0 |  |        |       | 100.0 |  |      |      | 100.0 | 
|                        |                                     |                            |      |       |       |  |        |       |      
|Cost of sales           |                                     |                            | 37.2 |       |       |  | 36.2   |       |       |  | 36.4 |     
|                        |                                     |                            |      |       |       |  |        |       |      
|                        | Gross profit                        |                            |      | 62.8  |       |  |        | 63.8  |       |  |      | 63.6 |      
|                        |                                     |                            |      |       |       |  |        |       |      
|Operating expenses:     |                                     |                            |      |       |       |  |        |       |       |  |      |     
|                        | Engineering and development         |                            |      | 21.3  |       |  |        | 20.1  |       |  |      | 19.9 |      
|                        | Selling and marketing               |                            |      | 8.6   |       |  |        | 7.7   |       |  |      | 6.1  |      
|                        | General and administrative          |                            |      | 3.1   |       |  |        | 5.2   |       |  |      | 13.0 |      
|                        | Amortization of intangibles         |                            |      | 7.0   |       |  |        | 5.2   |       |  |      | 1.9  |      
|                        | Impairment of goodwill              |                            |      | 0.3   |       |  |        | 160.1 |       |  |      |     |      
|                        | In-process research and development |                            |      |      |       |  |        | 3.1   |       |  |      |     |      
|                        |                                     |                            |      |       |       |  |        |       |      
|                        |                                     | Total operating expenses   |      |       | 40.3  |  |        |       | 201.4 |  |      |      | 40.9  | 
|                        |                                     |                            |      |       |       |  |        |       |      
|Operating income (loss) |                                     |                            | 22.5 |       |       |  | (137.6 | )     |       |  | 22.7 |     
|                        |                                     |                            |      |       |       |  |        |       |      

29



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|                                  |                                                      |                            |      |      |      |  |        |      |     |  |      |      |      | 
|--------------------------------- | ---------------------------------------------------- | -------------------------- | ---- | ---- | ---- |  | ------ | ---- | --- |  | ---- | ---- | ---- | 
|                                  |                                                      | Percentage of Net Revenues |     
|                                  |                                                      |                            |     
|                                  |                                                      | 2005                       |      |      | 2004 |  |        | 2003 |    
|                                  |                                                      |                            |      |      |      |  |        |      |    
|Nonoperating income:              |                                                      |                            |      |      |      |  |        |      |     |  |      |     
|                                  | Interest income                                      |                            |      | 3.5  |      |  |        | 2.5  |     |  |      | 4.2  |     
|                                  | Interest expense                                     |                            |      | (1.1 | )    |  |        | (1.3 | )   |  |      | (1.8 | )   
|                                  | Gain on repurchase of convertible subordinated notes |                            |      | 5.5  |      |  |        | 0.7  |     |  |      | 9.3  |     
|                                  | Other income (expense), net                          |                            |      | (0.6 | )    |  |        |     |     |  |      |     |     
|                                  |                                                      |                            |      |      |      |  |        |      |    
|                                  |                                                      | Total nonoperating income  |      |      | 7.3  |  |        |      | 1.9 |  |      |      | 11.7 | 
|                                  |                                                      |                            |      |      |      |  |        |      |    
|Income (loss) before income taxes |                                                      |                            | 29.8 |      |      |  | (135.7 | )    |     |  | 34.4 |     
|Income tax provision              |                                                      |                            | 10.7 |      |      |  | 10.4   |      |     |  | 13.1 |     
|                                  |                                                      |                            |      |      |      |  |        |      |    
|Net income (loss)                 |                                                      |                            | 19.1 | %    |      |  | (146.1 | )%   |     |  | 21.3 | %   
|                                  |                                                      |                            |      |      |      |  |        |      |    

Fiscal 2005 versus Fiscal 2004


Net Revenues.




Net Revenues by Product Line


|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |   |        |   |  |  |     |   
|------------------ |  | -------------- | ------- | ------------- | ------------ |  | --- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | - | ------ | - | ------ | - |  |  | --- | --
|                   |  |                |         | Percentage of |              |  |     |      | Percentage of |   |              | Increase/ |  |            | Percentage |  
|                   |  | 2005           |         |               | Net Revenues |  |     | 2004 |               |   | Net Revenues |           |  | (Decrease) |            |   | Change |  
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|                   |  | (In thousands) |        
|Fibre Channel      |  | $              | 375,569 |               |              |  | 100 | %    |               | $ | 363,871      |           |  |            | 100        | % |        | $ | 11,698 |   |  |  | 3   | % 
|IP networking      |  |                | 65      |               |              |  |    |      |               |   | 529          |           |  |            |           |   |        |   | (464   | ) |  |  | (88 | %)
|Other              |  |                | 19      |               |              |  |    |      |               |   | 22           |           |  |            |           |   |        |   | (3     | ) |  |  | (14 | %)
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|Total net revenues |  | $              | 375,653 |               |              |  | 100 | %    |               | $ | 364,422      |           |  |            | 100        | % |        | $ | 11,231 |   |  |  | 3   | % 
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  





30



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Net Revenues by Major Customers


|                          |                 |          |  |              |              |  |  |      |   |  |      |    |   |  |  |    |  
|------------------------- | --------------- | -------- |  | ------------ | ------------ |  |  | ---- | - |  | ---- | -- | - |  |  | -- | -
|                          |                 |          |  | Total Direct |             
|                          |                 | Direct   |  |              | and Indirect | 
|                          |                 | Revenues |  |              | Revenues(2)  | 
|                          |                 |          |  |              |              | 
|                          |                 | 2005     |  |              | 2004         |  |  | 2005 |   |  | 2004 |   
|                          |                 |          |  |              |              |  |  |      |   |  |      |   
|Net revenue percentage(1) |                 |          |  |              |              |  |  |      |   |  |      |    |   |  |  |   
|                          | EMC             |          |  |             |              |  |  |     |   |  |      | 20 | % |  |  | 24 | %
|                          | Hewlett-Packard |          |  | 12           | %            |  |  | 18   | % |  |      | 14 | % |  |  | 20 | %
|                          | IBM             |          |  | 31           | %            |  |  | 24   | % |  |      | 31 | % |  |  | 24 | %
|                          | Info-X          |          |  | 17           | %            |  |  | 12   | % |  |      |   |   |  |  |   |  






|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts less than 10 percent are not presented.                                                                                                                                      
|   
|(2) | Customer-specific models sold indirectly are included with the
    OEMs revenues in these columns rather than as revenue for
    the distributors, resellers or other third parties.





Net Revenues by Sales Channel


|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |   |        |   |  |  |     |   
|------------------ |  | -------------- | ------- | ------------- | ------------ |  | --- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | - | ------ | - | ------ | - |  |  | --- | --
|                   |  |                |         | Percentage of |              |  |     |      | Percentage of |   |              | Increase/ |  |            | Percentage |  
|                   |  | 2005           |         |               | Net Revenues |  |     | 2004 |               |   | Net Revenues |           |  | (Decrease) |            |   | Change |  
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|                   |  | (In thousands) |        
|OEM                |  | $              | 246,869 |               |              |  | 66  | %    |               | $ | 232,739      |           |  |            | 64         | % |        | $ | 14,130 |   |  |  | 6   | % 
|Distribution       |  |                | 128,256 |               |              |  | 34  | %    |               |   | 131,573      |           |  |            | 36         | % |        |   | (3,317 | ) |  |  | (3  | %)
|Other              |  |                | 528     |               |              |  |    |      |               |   | 110          |           |  |            |           |   |        |   | 418    |   |  |  | 380 | % 
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|Total net revenues |  | $              | 375,653 |               |              |  | 100 | %    |               | $ | 364,422      |           |  |            | 100        | % |        | $ | 11,231 |   |  |  | 3   | % 
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  





31



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Net Domestic and International Revenues


|                             |                    |                |         |               |              |  |    |      |               |   |              |           |  |            |            |     |        |   |        |        |  |  |    |    |  
|---------------------------- | ------------------ | -------------- | ------- | ------------- | ------------ |  | -- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | --- | ------ | - | ------ | ------ |  |  | -- | -- | -
|                             |                    |                |         | Percentage of |              |  |    |      | Percentage of |   |              | Increase/ |  |            | Percentage |    
|                             |                    | 2005           |         |               | Net Revenues |  |    | 2004 |               |   | Net Revenues |           |  | (Decrease) |            |     | Change |  
|                             |                    |                |         |               |              |  |    |      |               |   |              |           |  |            |            |     |        |  
|                             |                    | (In thousands) |         |               |             
|United States                |                    | $              | 205,633 |               |              |  | 55 | %    |               | $ | 205,390      |           |  |            | 56         | %   |        | $ | 243    |        |  |  |   | % 
|Pacific Rim Countries        |                    |                | 56,550  |               |              |  | 15 | %    |               |   | 36,259       |           |  |            | 10         | %   |        |   | 20,291 |        |  |  | 56 | % 
|Europe and rest of the world |                    |                | 113,470 |               |              |  | 30 | %    |               |   | 122,773      |           |  |            | 34         | %   |        |   | (9,303 | )      |  |  | (8 | %)
|                             |                    |                |         |               |              |  |    |      |               |   |              |           |  |            |            |     |        |  
|                             | Total net revenues |                | $       | 375,653       |              |  |    | 100  | %             |   | $            | 364,422   |  |            |            | 100 | %      |   | $      | 11,231 |  |  |    | 3  | %
|                             |                    |                |         |               |              |  |    |      |               |   |              |           |  |            |            |     |        |  



Gross Profit.


Engineering and Development.


Selling and Marketing.


32



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General and Administrative.


Amortization of Intangibles.


Impairment of Goodwill.


33



---



##### Table of Contents





In-Process Research and Development Expense.


Nonoperating Income.


Income taxes.


Fiscal 2004 versus Fiscal 2003


Net Revenues.




34



---



##### Table of Contents



Net Revenues by Product Line


|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |   |        |   |  |  |     |   
|------------------ |  | -------------- | ------- | ------------- | ------------ |  | --- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | - | ------ | - | ------ | - |  |  | --- | --
|                   |  |                |         | Percentage of |              |  |     |      | Percentage of |   |              | Increase/ |  |            | Percentage |  
|                   |  | 2004           |         |               | Net Revenues |  |     | 2003 |               |   | Net Revenues |           |  | (Decrease) |            |   | Change |  
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|                   |  | (In thousands) |        
|Fibre Channel      |  | $              | 363,871 |               |              |  | 100 | %    |               | $ | 304,596      |           |  |            | 99         | % |        | $ | 59,275 |   |  |  | 19  | % 
|IP networking      |  |                | 529     |               |              |  |    |      |               |   | 2,408        |           |  |            | 1          | % |        |   | (1,879 | ) |  |  | (78 | %)
|Other              |  |                | 22      |               |              |  |    |      |               |   | 1,204        |           |  |            |           |   |        |   | (1,182 | ) |  |  | (98 | %)
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|Total net revenues |  | $              | 364,422 |               |              |  | 100 | %    |               | $ | 308,208      |           |  |            | 100        | % |        | $ | 56,214 |   |  |  | 18  | % 
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  



Net Revenues by Major Customers


|                          |                 |          |  |              |              |  |  |      |   |  |      |    |   |  |  |    |  
|------------------------- | --------------- | -------- |  | ------------ | ------------ |  |  | ---- | - |  | ---- | -- | - |  |  | -- | -
|                          |                 |          |  | Total Direct |             
|                          |                 | Direct   |  |              | and Indirect | 
|                          |                 | Revenues |  |              | Revenues(2)  | 
|                          |                 |          |  |              |              | 
|                          |                 | 2004     |  |              | 2003         |  |  | 2004 |   |  | 2003 |   
|                          |                 |          |  |              |              |  |  |      |   |  |      |   
|Net revenue percentage(1) |                 |          |  |              |              |  |  |      |   |  |      |    |   |  |  |   
|                          | EMC             |          |  |             |              |  |  |     |   |  |      | 24 | % |  |  | 22 | %
|                          | Hewlett-Packard |          |  | 18           | %            |  |  | 23   | % |  |      | 20 | % |  |  | 23 | %
|                          | IBM             |          |  | 24           | %            |  |  | 23   | % |  |      | 24 | % |  |  | 26 | %
|                          | Info-X          |          |  | 12           | %            |  |  |     |   |  |      |   |   |  |  |   |  






|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts less than 10 percent are not presented.                                                                                                                                      
|   
|(2) | Customer-specific models sold indirectly are included with the
    OEMs revenues in these columns rather than as revenue for
    the distributors, resellers or other third parties.



Net Revenues by Sales Channel


|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |   |        |   |  |  |     |   
|------------------ |  | -------------- | ------- | ------------- | ------------ |  | --- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | - | ------ | - | ------ | - |  |  | --- | --
|                   |  |                |         | Percentage of |              |  |     |      | Percentage of |   |              | Increase/ |  |            | Percentage |  
|                   |  | 2004           |         |               | Net Revenues |  |     | 2003 |               |   | Net Revenues |           |  | (Decrease) |            |   | Change |  
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|                   |  | (In thousands) |        
|OEM                |  | $              | 232,739 |               |              |  | 64  | %    |               | $ | 204,317      |           |  |            | 66         | % |        | $ | 28,422 |   |  |  | 14  | % 
|Distribution       |  |                | 131,573 |               |              |  | 36  | %    |               |   | 103,719      |           |  |            | 34         | % |        |   | 27,854 |   |  |  | 27  | % 
|Other              |  |                | 110     |               |              |  |    |      |               |   | 172          |           |  |            |           |   |        |   | (62    | ) |  |  | (36 | %)
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|Total net revenues |  | $              | 364,422 |               |              |  | 100 | %    |               | $ | 308,208      |           |  |            | 100        | % |        | $ | 56,214 |   |  |  | 18  | % 
|                   |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  



35



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Net Domestic and International Revenues


|                         |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |   |        |  |  |  |    |  
|------------------------ |  | -------------- | ------- | ------------- | ------------ |  | --- | ---- | ------------- | - | ------------ | --------- |  | ---------- | ---------- | - | ------ | - | ------ |  |  |  | -- | -
|                         |  |                |         | Percentage of |              |  |     |      | Percentage of |   |              | Increase/ |  |            | Percentage |  
|                         |  | 2004           |         |               | Net Revenues |  |     | 2003 |               |   | Net Revenues |           |  | (Decrease) |            |   | Change |  
|                         |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|                         |  | (In thousands) |        
|Domestic                 |  | $              | 205,390 |               |              |  | 56  | %    |               | $ | 185,195      |           |  |            | 60         | % |        | $ | 20,195 |  |  |  | 11 | %
|Pacific Rim              |  |                | 36,259  |               |              |  | 10  | %    |               |   | 21,537       |           |  |            | 7          | % |        |   | 14,722 |  |  |  | 68 | %
|Europe and rest of world |  |                | 122,773 |               |              |  | 34  | %    |               |   | 101,476      |           |  |            | 33         | % |        |   | 21,297 |  |  |  | 21 | %
|                         |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  
|Total net revenues       |  | $              | 364,422 |               |              |  | 100 | %    |               | $ | 308,208      |           |  |            | 100        | % |        | $ | 56,214 |  |  |  | 18 | %
|                         |  |                |         |               |              |  |     |      |               |   |              |           |  |            |            |   |        |  



Gross Profit.


Engineering and Development.


Selling and Marketing.


36



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##### Table of Contents





General and Administrative.


Amortization of Intangibles.


Impairment of Goodwill.


37



---



##### Table of Contents





In-Process Research and Development Expense.


Nonoperating Income.


Income taxes.


Critical Accounting Policies






Revenue Recognition.


38



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##### Table of Contents





Warranty.


Allowance for Doubtful Accounts.


Intangibles and Other Long-Lived Assets.


Inventories.


Income Taxes.


39



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##### Table of Contents





Stock Compensation.


Liquidity and Capital Resources










40



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##### Table of Contents



















41



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##### Table of Contents



Russell Fink v. Vixel Corporation, et al., Fink v. Vixel Fink v. Vixel








|                                               |       |                |         |                        |           |   |        |          |  |     |          |         |         |       |       |       |  |   |     |     | 
|---------------------------------------------- | ----- | -------------- | ------- | ---------------------- | --------- | - | ------ | -------- |  | --- | -------- | ------- | ------- | ----- | ----- | ----- |  | - | --- | --- | 
|                                               |       |                |         | Payments Due by Period |          
|                                               |       |                |         |                        |          
|                                               |       |                |         | Less                   |           |   |       
|                                               |       |                |         | than                   |           |   | 1-3    |          |  | 4-5 |          |         | After 5 |      
|                                               |       | Total          |         |                        | 1 Year(2) |   |        | Years(3) |  |     | Years(4) |         |         | Years |      
|                                               |       |                |         |                        |           |   |        |          |  |     |          |         |         |       |      
|                                               |       | (In thousands) |        
|Convertible subordinated notes and interest(1) |       | $              | 236,885 |                        |           | $ | 590    |          |  | $   | 236,295  |         |         | $     |      |       |  | $ |    |    
|Leases                                         |       |                | 5,604   |                        |           |   | 1,500  |          |  |     | 1,807    |         |         |       | 1,532 |       |  |   | 765 |    
|Inventory purchase commitments                 |       |                | 20,644  |                        |           |   | 20,644 |          |  |     |         |         |         |       |      |       |  |   |    |    
|Other commitments                              |       |                | 1,083   |                        |           |   | 1,083  |          |  |     |         |         |         |       |      |       |  |   |    |    
|                                               |       |                |         |                        |           |   |        |          |  |     |          |         |         |       |      
|                                               | Total |                | $       | 264,216                |           |   | $      | 23,817   |  |     | $        | 238,102 |         |       | $     | 1,532 |  |   | $   | 765 | 
|                                               |       |                |         |                        |           |   |        |          |  |     |          |         |         |       |      

42



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The remaining principal payment related to the outstanding
    0.25 percent private placement of $236.0 million is
    shown as a payment in the period for the two fiscal years ending
    June 2008 above as holders of these 20-year notes may require us
    to purchase the notes for cash by giving us written notice as
    early as 20 business days prior to each of December 15,
    2006, December 15, 2008, December 15, 2013, and
    December 15, 2018.
|   
|(2) | Fiscal year ending July 2, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) | Fiscal years ending July 1, 2007 and June 29, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | Fiscal years ending June 28, 2009 and June 27, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                 



|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Qualitative and Quantitative Disclosures about Market
    Risk.

Interest Rate Sensitivity






Foreign Currency






|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure.





|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures




43



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##### Table of Contents





Managements Report on Internal Control Over Financial
Reporting








Changes in Internal Control Over Financial Reporting




PART III




|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant.







|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.





44



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|                      |  |               |         |  |                  |   |         | 
|--------------------- |  | ------------- | ------- |  | ---------------- | - | ------- | 
|Name                  |  | 2005 Q4 Bonus |         |  | Total 2005 Bonus |  
|                      |  |               |         |  |                  |  
|Paul F. Folino        |  | $             | 145,627 |  |                  | $ | 494,488 | 
|Kirk D. Roller        |  |               | 54,236  |  |                  |   | 184,163 | 
|James M. McCluney     |  |               | 53,535  |  |                  |   | 181,783 | 
|Karen Mulvany         |  |               | 31,634  |  |                  |   | 107,916 | 
|Michael J. Rockenbach |  |               | 29,572  |  |                  |   | 100,414 | 
|William F. Gill       |  |               | 49,734  |  |                  |   | 166,472 | 



|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management.



45



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##### Table of Contents



Securities Authorized for Issuance Under Equity Compensation
Plans




|                                                               |  |                      |            |  |                      |                      |                     |                        |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | ---------- |  | -------------------- | -------------------- | ------------------- | ---------------------- |  |  | --------- | 
|                                                               |  |                      |            |  |                      | Number of securities |                    
|                                                               |  |                      |            |  |                      | remaining available  |                    
|                                                               |  | Number of securities |            |  |                      |                      | for future issuance |                       
|                                                               |  | to be issued upon    |            |  | Weighted-average     |                      |                     | under equity           | 
|                                                               |  | exercise of          |            |  | exercise price of    |                      |                     | compensation plans     | 
|                                                               |  | outstanding options, |            |  | outstanding options, |                      |                     | (excluding securities  | 
|Plan Category                                                  |  | warrants and rights  |            |  | warrants and rights  |                      |                     | related in column (a)) | 
|                                                               |  |                      |            |  |                      |                      |                     |                        | 
|                                                               |  | (a)                  |            |  | (b)                  |                      |                     | (c)                    | 
|Equity compensations plans approved by security holders(1)     |  |                      | 12,757,002 |  |                      | $                    | 23.42               |                        |  |  | 2,413,416 | 
|Employee stock purchase plan approved by security holders(2)   |  |                      |           |  |                      |                      |                    |                        |  |  | 1,229,335 | 
|Equity compensations plans not approved by security holders(3) |  |                      | 1,353,462  |  |                      | $                    | 10.13               |                        |  |  | 441,251   | 
|                                                               |  |                      |            |  |                      |                      |                     |                        | 
|Total                                                          |  |                      | 14,110,464 |  |                      | $                    | 22.15               |                        |  |  | 4,084,002 | 
|                                                               |  |                      |            |  |                      |                      |                     |                        | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of the Emulex Corporation Employee Stock Option Plan,
    the Emulex Corporation 2004 Employee Stock Incentive Plan and
    the Emulex Corporation 1997 Stock Option Plan for Non-Employee
    Directors.                                                                                                                                                                                                                           
|   
|(2) | The Emulex Employee Stock Purchase Plan enables employees to
    purchase our common stock at a 15 percent discount to the
    lower of market value at the beginning or end of each six month
    offering period. As such, the number of shares that may be
    issued during a given six month period and the purchase price of
    such shares cannot be determined in advance. See note 12 to
    our Consolidated Financial Statements.
|   
|(3) | Consists of the Giganet, Inc. 1995 Stock Option Plan, the Vixel
    Corporation Amended and Restated 1995 Stock Option Plan, the
    Vixel Corporation 1999 Equity Incentive Plan, and the Vixel
    Corporation 2000 Non-Officer Equity Incentive Plan. Options
    issued under these plans were converted into options to purchase
    Emulex common stock as a result of the acquisitions of Giganet
    and Vixel.                      



|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.





|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accountant Fees and Services.



PART IV




|         |                                            
|-------- | -------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules.

Financial Statements and Schedules




| |                                     
| | ------------------------------------
| | 1. Consolidated Financial Statements

46



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##### Table of Contents





| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The consolidated financial statements listed in the
    accompanying Index to Consolidated Financial Statements and
    Schedule are filed as part of this report.
|
| | 2. Financial Statement Schedule                                                                                                                                   
|
| | The financial statement schedule listed in the accompanying
    Index to Consolidated Financial Statements and Schedule is filed
    as part of this report.      
|
| | 3. Exhibits                                                                                                                                                       
|
| | See Item 15(b) below.                                                                                                                                             

Exhibit Listing


| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                              
| | -- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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).                                                                                                                                                                                                                                
|
| | 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).                                                                                                                                              
|
| | 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 August 30, 2005).                                                                                                                                                                                                             
|
| | 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).                                                                                                                                                                        
|
| | 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).                                                                                                                                                                                                
|
| | 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).                                                                                                                          
|
| | 4  | .3  |  | Form of 0.25% Convertible Subordinated Note due
    December 15, 2023 (incorporated by reference to
    Exhibit 4.6 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended December 28,
    2003).                                                                                                                                                
|
| | 4  | .4  |  | Indenture between the Company, as Issuer, and U.S. Bank
    National Association, as Trustee, dated December 12, 2003,
    related to the Companys 0.25% Convertible
    Subordinated Notes due December 15, 2023 (incorporated by
    reference to Exhibit 4.7 to the Companys Quarterly
    Report on Form 10-Q for the quarterly period ended
    December 28, 2003).   
|
| | 4  | .5  |  | Registration Rights Agreement between the Company and Credit
    Suisse First Boston Corporation dated December 12, 2003,
    related to the Companys 0.25% Convertible
    Subordinated Notes due December 15, 2023 (incorporated by
    reference to Exhibit 4.8 to the Companys Quarterly
    Report on Form 10-Q for the quarterly period ended
    December 28, 2003).
|
| | 10 | .1* |  | Giganet, Inc. 1995 Stock Option Plan (incorporated by reference
    to Exhibit 99.1 to the Companys Registration
    Statement on Form S-8, filed March 2, 2001).                                                                                                                                                                                                           
|
| | 10 | .2* |  | Emulex Corporation Employee Stock Option Plan, as amended
    (incorporated by reference to Appendix B to the Companys
    Definitive Proxy Statement for its Annual Meeting of
    Stockholders held on November 21, 2002).                                                                                                                                                
|
| | 10 | .3* |  | Emulex Corporation 1997 Stock Option Plan for Non-Employee
    Directors, as amended (incorporated by reference to Appendix C
    to the Companys Definitive Proxy Statement for its Annual
    Meeting of Stockholders held on November 18, 2004).                                                                                                                         
|
| | 10 | .4* |  | Emulex Corporation Employee Stock Purchase Plan, as amended
    (incorporated by reference to Appendix D to the Companys
    Definitive Proxy Statement for its Annual Meeting of
    Stockholders held on November 18, 2004).                                                                                                                                              
|
| | 10 | .5* |  | Emulex Corporation 2004 Employee Stock Incentive Plan
    (incorporated by reference to Appendix B to the Companys
    Definitive Proxy Statement for its Annual Meeting of
    Stockholders held on November 18, 2004).                                                                                                                                                    
|
| | 10 | .6  |  | Standard Commercial Lease between the Flatley Company and
    Giganet, Inc. (incorporated by reference to Exhibit 10.15
    to the Companys 2001 Annual Report on Form 10-K).                                                                                                                                                                                               

47



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| |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .7*  |  | Form of Key Employee Retention Agreement to which the following
    executive officers of the Company are a party: James M.
    McCluney, Kirk D. Roller, William F. Gill, Sadie A. Herrera,
    Marshall D. Lee, Karen Mulvany, Michael J. Rockenbach and
    Michael E. Smith (incorporated by reference to Exhibit 10.8
    to the Companys Quarterly Report on Form 10-Q for the
    quarterly period ended December 26, 2004).
|
| | 10 | .8*  |  | Key Employee Retention Agreement with Paul F. Folino
    (incorporated by reference to Exhibit 10.7 of the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended December 26, 2004).                                                                                                                                                                                                                       
|
| | 10 | .9   |  | Form of Indemnification Agreement (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed May 17, 2005).                                                                                                                                                                                                                                                                               
|
| | 10 | .10  |  | Real Estate Lease dated September 12, 2000, between LM
    Venture, LLC and Emulex Corporation (incorporated by reference
    to Exhibit 10.22 to the Companys 2003 Annual Report
    on Form 10-K).                                                                                                                                                                                                                               
|
| | 10 | .11  |  | First Amendment to Lease (amendment dated February 8,
    2001), between LM Venture LLC and Emulex Corporation
    (incorporated by reference to Exhibit 10.23 to the
    Companys 2003 Annual Report on Form 10-K).                                                                                                                                                                                                               
|
| | 10 | .12* |  | Vixel Corporation Amended and Restated 1995 Stock Option Plan
    incorporated by reference to Exhibit 10.2 of Amendment
    No. 1 to the Registration Statement on Form S-1 of
    Vixel Corporation (File No. 333-81347), filed on
    August 16, 1999).                                                                                                                                                                          
|
| | 10 | .13* |  | Vixel Corporation 1999 Equity Incentive Plan (as amended)
    (incorporated by reference to Exhibit 10.23 of Amendment
    No. 1 to the Registration Statement on Form S-1 of
    Vixel Corporation (File No. 333-81347), filed on
    August 16, 1999).                                                                                                                                                                            
|
| | 10 | .14* |  | Vixel Corporation 2000 Non-Officer Equity Incentive Plan
    (incorporate reference to Exhibit 99.1 of the Registration
    Statement on Form S-8/S-3 of Vixel Corporation (File
    No. 333-39000), filed on June 9, 2000).                                                                                                                                                                                                        
|
| | 10 | .15  |  | First Amendment to Standard Commercial Lease (amendment dated
    July 1, 2004) between the Flatley Company and Emulex
    Design & Manufacturing Corporation,
    successor-in-interest to Giganet, Inc. (incorporated by
    reference to Exhibit 10.15 to the Companys 2004
    Annual Report on Form 10-K).                                                                                                                    
|
| | 10 | .16* |  | Form of Director Stock Option Agreement and related form of
    Grant Summary for grants made pursuant to the 1997 Non-Employee
    Director Stock Option Plan (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed August 30, 2005).                                                                                                                                               
|
| | 10 | .17* |  | Form of Incentive Stock Option Agreement for grants made
    pursuant to the Employee Stock Option Plan (incorporated by
    reference to Exhibit 10.2 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                                                                                                                                                      
|
| | 10 | .18* |  | Form of Non-Qualified Stock Option Agreement for grants made
    pursuant to the Employee Stock Option Plan (incorporated by
    reference to Exhibit 10.3 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                                                                                                                                                  
|
| | 10 | .19* |  | Form of Incentive Stock Option Agreement for grants made
    pursuant to the 2004 Employee Stock Incentive Plan (incorporated
    by reference to Exhibit 10.4 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                                                                                                                                              
|
| | 10 | .20* |  | Form of Non-Qualified Stock Option Agreement for grants made
    pursuant to the 2004 Employee Stock Incentive Plan (incorporated
    by reference to Exhibit 10.5 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                                                                                                                                          
|
| | 10 | .22* |  | Form of Notice of Grant of Stock Options and Stock Option
    Agreement for grants made pursuant to both the Employee Stock
    Option Plan and 2004 Employee Stock Incentive Plan (incorporated
    by reference to Exhibit 10.6 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                                                                           
|
| | 10 | .23  |  | Office lease Agreement dated August 25, 2005 by and between
    24000 Development, LLC and Emulex Design &
    Manufacturing Corporation (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed August 31, 2005).                                                                                                                                                                     
|
| | 10 | .24* |  | Description of Compensation Arrangements with Non-Employee
    Directors.                                                                                                                                                                                                                                                                                                                                                           
|
| | 10 | .25* |  | Description of Compensation Arrangements for Certain Executive
    Officers.                                                                                                                                                                                                                                                                                                                                                        

48



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| |    |      |  |                                                                                                                                                           
| | -- | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .26* |  | Executive Bonus Plan of Emulex Corporation.                                                                                                               
|
| | 21 |      |  | List of the Companys subsidiaries.                                                                                                                       
|
| | 23 |      |  | Consent of Independent Registered Public Accounting Firm.                                                                                                 
|
| | 31 | A    |  | 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.
|
| | 31 | B    |  | 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.
|
| | 32 |      |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.                                      






|  |                                                                         
|- | ------------------------------------------------------------------------
|* | Indicates a management contract or compensation plan or
    arrangement.

49



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##### Table of Contents






EMULEX CORPORATION AND SUBSIDIARIES


ANNUAL REPORT  FORM 10-K


Items 8, 15(a)(1) and 15(a)(2)


Index to Consolidated Financial Statements and Schedule


July 3, 2005, June 27, 2004, and June 29,
2003


(With Report of Independent Registered Public Accounting Firm
Thereon)


|                                                                                                                     |  |             |    | 
|-------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | 
|                                                                                                                     |  | Page Number |   
|                                                                                                                     |  |             |   
|Consolidated Financial Statements                                                                                    |  |             |    | 
|Reports of Independent Registered Public Accounting Firm                                                             |  |             | 51 | 
|Consolidated Balance Sheets  July 3, 2005, and
    June 27, 2004                                                    |  |             | 53 | 
|Consolidated Statements of Operations  Years ended
    July 3, 2005, June 27, 2004, and June 29, 2003               |  |             | 54 | 
|Consolidated Statements of Stockholders Equity 
    Years ended July 3, 2005, June 27, 2004, and
    June 29, 2003 |  |             | 55 | 
|Consolidated Statements of Cash Flows  Years ended
    July 3, 2005, June 27, 2004, and June 29, 2003               |  |             | 56 | 
|Notes to Consolidated Financial Statements                                                                           |  |             | 57 | 
|                                                                                                                    
|Schedule                                                                                                             |  |             |    | 
|Schedule II  Valuation and Qualifying Accounts
    and Reserves                                                     |  |             | 85 | 



50



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders


Emulex Corporation:








Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) .








51



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders


Emulex Corporation:


Internal Control  Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO)








Internal
Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO) Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO)










52



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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES







CONSOLIDATED BALANCE SHEETS


July 3, 2005 and June 27, 2004


|                                                |                                                                                                                                                                                     |                            |         |          |         |   |         |          |         | 
|----------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | ------- | - | ------- | -------- | ------- | 
|                                                |                                                                                                                                                                                     | 2005                       |         |          | 2004    |  
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | (In thousands,             |        
|                                                |                                                                                                                                                                                     | except share data)         |        
|ASSETS                                         
|Current assets:                                 |                                                                                                                                                                                     |                            |         |          |         |   |         |         
|                                                | Cash and cash equivalents                                                                                                                                                           |                            | $       | 120,317  |         |   | $       | 192,137  |        
|                                                | Restricted cash                                                                                                                                                                     |                            |         |         |         |   |         | 23       |        
|                                                | Investments                                                                                                                                                                         |                            |         | 346,675  |         |   |         | 220,114  |        
|                                                | Accounts and other receivables, less allowance for doubtful
    accounts of $1,919 in 2005 and $2,081 in 2004                                                                       |                            |         | 47,730   |         |   |         | 61,720   |        
|                                                | Litigation settlements receivable                                                                                                                                                   |                            |         |         |         |   |         | 5,101    |        
|                                                | Inventories, net                                                                                                                                                                    |                            |         | 36,266   |         |   |         | 31,835   |        
|                                                | Prepaid expenses                                                                                                                                                                    |                            |         | 4,508    |         |   |         | 3,572    |        
|                                                | Deferred income taxes                                                                                                                                                               |                            |         | 28,961   |         |   |         | 26,824   |        
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | Total current assets       |         |          | 584,457 |   |         |          | 541,326 | 
|Property and equipment, net                     |                                                                                                                                                                                     |                            | 65,976  |          |         |   | 64,570  |         
|Investments                                     |                                                                                                                                                                                     |                            | 54,936  |          |         |   | 243,125 |         
|Intangibles, net                                |                                                                                                                                                                                     |                            | 95,806  |          |         |   | 122,667 |         
|Other assets                                    |                                                                                                                                                                                     |                            | 606     |          |         |   | 1,293   |         
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | $                          | 801,781 |          |         | $ | 972,981 |         
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY           
|Current liabilities:                            |                                                                                                                                                                                     |                            |         |          |         |   |         |         
|                                                | Accounts payable                                                                                                                                                                    |                            | $       | 29,778   |         |   | $       | 21,747   |        
|                                                | Accrued liabilities                                                                                                                                                                 |                            |         | 21,505   |         |   |         | 22,839   |        
|                                                | Income taxes payable                                                                                                                                                                |                            |         | 25,361   |         |   |         | 9,910    |        
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | Total current liabilities  |         |          | 76,644  |   |         |          | 54,496  | 
|Convertible subordinated notes                  |                                                                                                                                                                                     |                            | 233,382 |          |         |   | 524,845 |         
|Deferred income taxes and other                 |                                                                                                                                                                                     |                            | 14,164  |          |         |   | 486     |         
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | Total liabilities          |         |          | 324,190 |   |         |          | 579,827 | 
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|Commitments and contingencies (notes 11 and 13) |                                                                                                                                                                                     |                            |         |          |         |   |         |         
|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; 83,201,002 and 82,413,845 issued and outstanding in
    2005 and 2004, respectively                               |                            |         | 8,320    |         |   |         | 8,241    |        
|                                                | Additional paid-in capital                                                                                                                                                          |                            |         | 944,545  |         |   |         | 936,123  |        
|                                                | Deferred compensation                                                                                                                                                               |                            |         | (3,407   | )       |   |         | (7,754   | )      
|                                                | Accumulated deficit                                                                                                                                                                 |                            |         | (471,867 | )       |   |         | (543,456 | )      
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | Total stockholders equity |         |          | 477,591 |   |         |          | 393,154 | 
|                                                |                                                                                                                                                                                     |                            |         |          |         |  
|                                                |                                                                                                                                                                                     | $                          | 801,781 |          |         | $ | 972,981 |         
|                                                |                                                                                                                                                                                     |                            |         |          |         |  



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EMULEX CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


Years Ended July 3, 2005, June 27, 2004, and
June 29, 2003


|                                                 |                                                      |                                       |         |        |         |   |          |         |         |   |         |        |         | 
|------------------------------------------------ | ---------------------------------------------------- | ------------------------------------- | ------- | ------ | ------- | - | -------- | ------- | ------- | - | ------- | ------ | ------- | 
|                                                 |                                                      | 2005                                  |         |        | 2004    |   |          | 2003    |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 |                                                      | (In thousands, except per share data) |        
|Net revenues                                     |                                                      | $                                     | 375,653 |        |         | $ | 364,422  |         |         | $ | 308,208 |       
|Cost of sales                                    |                                                      |                                       | 139,682 |        |         |   | 131,803  |         |         |   | 112,040 |       
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 |                                                      | Gross profit                          |         |        | 235,971 |   |          |         | 232,619 |   |         |        | 196,168 | 
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Operating expenses:                              |                                                      |                                       |         |        |         |   |          |         |         |   |         |       
|                                                 | Engineering and development                          |                                       |         | 79,971 |         |   |          | 73,211  |         |   |         | 61,257 |        
|                                                 | Selling and marketing                                |                                       |         | 32,441 |         |   |          | 28,035  |         |   |         | 18,994 |        
|                                                 | General and administrative                           |                                       |         | 11,636 |         |   |          | 18,815  |         |   |         | 40,291 |        
|                                                 | Amortization of intangibles                          |                                       |         | 26,162 |         |   |          | 19,093  |         |   |         | 5,807  |        
|                                                 | Impairment of goodwill                               |                                       |         | 1,096  |         |   |          | 583,499 |         |   |         |       |        
|                                                 | In-process research and development                  |                                       |         |       |         |   |          | 11,400  |         |   |         |       |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 |                                                      | Total operating expenses              |         |        | 151,306 |   |          |         | 734,053 |   |         |        | 126,349 | 
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Operating income (loss)                          |                                                      |                                       | 84,665  |        |         |   | (501,434 | )       |         |   | 69,819  |       
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Nonoperating income:                             |                                                      |                                       |         |        |         |   |          |         |         |   |         |       
|                                                 | Interest income                                      |                                       |         | 13,106 |         |   |          | 9,149   |         |   |         | 12,991 |        
|                                                 | Interest expense                                     |                                       |         | (4,202 | )       |   |          | (4,754  | )       |   |         | (5,510 | )      
|                                                 | Gain on repurchase of convertible subordinated notes |                                       |         | 20,514 |         |   |          | 2,670   |         |   |         | 28,729 |        
|                                                 | Other income (expense), net                          |                                       |         | (2,273 | )       |   |          | 109     |         |   |         | (78    | )      
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 |                                                      | Total nonoperating income             |         |        | 27,145  |   |          |         | 7,174   |   |         |        | 36,132  | 
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Income (loss) before income taxes                |                                                      |                                       | 111,810 |        |         |   | (494,260 | )       |         |   | 105,951 |       
|Income tax provision                             |                                                      |                                       | 40,221  |        |         |   | 38,062   |         |         |   | 40,262  |       
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Net income (loss)                                |                                                      | $                                     | 71,589  |        |         | $ | (532,322 | )       |         | $ | 65,689  |       
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Net income (loss) per share:                     |                                                      |                                       |         |        |         |   |          |         |         |   |         |       
|                                                 | Basic                                                |                                       | $       | 0.86   |         |   | $        | (6.47   | )       |   | $       | 0.80   |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 | Diluted                                              |                                       | $       | 0.80   |         |   | $        | (6.47   | )       |   | $       | 0.79   |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|Number of shares used in per share computations: |                                                      |                                       |         |        |         |   |          |         |         |   |         |       
|                                                 | Basic                                                |                                       |         | 82,819 |         |   |          | 82,293  |         |   |         | 82,051 |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        
|                                                 | Diluted                                              |                                       |         | 92,970 |         |   |          | 82,293  |         |   |         | 87,914 |        
|                                                 |                                                      |                                       |         |        |         |   |          |         |        



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EMULEX CORPORATION AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


Years ended July 3, 2005, June 27, 2004, and
June 29, 2003


|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |   |          |   |  |   |          |  
|------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | ---------- | - | ----- | -------- |  | ----- | --------- | - |  | -------- | ------- | - | ------ | - | -------- | - |  | - | -------- | -
|                                                                                      |  |                                   |            |   |            |   |       |          |  | Total |          
|                                                                                      |  | Common Stock                      |            |   | Additional |   |       | Deferred |  |       | Accumu-   |   |  | Stock-   |        
|                                                                                      |  |                                   |            |   | Paid-In    |   |       | Com-     |  |       | lated     |   |  | holders |        
|                                                                                      |  | Shares                            |            |   | Amount     |   |       | Capital  |  |       | pensation |   |  | Deficit  |         |   | Equity |  
|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |  
|                                                                                      |  | (In thousands, except share data) |           
|Balance at June 30, 2002                                                              |  |                                   | 81,800,909 |   |            | $ | 8,180 |          |  | $     | 898,803   |   |  | $        | (7,156  | ) |        | $ | (76,823  | ) |  | $ | 823,004  |  
|Amortization of deferred compensation                                                 |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          | 4,205   |   |        |   |         |   |  |   | 4,205    |  
|Reversal of deferred compensation due to employee terminations                        |  |                                   |           |   |            |   |      |          |  |       | (790      | ) |  |          | 790     |   |        |   |         |   |  |   |         |  
|Exercise of stock options                                                             |  |                                   | 518,358    |   |            |   | 52    |          |  |       | 3,554     |   |  |          |        |   |        |   |         |   |  |   | 3,606    |  
|Tax benefit from exercise of stock options                                            |  |                                   |           |   |            |   |      |          |  |       | 4,054     |   |  |          |        |   |        |   |         |   |  |   | 4,054    |  
|Deferred compensation for employee stock purchase plan                                |  |                                   |           |   |            |   |      |          |  |       | 998       |   |  |          | (998    | ) |        |   |         |   |  |   |         |  
|Issuance of common stock under employee stock purchase plan                           |  |                                   | 146,546    |   |            |   | 15    |          |  |       | 1,357     |   |  |          |        |   |        |   |         |   |  |   | 1,372    |  
|Net income                                                                            |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          |        |   |        |   | 65,689   |   |  |   | 65,689   |  
|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |  
|Balance at June 29, 2003                                                              |  |                                   | 82,465,813 |   |            |   | 8,247 |          |  |       | 907,976   |   |  |          | (3,159  | ) |        |   | (11,134  | ) |  |   | 901,930  |  
|Options issued and deferred compensation related to purchase of
    Vixel Corporation |  |                                   |           |   |            |   |      |          |  |       | 47,538    |   |  |          | (13,926 | ) |        |   |         |   |  |   | 33,612   |  
|Amortization of deferred compensation                                                 |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          | 6,822   |   |        |   |         |   |  |   | 6,822    |  
|Reversal of deferred compensation due to employee terminations                        |  |                                   |           |   |            |   |      |          |  |       | (2,509    | ) |  |          | 2,509   |   |        |   |         |   |  |   |         |  
|Exercise of stock options                                                             |  |                                   | 1,284,754  |   |            |   | 128   |          |  |       | 11,096    |   |  |          |        |   |        |   |         |   |  |   | 11,224   |  
|Tax benefit from exercise of stock options                                            |  |                                   |           |   |            |   |      |          |  |       | 9,529     |   |  |          |        |   |        |   |         |   |  |   | 9,529    |  
|Repurchase of common stock                                                            |  |                                   | (1,500,000 | ) |            |   | (150  | )        |  |       | (40,350   | ) |  |          |        |   |        |   |         |   |  |   | (40,500  | )
|Issuance of common stock under employee stock purchase plan                           |  |                                   | 163,278    |   |            |   | 16    |          |  |       | 2,843     |   |  |          |        |   |        |   |         |   |  |   | 2,859    |  
|Net loss                                                                              |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          |        |   |        |   | (532,322 | ) |  |   | (532,322 | )
|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |  
|Balance at June 27, 2004                                                              |  |                                   | 82,413,845 |   |            |   | 8,241 |          |  |       | 936,123   |   |  |          | (7,754  | ) |        |   | (543,456 | ) |  |   | 393,154  |  
|Amortization of deferred compensation                                                 |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          | 3,984   |   |        |   |         |   |  |   | 3,984    |  
|Reversal of deferred compensation due to employee terminations                        |  |                                   |           |   |            |   |      |          |  |       | (363      | ) |  |          | 363     |   |        |   |         |   |  |   |         |  
|Exercise of stock options                                                             |  |                                   | 530,565    |   |            |   | 53    |          |  |       | 4,391     |   |  |          |        |   |        |   |         |   |  |   | 4,444    |  
|Tax benefit from exercise of stock options                                            |  |                                   |           |   |            |   |      |          |  |       | 1,882     |   |  |          |        |   |        |   |         |   |  |   | 1,882    |  
|Issuance of common stock under employee stock purchase plan                           |  |                                   | 256,592    |   |            |   | 26    |          |  |       | 2,512     |   |  |          |        |   |        |   |         |   |  |   | 2,538    |  
|Net income                                                                            |  |                                   |           |   |            |   |      |          |  |       |          |   |  |          |        |   |        |   | 71,589   |   |  |   | 71,589   |  
|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |  
|Balance at July 3, 2005                                                               |  |                                   | 83,201,002 |   |            | $ | 8,320 |          |  | $     | 944,545   |   |  | $        | (3,407  | ) |        | $ | (471,867 | ) |  | $ | 477,591  |  
|                                                                                      |  |                                   |            |   |            |   |       |          |  |       |           |   |  |          |         |   |        |  



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EMULEX CORPORATION AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF CASH FLOWS


July 3, 2005, June 27, 2004, and June 29,
2003


|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |          |         |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------------------------------- | -------- | -------- | ------ | - | -------- | -------- | ------- | - | -------- | -------- | ------- | -
|                                                                                      |                                                                                              | 2005                                                  |          |          | 2004   |   |          | 2003     |        
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|                                                                                      |                                                                                              | (In thousands)                                        |         
|Cash flows from operating activities:                                                 |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|Net income (loss)                                                                     |                                                                                              | $                                                     | 71,589   |          |        | $ | (532,322 | )        |         | $ | 65,689   |         
|                                                                                      | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                       |          |          |        |   |          |          |         |   |          |          |        
|                                                                                      | Depreciation and amortization of property and equipment                                      |                                                       |          | 14,932   |        |   |          | 12,442   |         |   |          | 11,049   |        
|                                                                                      | Amortization of discount on 0.25% convertible subordinated
    notes                         |                                                       |          | 2,827    |        |   |          | 2,024    |         |   |          |         |        
|                                                                                      | Gain on repurchase of convertible subordinated notes                                         |                                                       |          | (20,514  | )      |   |          | (2,670   | )       |   |          | (28,729  | )      
|                                                                                      | Litigation settlements, net of insurance recoveries                                          |                                                       |          | (4,649   | )      |   |          | 698      |         |   |          | 27,007   |        
|                                                                                      | Amortization of deferred compensation                                                        |                                                       |          | 3,984    |        |   |          | 6,822    |         |   |          | 4,205    |        
|                                                                                      | Amortization of intangibles                                                                  |                                                       |          | 26,162   |        |   |          | 19,093   |         |   |          | 5,807    |        
|                                                                                      | Impairment of goodwill                                                                       |                                                       |          | 1,096    |        |   |          | 583,499  |         |   |          |         |        
|                                                                                      | Impairment of strategic investment and related note receivable                               |                                                       |          | 2,265    |        |   |          |         |         |   |          |         |        
|                                                                                      | In-process research and development                                                          |                                                       |          |         |        |   |          | 11,400   |         |   |          |         |        
|                                                                                      | Loss on disposal of property and equipment                                                   |                                                       |          | 86       |        |   |          | 83       |         |   |          | 147      |        
|                                                                                      | Deferred income taxes                                                                        |                                                       |          | 10,168   |        |   |          | 15,820   |         |   |          | 27,520   |        
|                                                                                      | Tax benefit from exercise of stock options                                                   |                                                       |          | 2,581    |        |   |          | 9,529    |         |   |          | 4,054    |        
|                                                                                      | Allowance for doubtful accounts                                                              |                                                       |          |         |        |   |          | 141      |         |   |          | 248      |        
|                                                                                      | Changes in assets and liabilities:                                                           |                                                       |          |          |        |   |          |          |         |   |          |          |        
|                                                                                      |                                                                                              | Accounts and other receivables                        |          |          | 13,225 |   |          |          | (8,809  | ) |          |          | (10,667 | )
|                                                                                      |                                                                                              | Inventories                                           |          |          | (4,431 | ) |          |          | (19,436 | ) |          |          | 3,835   |  
|                                                                                      |                                                                                              | Prepaid expenses and other assets                     |          |          | (695   | ) |          |          | 4,791   |   |          |          | 1,577   |  
|                                                                                      |                                                                                              | Accounts payable and accrued liabilities              |          |          | 7,888  |   |          |          | 3,021   |   |          |          | (3,111  | )
|                                                                                      |                                                                                              | Reimbursement for (payment of) litigation settlements |          |          | 9,052  |   |          |          | (31,506 | ) |          |          |        |  
|                                                                                      |                                                                                              | Income taxes payable                                  |          |          | 15,451 |   |          |          | 3,976   |   |          |          | (1,563  | )
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|                                                                                      | Net cash provided by operating activities                                                    |                                                       |          | 151,017  |        |   |          | 78,596   |         |   |          | 107,068  |        
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|Cash flows from investing activities:                                                 |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|Net proceeds from sale of property and equipment                                      |                                                                                              |                                                       | 42       |          |        |   | 53       |          |         |   | 11       |         
|Additions to property and equipment                                                   |                                                                                              |                                                       | (16,466  | )        |        |   | (48,418  | )        |         |   | (19,218  | )       
|Net (increase) decrease in restricted cash related to
    construction escrow account |                                                                                              |                                                       | 23       |          |        |   | 9,319    |          |         |   | (7,318   | )       
|Payments for purchase of Vixel Corporation, net of cash acquired                      |                                                                                              |                                                       |         |          |        |   | (294,729 | )        |         |   |         |         
|Payments for purchase of the technology assets of Trebia
    Networks, Inc.           |                                                                                              |                                                       |         |          |        |   | (2,094   | )        |         |   |         |         
|Purchases of investments                                                              |                                                                                              |                                                       | (725,929 | )        |        |   | (402,118 | )        |         |   | (650,184 | )       
|Maturities of investments                                                             |                                                                                              |                                                       | 786,057  |          |        |   | 422,704  |          |         |   | 523,242  |         
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|                                                                                      | Net cash provided by (used in) investing activities                                          |                                                       |          | 43,727   |        |   |          | (315,283 | )       |   |          | (153,467 | )      
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|Cash flows from financing activities:                                                 |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|Repayment of short term indebtedness, notes payable and capital
    leases            |                                                                                              |                                                       |         |          |        |   | (175,300 | )        |         |   |         |         
|Proceeds from short term indebtedness                                                 |                                                                                              |                                                       |         |          |        |   | 174,000  |          |         |   |         |         
|Proceeds from issuance of common stock under stock plans                              |                                                                                              |                                                       | 6,982    |          |        |   | 14,083   |          |         |   | 4,978    |         
|Repurchase of common stock                                                            |                                                                                              |                                                       |         |          |        |   | (40,500  | )        |         |   |         |         
|Net proceeds from issuance of 0.25% convertible
    subordinated notes                |                                                                                              |                                                       |         |          |        |   | 505,179  |          |         |   |         |         
|Repurchase of convertible subordinated notes                                          |                                                                                              |                                                       | (273,546 | )        |        |   | (185,609 | )        |         |   | (104,169 | )       
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|                                                                                      | Net cash provided by (used in) financing activities                                          |                                                       |          | (266,564 | )      |   |          | 291,853  |         |   |          | (99,191  | )      
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|Net increase (decrease) in cash and cash equivalents                                  |                                                                                              |                                                       | (71,820  | )        |        |   | 55,166   |          |         |   | (145,590 | )       
|Cash and cash equivalents at beginning of year                                        |                                                                                              |                                                       | 192,137  |          |        |   | 136,971  |          |         |   | 282,561  |         
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|Cash and cash equivalents at end of year                                              |                                                                                              | $                                                     | 120,317  |          |        | $ | 192,137  |          |         | $ | 136,971  |         
|                                                                                      |                                                                                              |                                                       |          |          |        |   |          |          |        
|Supplemental disclosures:                                                             |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|Noncash investing and financing activities:                                           |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|                                                                                      | Fair value of assets acquired                                                                |                                                       | $        |         |        |   | $        | 20,849   |         |   | $        |         |        
|                                                                                      | Fair value of liabilities assumed                                                            |                                                       |          |         |        |   |          | 12,736   |         |   |          |         |        
|                                                                                      | Stock options assumed for acquired business                                                  |                                                       |          |         |        |   |          | 47,538   |         |   |          |         |        
|Cash paid during the period for:                                                      |                                                                                              |                                                       |          |          |        |   |          |          |         |   |          |         
|                                                                                      | Interest                                                                                     |                                                       | $        | 1,282    |        |   | $        | 2,888    |         |   | $        | 4,878    |        
|                                                                                      | Income taxes                                                                                 |                                                       |          | 12,527   |        |   |          | 9,387    |         |   |          | 10,735   |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


July 3, 2005, June 27, 2004, and June 29,
2003


Note 1  Summary of Significant
Accounting Policies




| |                            
| | ---------------------------
| | Principles of Consolidation





| |            
| | -----------
| | Fiscal Year





| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                 
| | ----------------
| | Cash Equivalents





| |            
| | -----------
| | Investments





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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






| |                    
| | -------------------
| | Accounts Receivable





| |            
| | -----------
| | Inventories





| |                       
| | ----------------------
| | Property and Equipment





| |                  
| | -----------------
| | Long-Lived Assets





| |                       
| | ----------------------
| | Other Intangibles, Net



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






| |                    
| | -------------------
| | Revenue Recognition







| |                         
| | ------------------------
| | Research and Development





| |             
| | ------------
| | Income Taxes



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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




| |                            
| | ---------------------------
| | Net Income (Loss) per Share





| |                     
| | --------------------
| | Comprehensive Income





| |                   
| | ------------------
| | Stock Compensation



|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |          |   |         |      |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------------------- | ------- | ---- | ------ | - | -------- | ----- | -------- | - | ------- | ---- | ------ | 
|                                                                                                                                              |                       | 2005                                  |         |      | 2004   |   |          | 2003  |         
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|                                                                                                                                              |                       | (In thousands, except per share data) |        
|Net income (loss) as reported                                                                                                                 |                       | $                                     | 71,589  |      |        | $ | (532,322 | )     |          | $ | 65,689  |     
|Add: Total employee stock-based compensation expense included in
    net income (loss) as reported, net of related tax effects                |                       |                                       | 2,742   |      |        |   | 5,095    |       |          |   | 4,205   |     
|Deduct: Total employee stock-based compensation expense
    determined under fair value method for all awards, net of
    related tax effects |                       |                                       | (22,877 | )    |        |   | (35,872  | )     |          |   | (34,270 | )   
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|                                                                                                                                              |                       | Pro forma net income (loss)           |         | $    | 51,454 |   |          | $     | (563,099 | ) |         | $    | 35,624 | 
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|Pro forma net income (loss) per share                                                                                                         |                       |                                       |         |      |        |   |          |       |          |   |         |     
|                                                                                                                                              | Basic  as reported   |                                       | $       | 0.86 |        |   | $        | (6.47 | )        |   | $       | 0.80 |       
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|                                                                                                                                              | Basic  pro forma     |                                       | $       | 0.62 |        |   | $        | (6.84 | )        |   | $       | 0.43 |       
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|                                                                                                                                              | Diluted  as reported |                                       | $       | 0.80 |        |   | $        | (6.47 | )        |   | $       | 0.79 |       
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         
|                                                                                                                                              | Diluted  pro forma   |                                       | $       | 0.58 |        |   | $        | (6.84 | )        |   | $       | 0.43 |       
|                                                                                                                                              |                       |                                       |         |      |        |   |          |       |         

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                                               |  |      |               |  |      |  |                |      |  |  |                | 
|---------------------------------------------- |  | ---- | ------------- |  | ---- |  | -------------- | ---- |  |  | -------------- | 
|                                               |  | 2005 |               |  | 2004 |  |                | 2003 | 
|                                               |  |      |               |  |      |  |                |      | 
|Risk-free interest rate                        |  |      | 2.0%   4.0%  |  |      |  | 1.0%    3.3%  |      |  |  | 1.2%   2.3%   | 
|Stock volatility                               |  |      | 35.1%  84.0% |  |      |  | 40.6%  117.7% |      |  |  | 97.7%  99.1%  | 
|Dividend yield                                 |  |      | 0.0%          |  |      |  | 0.0%           |      |  |  | 0.0%           | 
|Average expected lives (years)                 |  |      | 0.5  2.9     |  |      |  | 0.5  3.4      |      |  |  | 0.5  3.7      | 
|Weighted-average fair value per option granted |  |      | $3.49  $6.08 |  |      |  | $4.92  $18.04 |      |  |  | $8.26  $16.42 | 





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                   
| | ----------------------------------
| | Business and Credit Concentrations





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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






| |                 
| | ----------------
| | Use of Estimates





| |                    
| | -------------------
| | Segment Information





| |                  
| | -----------------
| | Reclassifications





| |                         
| | ------------------------
| | New Accounting Standards





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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003












|         |                     
|-------- | --------------------
|Note 2  | Business Combination





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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003
















| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The estimated revenues associated with the first project were
    evaluated over seven years with peak revenues expected in fiscal
    years 2008 and 2009 and declining revenues thereafter. The
    estimated revenues associated with the second project were
    evaluated over nine years with peak revenues expected in fiscal
    years 2008 and 2009 and declining revenues thereafter. These
    projections are based on managements estimates over the
    expected remaining lives of the technologies.
|
| |  | The discount rates used in the valuation reflect the relative
    risk of the product lines, with a discount rate of 20% used for
    the first project and a discount rate of 18% used for the second
    project. These discount rates were based on the amount and risk
    of effort remaining to complete the respective projects.                                                                                                                                                                             



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003








|                                |                                     |   |         |        | 
|------------------------------- | ----------------------------------- | - | ------- | ------ | 
|Tangible assets                 |                                     | $ | 31,289  |       
|Liabilities                     |                                     |   | 12,736  |       
|                                |                                     |   |        
|Net tangible assets             |                                     |   | 18,553  |       
|                                |                                     |   |        
|Identifiable intangible assets: |                                     |   |         |       
|                                | In-process research and development |   |         | 11,400 | 
|                                | Core technology                     |   |         | 43,300 | 
|                                | Developed technology                |   |         | 9,400  | 
|                                | Patents                             |   |         | 13,100 | 
|                                | Backlog                             |   |         | 500    | 
|                                | Customer relationships              |   |         | 38,200 | 
|                                | Tradename                           |   |         | 5,000  | 
|                                | Covenants not-to-compete            |   |         | 3,100  | 
|Deferred taxes                  |                                     |   | 9,986   |       
|Goodwill                        |                                     |   | 186,243 |       
|Deferred compensation           |                                     |   | 13,926  |       
|                                |                                     |   |        
|                                |                                     | $ | 352,708 |       
|                                |                                     |   |        



|                                     |  |  |              | 
|------------------------------------ |  |  | ------------ | 
|Core technology                      |  |  | 7 years      | 
|Developed technology                 |  |  | 4 years      | 
|Patents                              |  |  | 2 to 7 years | 
|Backlog                              |  |  | 3 months     | 
|Customer relationships               |  |  | 5 years      | 
|Tradename                            |  |  | 7 years      | 
|Covenants not-to-compete             |  |  | 3 years      | 
|Weighted-average amortization period |  |  | 6 years      | 



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                                    |  |                        |          |   |          |   |         | 
|----------------------------------- |  | ---------------------- | -------- | - | -------- | - | ------- | 
|                                    |  | Years Ended            |         
|                                    |  |                        |         
|                                    |  | June 27,               |          |   | June 29, |  
|                                    |  | 2004                   |          |   | 2003     |  
|                                    |  |                        |          |   |          |  
|                                    |  | (In thousands,         |         
|                                    |  | except per share data) |         
|Net revenues                        |  | $                      | 375,674  |   |          | $ | 330,401 | 
|Net income (loss)                   |  | $                      | (534,678 | ) |          | $ | 39,206  | 
|                                    |  |                        |          |   |          |  
|Net income (loss) per diluted share |  | $                      | (6.50    | ) |          | $ | 0.46    | 
|                                    |  |                        |          |   |          |  



|         |                                                        
|-------- | -------------------------------------------------------
|Note 3  | Cash, Cash Equivalents, Restricted Cash and Investments



|                                  |  |                |         |  |      |   |         | 
|--------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                  |  | 2005           |         |  | 2004 |  
|                                  |  |                |         |  |      |  
|                                  |  | (In thousands) |        
|Cash                              |  | $              | 13,477  |  |      | $ | 158,222 | 
|Money market funds                |  |                | 106,840 |  |      |   | 33,915  | 
|Restricted cash                   |  |                |        |  |      |   | 23      | 
|Certificates of deposit           |  |                | 7,050   |  |      |   | 17,571  | 
|Commercial paper                  |  |                | 39,908  |  |      |   | 23,977  | 
|Municipal bonds                   |  |                | 8,099   |  |      |   | 19,239  | 
|U.S. Government Agency securities |  |                | 271,106 |  |      |   | 264,892 | 
|Corporate bonds                   |  |                | 74,832  |  |      |   | 110,073 | 
|Other                             |  |                | 616     |  |      |   | 27,487  | 
|                                  |  |                |         |  |      |  
|                                  |  | $              | 521,928 |  |      | $ | 655,399 | 
|                                  |  |                |         |  |      |  

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                                                        |  |                |         |  |      |   |         | 
|------------------------------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                                        |  | 2005           |         |  | 2004 |  
|                                                        |  |                |         |  |      |  
|                                                        |  | (In thousands) |        
|Cash and cash equivalents                               |  | $              | 120,317 |  |      | $ | 192,137 | 
|Restricted cash                                         |  |                |        |  |      |   | 23      | 
|Short-term investments (maturities less than one year)  |  |                | 346,675 |  |      |   | 220,114 | 
|Long-term investments (maturities of one to five years) |  |                | 54,936  |  |      |   | 243,125 | 
|                                                        |  |                |         |  |      |  
|                                                        |  | $              | 521,928 |  |      | $ | 655,399 | 
|                                                        |  |                |         |  |      |  



|         |            
|-------- | -----------
|Note 4  | Inventories



|               |  |                |        |  |      |   |        | 
|-------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|               |  | 2005           |        |  | 2004 |  
|               |  |                |        |  |      |  
|               |  | (In thousands) |       
|Raw materials  |  | $              | 20,269 |  |      | $ | 19,181 | 
|Finished goods |  |                | 15,997 |  |      |   | 12,654 | 
|               |  |                |        |  |      |  
|               |  | $              | 36,266 |  |      | $ | 31,835 | 
|               |  |                |        |  |      |  



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|         |                       
|-------- | ----------------------
|Note 5  | Property and Equipment



|                                               |  |                |         |   |      |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                               |  | 2005           |         |   | 2004 |  
|                                               |  |                |         |   |      |  
|                                               |  | (In thousands) |        
|Production and test equipment                  |  | $              | 50,390  |   |      | $ | 40,375  |  
|Furniture and fixtures                         |  |                | 25,687  |   |      |   | 26,479  |  
|Buildings and improvements                     |  |                | 30,694  |   |      |   | 29,363  |  
|Land                                           |  |                | 12,532  |   |      |   | 12,531  |  
|                                               |  |                |         |   |      |  
|                                               |  |                | 119,303 |   |      |   | 108,748 |  
|Less accumulated depreciation and amortization |  |                | (53,327 | ) |      |   | (44,178 | )
|                                               |  |                |         |   |      |  
|                                               |  | $              | 65,976  |   |      | $ | 64,570  |  
|                                               |  |                |         |   |      |  



|         |             
|-------- | ------------
|Note 6  | Other Assets



|                                                                       |  |                |     |  |      |   |       | 
|---------------------------------------------------------------------- |  | -------------- | --- |  | ---- | - | ----- | 
|                                                                       |  | 2005           |     |  | 2004 |  
|                                                                       |  |                |     |  |      |  
|                                                                       |  | (In thousands) |    
|Deferred debt issuance costs  convertible
    subordinated notes, net |  | $              | 151 |  |      | $ | 833   | 
|Long-term prepaid assets                                               |  |                | 354 |  |      |   | 236   | 
|Refundable deposits                                                    |  |                | 101 |  |      |   | 224   | 
|                                                                       |  |                |     |  |      |  
|                                                                       |  | $              | 606 |  |      | $ | 1,293 | 
|                                                                       |  |                |     |  |      |  

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|         |                 
|-------- | ----------------
|Note 7  | Intangibles, net



|                                                              |                                                       |                |        |          |      |   |         |         |  
|------------------------------------------------------------- | ----------------------------------------------------- | -------------- | ------ | -------- | ---- | - | ------- | ------- | -
|                                                              |                                                       | 2005           |        |          | 2004 |  
|                                                              |                                                       |                |        |          |      |  
|                                                              |                                                       | (In thousands) |       
|Intangible assets subject to amortization:                    |                                                       |                |        |          |      |   |         |        
|                                                              | Core technology and patents                           |                | $      | 98,742   |      |   | $       | 99,094  |  
|                                                              | Accumulated amortization, core technology and patents |                |        | (39,216  | )    |   |         | (24,774 | )
|                                                              | Developed technology                                  |                |        | 9,341    |      |   |         | 9,400   |  
|                                                              | Accumulated amortization, developed technology        |                |        | (3,818   | )    |   |         | (1,472  | )
|                                                              | Customer relationships                                |                |        | 37,962   |      |   |         | 38,200  |  
|                                                              | Accumulated amortization, customer relationships      |                |        | (12,415  | )    |   |         | (4,786  | )
|                                                              | Tradename                                             |                |        | 4,969    |      |   |         | 5,000   |  
|                                                              | Accumulated amortization, tradename                   |                |        | (1,161   | )    |   |         | (448    | )
|                                                              | Covenants not-to-compete                              |                |        | 3,081    |      |   |         | 3,100   |  
|                                                              | Accumulated amortization, covenants not-to-compete    |                |        | (1,679   | )    |   |         | (647    | )
|                                                              |                                                       |                |        |          |      |  
|Intangible assets subject to amortization, net                |                                                       | $              | 95,806 |          |      | $ | 122,667 |        
|                                                              |                                                       |                |        |          |      |  
|Intangible assets not subject to amortization (in thousands): |                                                       |                |        |          |      |   |         |        
|                                                              | Goodwill balance as of June 29, 2003                  |                | $      | 397,256  |      |   |         |         |  
|                                                              | Goodwill acquired during 2004                         |                |        | 186,243  |      |   |         |         |  
|                                                              | Impairment of goodwill in 2004                        |                |        | (583,499 | )    |   |         |         |  
|                                                              |                                                       |                |        |          |      |  
|                                                              | Goodwill balance as of July 3, 2005 and June 27, 2004 |                | $      |         |      |   |         |         |  
|                                                              |                                                       |                |        |          |      |  





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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003








|     |  |   |        | 
|---- |  | - | ------ | 
|2006 |  | $ | 25,946 | 
|2007 |  | $ | 25,273 | 
|2008 |  | $ | 21,153 | 
|2009 |  | $ | 11,510 | 
|2010 |  | $ | 8,672  | 



|         |                    
|-------- | -------------------
|Note 8  | Accrued Liabilities



|                                                     |  |                |        |  |      |   |        | 
|---------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                                     |  | 2005           |        |  | 2004 |  
|                                                     |  |                |        |  |      |  
|                                                     |  | (In thousands) |       
|Payroll and related costs                            |  | $              | 8,204  |  |      | $ | 8,936  | 
|Warranty reserves                                    |  |                | 4,085  |  |      |   | 4,046  | 
|Deferred revenue, sales returns and allowances       |  |                | 3,442  |  |      |   | 3,206  | 
|Accrued advertising and promotions                   |  |                | 1,674  |  |      |   | 1,139  | 
|Accrued property, sales, franchise and related taxes |  |                | 1,280  |  |      |   | 1,938  | 
|Other                                                |  |                | 2,820  |  |      |   | 3,574  | 
|                                                     |  |                |        |  |      |  
|                                                     |  | $              | 21,505 |  |      | $ | 22,839 | 
|                                                     |  |                |        |  |      |  



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                                       |  |                |        |   |      |   |        |  
|-------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                       |  | 2005           |        |   | 2004 |  
|                                       |  |                |        |   |      |  
|                                       |  | (In thousands) |       
|Balance at beginning of period         |  | $              | 4,046  |   |      | $ | 2,349  |  
|Additions to costs and expenses        |  |                | 3,043  |   |      |   | 2,880  |  
|Amounts charged against reserve        |  |                | (3,004 | ) |      |   | (2,036 | )
|Beginning balance of Vixel Corporation |  |                |       |   |      |   | 853    |  
|                                       |  |                |        |   |      |  
|Balance at end of period               |  | $              | 4,085  |   |      | $ | 4,046  |  
|                                       |  |                |        |   |      |  



|         |                               
|-------- | ------------------------------
|Note 9  | Convertible Subordinated Notes











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | prior to December 15, 2021, on any date during any fiscal
    quarter (and only during such fiscal quarter) after the fiscal
    quarter ending December 31, 2003, if the closing sale price
    of the Companys common stock was more than
    120 percent of the then current conversion price for at
    least 20 trading days in the period of the 30 consecutive
    trading days ending on the last day of the previous fiscal
    quarter;
|
| |  | on or after December 15, 2021, at all times on or after any
    date on which the closing sale price of the Companys
    common stock is more than 120 percent of the then current
    conversion price of the notes;                                                                                                                                                                                                                            

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if the Company elects to redeem the notes on or after
    December 20, 2008;                                                                                                                                                                                                                               
|
| |  | upon the occurrence of specified corporate transactions or
    significant distributions to holders of the Companys
    common stock; or                                                                                                                                                                  
|
| |  | subject to specified exceptions, for the ten business day period
    after any five consecutive trading day period in which the
    average trading prices for the notes for such five trading day
    period was less than 98 percent of the average conversion value
    of the notes during that period.







|          |                                 
|--------- | --------------------------------
|Note 10  | Employee Retirement Savings Plan







|          |                              
|--------- | -----------------------------
|Note 11  | Commitments and Contingencies

Leases




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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                             |  |                  |       | 
|---------------------------- |  | ---------------- | ----- | 
|                             |  | Operating Leases |      
|Fiscal year:                 |  |                  |      
|2006                         |  | $                | 1,500 | 
|2007                         |  |                  | 964   | 
|2008                         |  |                  | 843   | 
|2009                         |  |                  | 767   | 
|2010 and thereafter          |  |                  | 1,530 | 
|                             |  |                  |      
|Total minimum lease payments |  | $                | 5,604 | 
|                             |  |                  |      



| |           
| | ----------
| | Litigation









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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




Vixel
Corporation. v. Brocade Communications Systems, Inc.,




Russell
Fink v. Vixel Corporation, et al., Fink v. Vixel Fink v.
Vixel




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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003












| |                                    
| | -----------------------------------
| | Other Commitments and Contingencies





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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|          |                     
|--------- | --------------------
|Note 12  | Stockholders Equity



| |                         
| | ------------------------
| | Stock Repurchase Program





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan





| |                   
| | ------------------
| | Stock Option Plans







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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003








|                                     |           |           |            |            |                |   |       |       | 
|------------------------------------ | --------- | --------- | ---------- | ---------- | -------------- | - | ----- | ----- | 
|                                     |           |           |            | Weighted   |               
|                                     |           |           |            | Average    |               
|                                     |           | Number of |            |            | Exercise Price |  
|                                     |           | Shares    |            |            | Per Share      |  
|                                     |           |           |            |            |                |  
|Options outstanding at June 30, 2002 |           |           | 9,320,354  |            |                | $ | 28.56 |      
|                                     | Granted   |           |            | 1,586,500  |                |   |       | 23.24 | 
|                                     | Exercised |           |            | (518,358   | )              |   |       | 6.96  | 
|                                     | Canceled  |           |            | (292,276   | )              |   |       | 28.56 | 
|                                     |           |           |            |            |                |  
|Options outstanding at June 29, 2003 |           |           | 10,096,220 |            |                | $ | 28.84 |      
|                                     | Granted   |           |            | 5,022,813  |                |   |       | 18.32 | 
|                                     | Exercised |           |            | (1,284,754 | )              |   |       | 8.74  | 
|                                     | Canceled  |           |            | (1,461,709 | )              |   |       | 47.84 | 
|                                     |           |           |            |            |                |  
|Options outstanding at June 27, 2004 |           |           | 12,372,570 |            |                | $ | 24.41 |      
|                                     | Granted   |           |            | 3,105,323  |                |   |       | 11.96 | 
|                                     | Exercised |           |            | (530,565   | )              |   |       | 8.38  | 
|                                     | Canceled  |           |            | (836,864   | )              |   |       | 26.49 | 
|                                     |           |           |            |            |                |  
|Options outstanding at July 3, 2005  |           |           | 14,110,464 |            |                | $ | 22.15 |      
|                                     |           |           |            |            |                |  



|                         |                  |                   |              |  |                |            |  |                  |         |  |  |  |      | 
|------------------------ | ---------------- | ----------------- | ------------ |  | -------------- | ---------- |  | ---------------- | ------- |  |  |  | ---- | 
|Outstanding Options      |                 
|                         |                 
|                         |                  | Weighted Average  |             
|                         |                  | Weighted Average  |              |  | Remaining      |           
|                         |                  | Outstanding as of |              |  | Exercise Price |            |  | Contractual Life |        
|Range of Exercise Prices |                  |                   | July 3, 2005 |  |                | Per Option |  |                  | (Years) | 
|                         |                  |                   |              |  |                |            |  |                  |         | 
|$                        | 0.28 to $ 10.76  |                   |              |  | 3,233,581      |            |  | $                | 7.72    |  |  |  | 6.52 | 
|$                        | 10.90 to $ 17.47 |                   |              |  | 2,960,125      |            |  | $                | 14.57   |  |  |  | 7.19 | 
|$                        | 17.50 to $ 24.00 |                   |              |  | 3,364,747      |            |  | $                | 22.33   |  |  |  | 7.11 | 
|$                        | 24.22 to $ 34.48 |                   |              |  | 2,826,422      |            |  | $                | 27.12   |  |  |  | 6.99 | 
|$                        | 35.00 to $109.03 |                   |              |  | 1,725,589      |            |  | $                | 53.66   |  |  |  | 5.12 | 
|                         |                  |                   |              |  |                |            |  |                  |         | 
|$                        | 0.28 to $109.03  |                   |              |  | 14,110,464     |            |  | $                | 22.15   |  |  |  | 6.73 | 
|                         |                  |                   |              |  |                |            |  |                  |         | 

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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003


|                         |                   |                   |              |  |                |            |  |   |       | 
|------------------------ | ----------------- | ----------------- | ------------ |  | -------------- | ---------- |  | - | ----- | 
|Options Exercisable      |                  
|                         |                  
|                         |                   | Weighted Average  |             
|                         |                   | Exercisable as of |              |  | Exercise Price |           
|Range of Exercise Prices |                   |                   | July 3, 2005 |  |                | Per Option | 
|                         |                   |                   |              |  |                |            | 
|                         | $ 0.28 to $ 10.76 |                   |              |  | 1,823,454      |            |  | $ | 6.04  | 
|                         | $10.90 to $ 17.47 |                   |              |  | 1,638,459      |            |  | $ | 14.83 | 
|                         | $17.50 to $ 24.00 |                   |              |  | 2,587,917      |            |  | $ | 22.41 | 
|                         | $24.22 to $ 34.48 |                   |              |  | 1,899,202      |            |  | $ | 27.51 | 
|                         | $35.00 to $109.03 |                   |              |  | 1,712,762      |            |  | $ | 53.77 | 
|                         |                   |                   |              |  |                |            | 
|                         | $ 0.28 to $109.03 |                   |              |  | 9,661,794      |            |  | $ | 24.60 | 
|                         |                   |                   |              |  |                |            | 



| |                        
| | -----------------------
| | Shareholder Rights Plan



Note 13  Income Taxes




|         |          |                |        |        |      |   |        |        |   |   |        |        | 
|-------- | -------- | -------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | 
|         |          | 2005           |        |        | 2004 |   |        | 2003   |  
|         |          |                |        |        |      |   |        |        |  
|         |          | (In thousands) |       
|Federal: |          |                |        |        |      |   |        |        |   |   |        |       
|         | Current  |                | $      | 25,723 |      |   | $      | 18,101 |   |   | $      | 8,105  | 
|         | Deferred |                |        | 12,413 |      |   |        | 17,019 |   |   |        | 26,871 | 
|State:   |          |                |        |        |      |   |        |        |   |   |        |       
|         | Current  |                |        | 3,162  |      |   |        | 4,076  |   |   |        | 4,609  | 
|         | Deferred |                |        | (1,149 | )    |   |        | (1,199 | ) |   |        | 649    | 
|Foreign: |          |                |        |        |      |   |        |        |   |   |        |       
|         | Current  |                |        | 72     |      |   |        | 65     |   |   |        | 28     | 
|         |          |                |        |        |      |   |        |        |  
|         |          | $              | 40,221 |        |      | $ | 38,062 |        |   | $ | 40,262 |       
|         |          |                |        |        |      |   |        |        |  

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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






|         |  |                |         |  |      |   |          |      |  |   |         | 
|-------- |  | -------------- | ------- |  | ---- | - | -------- | ---- |  | - | ------- | 
|         |  | 2005           |         |  | 2004 |   |          | 2003 | 
|         |  |                |         |  |      |   |          |      | 
|         |  | (In thousands) |        
|Domestic |  | $              | 111,570 |  |      | $ | (494,481 | )    |  | $ | 105,857 | 
|Foreign  |  |                | 240     |  |      |   | 221      |      |  |   | 94      | 
|         |  |                |         |  |      |   |          |      | 
|Total    |  | $              | 111,810 |  |      | $ | (494,260 | )    |  | $ | 105,951 | 
|         |  |                |         |  |      |   |          |      | 



|                          |                                                   |                                                 |   |        |        |   |   |        |        | 
|------------------------- | ------------------------------------------------- | ----------------------------------------------- | - | ------ | ------ | - | - | ------ | ------ | 
|                          |                                                   | 2005                                            |   |        | 2004   |  
|                          |                                                   |                                                 |   |        |        |  
|                          |                                                   | (In thousands)                                  |  
|Deferred tax assets:      |                                                   |                                                 |   |        |        |   |   |       
|                          | Capitalization of inventory costs                 |                                                 | $ | 516    |        |   | $ | 224    |       
|                          | Reserves not currently deductible                 |                                                 |   | 9,150  |        |   |   | 7,887  |       
|                          | Deferred compensation                             |                                                 |   | 1,680  |        |   |   | 992    |       
|                          | Net operating loss carryforwards                  |                                                 |   | 25,725 |        |   |   | 43,442 |       
|                          | General business and state credit carryforwards   |                                                 |   | 11,523 |        |   |   | 17,719 |       
|                          | Capitalized research and development expenditures |                                                 |   | 764    |        |   |   | 2,349  |       
|                          | Alternative minimum tax credit carryforwards      |                                                 |   | 4,031  |        |   |   | 4,031  |       
|                          | Other                                             |                                                 |   | 1,213  |        |   |   | 247    |       
|                          |                                                   |                                                 |   |        |        |  
|                          |                                                   | Total gross deferred tax assets                 |   |        | 54,602 |   |   |        | 76,891 | 
|                          |                                                   | Less valuation allowance                        |   |        | (931   | ) |   |        |       | 
|                          |                                                   |                                                 |   |        |        |  
|                          |                                                   | Deferred tax assets, net of valuation allowance |   |        | 53,671 |   |   |        | 76,891 | 
|                          |                                                   |                                                 |   |        |        |  
|Deferred tax liabilities: |                                                   |                                                 |   |        |        |   |   |       
|                          | Various state taxes                               |                                                 |   | 2,987  |        |   |   | 2,571  |       
|                          | Intangible  Customer Relationships               |                                                 |   | 9,350  |        |   |   | 13,366 |       
|                          | Intangible  Core technology and patents          |                                                 |   | 23,360 |        |   |   | 32,201 |       
|                          | Depreciation                                      |                                                 |   | 2,663  |        |   |   | 848    |       
|                          | Intangible  Other                                |                                                 |   | 231    |        |   |   | 1,561  |       
|                          |                                                   |                                                 |   |        |        |  
|                          |                                                   | Total gross deferred tax liabilities            |   |        | 38,591 |   |   |        | 50,547 | 
|                          |                                                   |                                                 |   |        |        |  
|                          |                                                   | Net deferred tax asset                          |   | $      | 15,080 |   |   | $      | 26,344 | 
|                          |                                                   |                                                 |   |        |        |  



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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






|                                                              |  |                |        |   |      |   |          |      |  |   |        |  
|------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | -------- | ---- |  | - | ------ | -
|                                                              |  | 2005           |        |   | 2004 |   |          | 2003 | 
|                                                              |  |                |        |   |      |   |          |      | 
|                                                              |  | (In thousands) |       
|Expected income tax expense (benefit) at 35 percent           |  | $              | 39,133 |   |      | $ | (172,991 | )    |  | $ | 37,083 |  
|State income tax expense, net of federal tax benefit          |  |                | 1,240  |   |      |   | 3,234    |      |  |   | 4,032  |  
|Impairment of goodwill                                        |  |                | 383    |   |      |   | 204,225  |      |  |   |       |  
|In-process research and development expenditures              |  |                |       |   |      |   | 3,990    |      |  |   |       |  
|Change in valuation allowance allocated to income tax expense |  |                | 931    |   |      |   |         |      |  |   |       |  
|Extraterritorial income exclusion                             |  |                | (142   | ) |      |   | (855     | )    |  |   | (681   | )
|Research and other credits                                    |  |                | (1,706 | ) |      |   | (782     | )    |  |   | (1,924 | )
|Other, net                                                    |  |                | 382    |   |      |   | 1,241    |      |  |   | 1,752  |  
|                                                              |  |                |        |   |      |   |          |      | 
|                                                              |  | $              | 40,221 |   |      | $ | 38,062   |      |  | $ | 40,262 |  
|                                                              |  |                |        |   |      |   |          |      | 







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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|        |                                                                           
|------- | --------------------------------------------------------------------------
|Note 14 | Revenue by Product Families, Geographic Area and Significant
    Customers





|                   |               |                |         |         |      |   |         |         |  |   |         |         | 
|------------------ | ------------- | -------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                   |               | 2005           |         |         | 2004 |   |         | 2003    | 
|                   |               |                |         |         |      |   |         |         | 
|                   |               | (In thousands) |        
|Net revenues:      |               |                |         |         |      |   |         |         |  |   |         |        
|                   | Fibre Channel |                | $       | 375,569 |      |   | $       | 363,871 |  |   | $       | 304,596 | 
|                   | IP networking |                |         | 65      |      |   |         | 529     |  |   |         | 2,408   | 
|                   | Other         |                |         | 19      |      |   |         | 22      |  |   |         | 1,204   | 
|                   |               |                |         |         |      |   |         |         | 
|Total net revenues |               | $              | 375,653 |         |      | $ | 364,422 |         |  | $ | 308,208 |        
|                   |               |                |         |         |      |   |         |         | 





|                         |  |                |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  
|------------------------ |  | -------------- | ------- |  | ---- |  | --- | ---- |  | - | ------- |  |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|                         |  | 2005           |         |  | 2004 |  |     | 2003 | 
|                         |  |                |         |  |      |  |     |      | 
|                         |  | (In thousands) |        
|United States            |  | $              | 205,633 |  |      |  | 55  | %    |  | $ | 205,390 |  |  |  | 56  | % |  | $ | 185,195 |  |  |  | 60  | %
|Pacific Rim Countries    |  |                | 56,550  |  |      |  | 15  | %    |  |   | 36,259  |  |  |  | 10  | % |  |   | 21,537  |  |  |  | 7   | %
|Europe and rest of world |  |                | 113,470 |  |      |  | 30  | %    |  |   | 122,773 |  |  |  | 34  | % |  |   | 101,476 |  |  |  | 33  | %
|                         |  |                |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  
|                         |  | $              | 375,653 |  |      |  | 100 | %    |  | $ | 364,422 |  |  |  | 100 | % |  | $ | 308,208 |  |  |  | 100 | %
|                         |  |                |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  







|                |  |              |    |          |            |  |    |      |  |  |      |   |  |      |    |   |  |  |    |  
|--------------- |  | ------------ | -- | -------- | ---------- |  | -- | ---- |  |  | ---- | - |  | ---- | -- | - |  |  | -- | -
|                |  |              |    | Accounts |           
|                |  | Net Revenues |    |          | Receivable | 
|                |  |              |    |          |            | 
|                |  | 2005         |    |          | 2004       |  |    | 2003 |  |  | 2005 |   |  | 2004 |   
|                |  |              |    |          |            |  |    |      |  |  |      |   |  |      |   
|Hewlett-Packard |  |              | 12 | %        |            |  | 18 | %    |  |  | 23   | % |  |      |   |   |  |  | 13 | %
|IBM             |  |              | 31 | %        |            |  | 24 | %    |  |  | 23   | % |  |      | 41 | % |  |  | 31 | %
|Info-X          |  |              | 17 | %        |            |  | 12 | %    |  |  |     |   |  |      | 20 | % |  |  | 18 | %



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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003




|                |  |              |    |   |      |  |    |      |  |  |    |  
|--------------- |  | ------------ | -- | - | ---- |  | -- | ---- |  |  | -- | -
|                |  | Net Revenues |   
|                |  |              |   
|                |  | 2005         |    |   | 2004 |  |    | 2003 | 
|                |  |              |    |   |      |  |    |      | 
|EMC             |  |              | 20 | % |      |  | 24 | %    |  |  | 22 | %
|Hewlett-Packard |  |              | 14 | % |      |  | 20 | %    |  |  | 23 | %
|IBM             |  |              | 31 | % |      |  | 24 | %    |  |  | 26 | %



|          |                            
|--------- | ---------------------------
|Note 15  | Net Income (Loss) per Share



|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |          |   |        |       |        | 
|-------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------ | ----- | ------ | - | -------- | ---- | -------- | - | ------ | ----- | ------ | 
|                                                                                                                                       |                                                                                                        | 2005                                                                              |        |       | 2004   |   |          | 2003 |         
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|                                                                                                                                       |                                                                                                        | (In thousands, except per share data)                                             |       
|Numerator:                                                                                                                             |                                                                                                        |                                                                                   |        |       |        |   |          |      |          |   |        |      
|                                                                                                                                       |                                                                                                        | Net income (loss)                                                                 |        | $     | 71,589 |   |          | $    | (532,322 | ) |        | $     | 65,689 | 
|                                                                                                                                       |                                                                                                        | Adjustment for interest expense on convertible subordinated
    notes, net of tax |        |       | 2,685  |   |          |      |         |   |        |       | 3,416  | 
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Numerator for diluted net income (loss) per share                                                                                      |                                                                                                        | $                                                                                 | 74,274 |       |        | $ | (532,322 | )    |          | $ | 69,105 |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Denominator:                                                                                                                           |                                                                                                        |                                                                                   |        |       |        |   |          |      |          |   |        |      
|Denominator for basic net income (loss) per share 
    weighted average shares outstanding                                            |                                                                                                        |                                                                                   | 82,819 |       |        |   | 82,293   |      |          |   | 82,051 |      
|Effect of dilutive securities:                                                                                                         |                                                                                                        |                                                                                   |        |       |        |   |          |      |          |   |        |      
|                                                                                                                                       | Dilutive options outstanding                                                                           |                                                                                   |        | 1,384 |        |   |          |     |          |   |        | 1,579 |       
|                                                                                                                                       | Dilutive common shares from assumed conversion of convertible
    notes convertible subordinated notes |                                                                                   |        | 8,767 |        |   |          |     |          |   |        | 4,284 |       
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Denominator for diluted net income (loss) per share 
    adjusted weighted average shares                                             |                                                                                                        |                                                                                   | 92,970 |       |        |   | 82,293   |      |          |   | 87,914 |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Basic net income (loss) per share                                                                                                      |                                                                                                        | $                                                                                 | 0.86   |       |        | $ | (6.47    | )    |          | $ | 0.80   |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Diluted net income (loss) per share                                                                                                    |                                                                                                        | $                                                                                 | 0.80   |       |        | $ | (6.47    | )    |          | $ | 0.79   |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Antidilutive options excluded from the computations                                                                                    |                                                                                                        |                                                                                   | 8,944  |       |        |   | 12,373   |      |          |   | 6,696  |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Antidilutive common shares from assumed conversion of
    outstanding convertible subordinated notes excluded from the
    calculation |                                                                                                        |                                                                                   |       |       |        |   | 12,697   |      |          |   |       |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         
|Average market price of common stock                                                                                                   |                                                                                                        | $                                                                                 | 14.79  |       |        | $ | 23.80    |      |          | $ | 19.71  |      
|                                                                                                                                       |                                                                                                        |                                                                                   |        |       |        |   |          |      |         

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EMULEX CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


July 3, 2005, June 27, 2004, and June 29,
2003






|          |                                     
|--------- | ------------------------------------
|Note 16  | Quarterly Financial Data (Unaudited)



|      |                |                                       |   |         |              |  |            |             |         |            |       |          |          |   |   |       |      | 
|----- | -------------- | ------------------------------------- | - | ------- | ------------ |  | ---------- | ----------- | ------- | ---------- | ----- | -------- | -------- | - | - | ----- | ---- | 
|      |                |                                       |   |         |              |  |            | Diluted Net |        
|      |                |                                       |   |         |              |  |            | Income      |        
|      |                | Net                                   |   |         |              |  | Net Income |             |         | (Loss) Per |      
|      |                | Revenues                              |   |         | Gross Profit |  |            | (Loss)      |         |            | Share |         
|      |                |                                       |   |         |              |  |            |             |         |            |       |         
|      |                | (In thousands, except per share data) |  
|2005: |                |                                       |   |         |              |  |            |             |         |            |       |          |          |   |   |      
|      | Fourth quarter |                                       | $ | 108,177 |              |  | $          | 68,733      |         |            | $     | 25,301   |          |   | $ | 0.28  |     
|      | Third quarter  |                                       |   | 102,580 |              |  |            | 65,134      |         |            |       | 17,788   |          |   |   | 0.20  |     
|      | Second quarter |                                       |   | 91,671  |              |  |            | 58,125      |         |            |       | 14,201   |          |   |   | 0.16  |     
|      | First quarter  |                                       |   | 73,225  |              |  |            | 43,979      |         |            |       | 14,299   |          |   |   | 0.16  | (1) 
|      |                |                                       |   |         |              |  |            |             |         |            |       |         
|      |                | Total                                 |   | $       | 375,653      |  |            | $           | 235,971 |            |       | $        | 71,589   |   |   |       |      | 
|      |                |                                       |   |         |              |  |            |             |         |            |       |         
|2004: |                |                                       |   |         |              |  |            |             |         |            |       |          |          |   |   |      
|      | Fourth quarter |                                       | $ | 86,438  |              |  | $          | 54,142      |         |            | $     | (572,853 | )(2)     |   | $ | (6.97 | )(1)
|      | Third quarter  |                                       |   | 99,038  |              |  |            | 62,664      |         |            |       | 14,328   |          |   |   | 0.16  | (1) 
|      | Second quarter |                                       |   | 94,369  |              |  |            | 59,563      |         |            |       | 3,615    |          |   |   | 0.04  | (1) 
|      | First quarter  |                                       |   | 84,577  |              |  |            | 56,250      |         |            |       | 22,588   |          |   |   | 0.27  |     
|      |                |                                       |   |         |              |  |            |             |         |            |       |         
|      |                | Total                                 |   | $       | 364,422      |  |            | $           | 232,619 |            |       | $        | (532,322 | ) |   |       |      | 
|      |                |                                       |   |         |              |  |            |             |         |            |       |         






|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|(1) | Amounts have been restated from previously reported information
    to comply with the issuance of EITF 04-08.
|   
|(2) | Includes an impairment of goodwill charge of
    $583.5 million. See note 7 for additional information.       

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CONSOLIDATED FINANCIAL STATEMENT







SCHEDULE OF EMULEX CORPORATION AND SUBSIDIARIES


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Schedule II


EMULEX CORPORATION AND SUBSIDIARIES







VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


Years ended July 3, 2005, June 27, 2004, and
June 29, 2003


(In thousands)


|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           |  |   |     |  |  |   |       | 
|------------------------- | -------------------------------------- | ---------- | - | --------- | ---------- |  | - | ---------- | ------- | ------- | ------- | --- |  | ----------- | ------- | ------ | --------- |  | - | --- |  |  | - | ----- | 
|                          |                                        |            |   | Additions |            |  |   |            | Amounts |         |         |     |  |            
|                          |                                        | Balance at |   |           | Charged to |  |   |            |         | Charged |         |     |  |             | Balance |       
|                          |                                        | Beginning  |   |           | Costs and  |  |   | Additions |         |         | Against |     |  | Reductions |         |        | at End    | 
|Classification            |                                        | of Period  |   |           | Expenses   |  |   | Other(1)   |         |         | Reserve |     |  | Other(2)    |         |        | of Period | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|Year ended July 3, 2005:  |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           |  |   |     |  |  |   |      
|                          | Allowance for doubtful accounts        |            | $ | 2,081     |            |  | $ |           |         |         | $       |    |  |             | $       | 162    |           |  | $ |    |  |  | $ | 1,919 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Sales returns, allowances and reserves |            | $ | 3,206     |            |  | $ | 16,438     |         |         | $       |    |  |             | $       | 16,202 |           |  | $ |    |  |  | $ | 3,442 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Warranty reserve                       |            | $ | 4,046     |            |  | $ | 3,043      |         |         | $       |    |  |             | $       | 3,004  |           |  | $ |    |  |  | $ | 4,085 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|Year ended June 27, 2004: |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           |  |   |     |  |  |   |      
|                          | Allowance for doubtful accounts        |            | $ | 1,844     |            |  | $ | 141        |         |         | $       | 108 |  |             | $       | 12     |           |  | $ |    |  |  | $ | 2,081 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Sales returns, allowances and reserves |            | $ | 1,897     |            |  | $ | 12,118     |         |         | $       |    |  |             | $       | 10,809 |           |  | $ |    |  |  | $ | 3,206 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Warranty reserve                       |            | $ | 2,349     |            |  | $ | 2,880      |         |         | $       | 853 |  |             | $       | 2,036  |           |  | $ |    |  |  | $ | 4,046 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|Year ended June 29, 2003: |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           |  |   |     |  |  |   |      
|                          | Allowance for doubtful accounts        |            | $ | 1,597     |            |  | $ | 248        |         |         | $       |    |  |             | $       | 1      |           |  | $ |    |  |  | $ | 1,844 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Sales returns, allowances and reserves |            | $ | 540       |            |  | $ | 5,584      |         |         | $       |    |  |             | $       | 4,227  |           |  | $ |    |  |  | $ | 1,897 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 
|                          | Warranty reserve                       |            | $ | 2,244     |            |  | $ | 1,642      |         |         | $       |    |  |             | $       | 1,154  |           |  | $ | 383 |  |  | $ | 2,349 | 
|                          |                                        |            |   |           |            |  |   |            |         |         |         |     |  |             |         |        |           | 






|    |                                                                          
|--- | -------------------------------------------------------------------------
|(1) | Represents the acquisition of Vixel Corporation                          
|   
|(2) | Change in estimate for preexisting warranties, including
    expirations.

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SIGNATURES




|                         |  |                                                                                                       
|------------------------ |  | ------------------------------------------------------------------------------------------------------
|                         |  | EMULEX CORPORATION                                                                                    
|                        
|Date: September 15, 2005 |  | By: /s/ Paul F.
    FolinoPaul
    F. Folino
    Chairman of the Board and
    Chief Executive Officer



|                                                         |  |                                                                            |  | 
|-------------------------------------------------------- |  | -------------------------------------------------------------------------- |  | 
|Signature                                                |  | Title                                                                     
|                                                         |  |                                                                           
|                                                        
|Principal Executive Officer:                             |  |                                                                           
|                                                        
|/s/ Paul F. Folino(Paul
    F. Folino)                   |  | Chairman of the Board and
    Chief Executive Officer                     
|                                                        
|Principal Financial and Accounting Officer:              |  |                                                                           
|                                                        
|/s/ Michael J.
    Rockenbach(Michael
    J. Rockenbach) |  | Exec. Vice President, Chief Financial Officer, Secretary and
    Treasurer
|                                                        
|/s/ Fred B. Cox(Fred
    B. Cox)                         |  | Director and Chairman Emeritus                                            
|                                                        
|/s/ Michael P. Downey(Michael
    P. Downey)             |  | Director                                                                  
|                                                        
|/s/ Bruce C. Edwards(Bruce
    C. Edwards)               |  | Director                                                                  
|                                                        
|/s/ Robert H. Goon(Robert
    H. Goon)                   |  | Director                                                                  
|                                                        
|/s/ Don M. Lyle(Don
    M. Lyle)                         |  | Director                                                                  
|                                                        
|/s/ Dean A. Yoost(Dean
    A. Yoost)                     |  | Director                                                                  

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EXHIBIT INDEX


|            |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- | -- | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of 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).                                                                                                                                                                                                                                                                                       
|            | 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).                                                                                                                                                                                                     
|            | 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 August 30, 2005).                                                                                                                                                                                                                                                                    
|            | 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).                                                                                                                                                                                                                               
|            | 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).                                                                                                                                                                                                                                                       
|            | 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).                                                                                                                                                                                 
|            | 4  | .3                     |  | Form of 0.25% Convertible Subordinated Note due
    December 15, 2023 (incorporated by reference to
    Exhibit 4.6 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended December 28,
    2003).                                                                                                                                                                                                       
|            | 4  | .4                     |  | Indenture between the Company, as Issuer, and U.S. Bank
    National Association, as Trustee, dated December 12, 2003,
    related to the Companys 0.25% Convertible Subordinated
    Notes due December 15, 2023 (incorporated by reference to
    Exhibit 4.7 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended December 28, 2003).                                                              
|            | 4  | .5                     |  | Registration Rights Agreement between the Company and Credit
    Suisse First Boston Corporation dated December 12, 2003,
    related to the Companys 0.25% Convertible Subordinated
    Notes due December 15, 2023 (incorporated by reference to
    Exhibit 4.8 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended December 28,
    2003).                                                       
|            | 10 | .1*                    |  | Giganet, Inc. 1995 Stock Option Plan (incorporated by reference
    to Exhibit 99.1 to the Companys Registration
    Statement on Form S-8, filed March 2, 2001).                                                                                                                                                                                                                                                                  
|            | 10 | .2*                    |  | Emulex Corporation Employee Stock Option Plan, as amended
    (incorporated by reference to Appendix B to the
    Companys Definitive Proxy Statement for its Annual Meeting
    of Stockholders held on November 21, 2002).                                                                                                                                                                                                       
|            | 10 | .3*                    |  | Emulex Corporation 1997 Stock Option Plan for Non-Employee
    Directors, as amended (incorporated by reference to Appendix C
    to the Companys Definitive Proxy Statement for its Annual
    Meeting of Stockholders held on November 18, 2004).                                                                                                                                                                                
|            | 10 | .4*                    |  | Emulex Corporation Employee Stock Purchase Plan, as amended
    (incorporated by reference to Appendix D to the
    Companys Definitive Proxy Statement for its Annual Meeting
    of Stockholders held on November 18, 2004).                                                                                                                                                                                                     
|            | 10 | .5*                    |  | Emulex Corporation 2004 Employee Stock Incentive Plan
    (incorporated by reference to Appendix B to the
    Companys Definitive Proxy Statement for its Annual Meeting
    of Stockholders held on November 18, 2004).                                                                                                                                                                                                           
|            | 10 | .6                     |  | Standard Commercial Lease between the Flatley Company and
    Giganet, Inc. (incorporated by reference to Exhibit 10.15
    to the Companys 2001 Annual Report on Form 10-K).                                                                                                                                                                                                                                                      
|            | 10 | .7*                    |  | Form of Key Employee Retention Agreement to which the
    following executive officers of the Company are a party: James
    M. McCluney, Kirk D. Roller, William F. Gill, Sadie A. Herrera,
    Marshall D. Lee, Karen Mulvany, Michael J. Rockenbach and
    Michael E. Smith (incorporated by reference to Exhibit 10.8
    to the Companys quarterly report on Form 10-Q for the
    quarterly period ended December 26, 2004).
|            | 10 | .8*                    |  | Key Employee Retention Agreement with Paul F. Folino
    (incorporated by reference to Exhibit 10.7 of the
    Companys quarterly report on Form 10-Q for the
    quarterly period ended December 26, 2004).                                                                                                                                                                                                                       

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|            |    |                        |  |                                                                                                                                                                                                                                                                                                             
|----------- | -- | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Exhibit
|            |    |                       
|            | 10 | .9                     |  | Form of Indemnification Agreement (incorporated by
    reference to Exhibit 10.1 to the Companys current
    Report on Form 8-K filed May 17, 2005).                                                                                                                                                       
|            | 10 | .10                    |  | Real Estate Lease dated September 12, 2000, between LM Venture,
    LLC and Emulex Corporation (incorporated by reference to
    Exhibit 10.22 to the Companys 2003 Annual Report on
    Form 10-K).                                                                                                       
|            | 10 | .11                    |  | First Amendment to Lease (amendment dated February 8,
    2001), between LM Venture LLC and Emulex Corporation
    (incorporated by reference to Exhibit 10.23 to the
    Companys 2003 Annual Report on Form 10-K).                                                                                       
|            | 10 | .12*                   |  | Vixel Corporation Amended and Restated 1995 Stock Option Plan
    incorporated by reference to Exhibit 10.2 of Amendment
    No. 1 to the Registration Statement on Form S-1 of
    Vixel Corporation (File No. 333-81347), filed on
    August 16, 1999).                                                  
|            | 10 | .13*                   |  | Vixel Corporation 1999 Equity Incentive Plan (as amended)
    (incorporated by reference to Exhibit 10.23 of Amendment
    No. 1 to the Registration Statement on Form S-1 of Vixel
    Corporation (File No. 333-81347), filed on August 16, 1999).                                                        
|            | 10 | .14*                   |  | Vixel Corporation 2000 Non-Officer Equity Incentive Plan
    (incorporate reference to Exhibit 99.1 of the Registration
    Statement on Form S-8/S-3 of Vixel Corporation (File
    No. 333-39000), filed on June 9, 2000).                                                                                
|            | 10 | .15                    |  | First Amendment to Standard Commercial Lease (amendment dated
    July 1, 2004) between the Flatley Company and Emulex Design
    & Manufacturing Corporation, successor-in-interest to
    Giganet, Inc. (incorporated by reference to Exhibit 10.15
    to the Companys 2004 Annual Report on Form 10-K).
|            | 10 | .16*                   |  | Form of Director Stock Option Agreement and related
    Form of Grant Summary for grants made pursuant to the 1997
    Non-Employee Director Stock Option Plan (incorporated by
    reference to Exhibit 10.1 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                       
|            | 10 | .17*                   |  | Form of Incentive Stock Option Agreement for grants made
    pursuant to the Employee Stock Option Plan (incorporated by
    reference to Exhibit 10.2 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                              
|            | 10 | .18*                   |  | Form of Non-Qualified Stock Option Agreement for grants
    made pursuant to the Employee Stock Option Plan (incorporated by
    reference to Exhibit 10.3 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                          
|            | 10 | .19*                   |  | Form of Incentive Stock Option Agreement for grants made
    pursuant to the 2004 Employee Stock Incentive Plan (incorporated
    by reference to Exhibit 10.4 to the Companys Current
    Report on Form 8-K filed August 30, 2005).                                                                      
|            | 10 | .20*                   |  | Form of Non-Qualified Stock Option Agreement for grants
    made pursuant to the 2004 Employee Stock Incentive Plan
    (incorporated by reference to Exhibit 10.5 to the
    Companys Current Report on Form 8-K filed
    August 30, 2005).                                                              
|            | 10 | .22*                   |  | Form of Notice of Grant of Stock Options and Stock Option
    Agreement for grants made pursuant to both the Employee Stock
    Option Plan and 2004 Employee Stock Incentive Plan (incorporated
    by reference to Exhibit 10.6 to the Companys Current
    Report on Form 8-K filed August 30, 2005).   
|            | 10 | .23                    |  | Office lease Agreement dated August 25, 2005 by and between
    24000 Development, LLC and Emulex Design & Manufacturing
    Corporation (incorporated by reference to Exhibit 10.1 to
    the Companys Current Report on Form 8-K filed
    August 31, 2005).                                             
|            | 10 | .24*                   |  | Description of Compensation Arrangements with Non-Employee
    Directors.                                                                                                                                                                                                                                   
|            | 10 | .25*                   |  | Description of Compensation Arrangements for Certain Executive
    Officers.                                                                                                                                                                                                                                
|            | 10 | .26*                   |  | Executive Bonus Plan of Emulex Corporation.                                                                                                                                                                                                                                                                 
|            | 21 |                        |  | List of the Companys subsidiaries.                                                                                                                                                                                                                                                                         
|            | 23 |                        |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                   

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|            |    |                        |  |                                                                                                                                                           
|----------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Exhibit
|            |    |                       
|            | 31 | A                      |  | 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.
|            | 31 | B                      |  | 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.
|            | 32 |                        |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.                                      




|  |                                                                         
|- | ------------------------------------------------------------------------
|* | Indicates a management contract or compensation plan or
    arrangement.

89