##### Table of Contents



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 1934For the fiscal year ended July
    2, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For 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

(I.R.S Employerof incorporation or
    organization)

Identification No.)3333 Susan Street

92626Costa Mesa,
    California

(Zip Code)(Address of principal executive
    offices)   (714) 662-5600
 (Registrants telephone
    number, including area code)
       Title of each class



Name of each exchange on which
    registeredCommon Stock, Par Value $0.10 Per
    Share



New York Stock ExchangePreferred Stock Purchase Rights



New York Stock Exchange    NONE
      þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  þ o o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



TABLE OF CONTENTS  PART IItem I. Business.Item 1A. Risk Factors.Item 1B. Unresolved Staff CommentsItem 2. Properties.Item 3. Legal Proceedings.Item 4. Submission of Matters to a Vote of Security Holders.PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.Item 6. Selected Consolidated Financial Data.Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 7A. Qualitative and Quantitative Disclosures about Market Risk.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.Item 9B. Other Information.PART IIIItem 10. Directors and Executive Officers of the Registrant.Item 11. Executive Compensation.Item 12. Security Ownership of Certain Beneficial Owners and Management.Item 13. Certain Relationships and Related Transactions.Item 14. Principal Accountant Fees and Services.PART IVItem 15. Exhibits and Financial Statement Schedules.SIGNATURESEXHIBIT INDEXEXHIBIT 10.25EXHIBIT 10.26EXHIBIT 21EXHIBIT 23EXHIBIT 31.AEXHIBIT 31.BEXHIBIT 32    Table of Contents  
 PART I
  All references to years refer to our fiscal years ended
    July 2, 2006, July 3, 2005, and June 27, 2004, as
    applicable, unless the calendar year is specified. References
    contained in this Annual Report on
    Form 10-K
    to Emulex, the Company, the
    Registrant, we, our and
    us, refer to Emulex Corporation and its
    subsidiaries.
 
  Item I.
    Business.  Introduction
    and Company History
      (714) 662-5600.
    ® ® ®
 1




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Industry
    Background
  e-commerce
    point-to-multipoint
  The
    Emergence of Networked Storage
     2




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Fibre
    Channel
    iSCSI
    Disk
    Interface Technologies and the Transition to Serial Storage
    I/O
     3




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Embedded
    Fibre Channel Solutions
      switch-on-a-chip tm
    Our
    Products
    Fibre
    Channel HBAs
    end-to-end
 4




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small-to-medium
  Fibre
    Channel IOCs
      The
    Intel Joint Development Agreement
  ® tm
  Fibre
    Channel Storage Switches
       5




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SAN
    Interconnect Solutions and Products
    end-of-life
  Intelligent
    Network Products
     6




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Internet
    Protocol Networking and Other Products
    Intellectual
    Property
        Engineering
    and Development
    Selling
    and Marketing
    Order
    Backlog
   7




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Seasonality
    Concentration
    of Customers, Revenue by Product Families and Geographic
    Area
  Form 10-K Form 10-K
  Competition
         8




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Manufacturing
    and Suppliers
        Employees
   9




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Executive
    Officers of the Registrant
    Name

Position

AgePaul F. Folino(1)

Chairman of the Board and Chief
    Executive Officer


61James M. McCluney(2)

President and Chief Operating
    Officer


55William F. Gill(3)

Executive Vice President,
    Worldwide Sales


49Sadie A. Herrera(3)

Executive Vice President, Human
    Resources and Facilities


57Marshall D. Lee(3)

Executive Vice President,
    Engineering


50Michael J. Rockenbach

Executive Vice President, Chief
    Financial Officer, Secretary, and Treasurer


45Michael E. Smith(3)

Executive Vice President,
    Worldwide Marketing


44Randall G. Wick(3)

Vice President, General Counsel


53     (1)
    
    Effective September 5, 2006, Mr. Folino resigned as
    Chief Executive Officer of the Company and was appointed as
    Executive Chairman.(2)
    
    Effective September 5, 2006, Mr. McCluney resigned as
    Chief Operating Officer and was appointed as Chief Executive
    Officer and President.(3)
    
    These persons serve in the indicated capacities as officers of
    the Registrants principal operating subsidiaries; they are
    not officers of the Registrant.  Mr. Folino
  Mr. McCluney
  Mr. Gill
  Ms. Herrera Ex-Cell-O/Textron
  Mr. Lee
 10




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Mr. Rockenbach
  Mr. Smith 1 2
  Mr. Wick
   
  Item 1A.
    Risk
    Factors.  Potential
    acquisitions or strategic investments may be more costly or less
    profitable than anticipated and may adversely affect the price
    of our company stock.
    
    difficulties in the assimilation of the operations,
    technologies, products, and personnel of the acquired company;
    purchased technology that is not adopted by customers in the way
    or the time frame we anticipated;
    diversion of managements attention from other business
    concerns;
    risks of entering markets in which we have limited or no prior
    experience;
    risks associated with assuming the legal obligations of the
    acquired company;
    minority interest in a company, resulting from a strategic
    investment, that could have an impact on our results;
    risks related to the effect that the acquired companys
    internal control processes might have on our financial reporting
    and managements report on our internal controls over
    financial reporting;
    potential loss of key employees of the company we invested in or
    acquired; 11




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
    there may exist unknown defects of an acquired companys
    products or assets that may not be identified due to the
    inherent limitations involved in the due diligence process of an
    acquisition; and
    changes in generally accepted accounting principles regarding
    the accounting treatment for acquisitions to less favorable
    treatment than is currently allowed.    Our
    acquisition of Aarohi Communications, Inc. on May 1, 2006,
    as well as our recently announced proposed acquisition of Sierra
    Logic, Inc., involve numerous risks which may have a material
    adverse effect on our business and operating
    results.
    
    difficulties and expenses in assimilating and retaining
    employees, including integrating teams that have not previously
    worked together;
    difficulties in creating and maintaining uniform standards,
    controls, procedures, and policies;
    different geographic locations of the principal operations of
    Emulex and Aarohi and difficulties relating to management of the
    former Aarohi operations and personnel in India;
    currency conversion exposure for payroll and other expenses of a
    principal product development facility in Bangalore, India;
    attainment of cost efficiencies in a principal product
    development facility in Bangalore, India;
    potential adverse reactions of existing customers and strategic
    relationship partners; and  
    difficulties with integrating Aarohis technology into our
    existing technology in a timely and efficient manner that would
    allow us to fully realize the benefits of this acquisition.      A
    downturn in information technology spending in general, or
    spending on computer and storage systems in particular, could
    adversely affect our revenues and results of
    operations.
   12




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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.
  and/or
  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.
       13




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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.
      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.
  period-to-period
  
    changes in the size, mix, timing and terms of OEM and other
    customer orders;
    changes in the sales and deployment cycles for our products
    and/or
    desired inventory levels for our products;
    acquisitions or strategic investments by our customers,
    competitors or us;
    timing and market acceptance of new or enhanced product
    introductions by us, our OEM customers
    and/or
    competitors;
    market share losses or difficulty in gaining incremental market
    share growth;
    fluctuations in product development, procurement, resource
    utilization and other operating expenses;
    component shortages;
    reduced demand from our customers if there is a shortage of, or
    difficulties in acquiring, components or other products, such as
    Fibre Channel disk drives and optical modules, used in
    conjunction with our products in the deployment of systems;
    inability of our electronics manufacturing service providers to
    produce and distribute our products in a timely fashion;
    difficulties with updates, changes or additions to our
    information technology systems; 14




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
    breaches of our network security, including viruses;
    changes in general social and economic conditions, including but
    not limited to natural disasters, terrorism, public health and
    slower than expected market growth, with resulting changes in
    customer technology budgeting and spending;
    changes in technology, industry standards or consumer
    preferences;
    seasonality; and
    changes in our accounting or other policies resulting from the
    adoption of new laws, regulations or pronouncements.    Our
    relatively small backlog of unfilled orders, possible customer
    delays or deferrals and our tendency to generate a large
    percentage of our quarterly sales near the end of the quarter
    contribute to possible fluctuations in our operating results
    that could have an adverse impact on our results of operations
    and stock price.
    Our
    industry is subject to rapid technological change and we must
    keep pace with the changes to successfully
    compete.
  PCI-X 2.0;
 15




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We
    have experienced losses in our history and may experience losses
    in our future that may adversely affect our stock price and
    financial condition.
  and/or
  The
    migration of our customers toward newer product platforms may
    have a significant adverse effect.
    Any
    failure of our OEM customers to keep up with rapid technological
    change and successfully market and sell systems that incorporate
    new technologies could adversely affect our
    business.
    Rapid
    changes in the evolution of technology, including the unexpected
    extent or timing of the transition from HBA solutions or
    embedded switch box solutions to lower priced ASIC solutions,
    could adversely affect our business.
    If
    customers elect to utilize lower end HBAs in higher end
    environments or applications, our business could be negatively
    affected.
    Advancement
    of storage disk capacity technology may not allow for additional
    revenue growth.
   16




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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
    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
 17




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A
    change in our business relationships with our third party
    suppliers or our electronics manufacturing service providers
    could adversely affect our business.
    
    discontinued production by a supplier;
    required long-term purchase commitments;
    undetected errors, failures or production quality issues,
    including projected failures that may exceed epidemic failure
    rates specified in agreements with our customers or that may
    require us to make concessions or accommodations for continuing
    customer relationships;
    timeliness of product delivery;
    sole sourcing and components made by a small number of
    suppliers, including the inability to obtain components and
    finished goods at reasonable cost from such sources and
    suppliers;
    financial stability and viability of our suppliers and EMS
    providers;
    changes in business strategies of our suppliers and EMS
    providers;
    increases in manufacturing costs due to lower volumes or more
    complex manufacturing process than anticipated;
    disruption in shipping channels;
    natural disasters;
    inability or unwillingness of our suppliers or EMS providers to
    continue their business with us;
    environmental, tax or legislative changes in the location where
    our products are produced or delivered, including implementation
    of European Union Directives 2002/95/EC (RoHS) and 2002/96/EC
    (WEEE), with the RoHS directive limiting the concentration of
    certain materials (lead, chromium, etc.) that may be contained
    in electronic products placed on the European market after
    July 1, 2006, and the WEEE directive requiring certain
    recycling markings and recycling procedures for electronic
    products placed on the European market after August 13,
    2005;
    difficulties associated with foreign operations; and
    market shortages.       18




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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.
   19




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Our
    international business activities subject us to risks that could
    adversely affect our business.
    
    imposition of or changes in governmental controls, taxes,
    tariffs, trade restrictions, and regulatory requirements;
    costs and risks of localizing products for foreign countries;
    longer accounts receivable payment cycles;
    changes in the value of local currencies relative to our
    functional currency;
    import and export restrictions;
    loss of tax benefits, or increases in tax expenses, due to
    international production;
    general economic and social conditions within foreign countries;
    taxation in multiple jurisdictions; and
    political instability, war or terrorism.    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; 20




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
    pricing pressures;
    short selling of our common stock;
    general conditions in the computer, storage, or communications
    markets; and
    events affecting other companies that investors deem to be
    comparable to us.    Terrorist
    activities and resulting military and other actions could
    adversely affect our business.
    Our
    corporate offices and principal product development facilities
    are located in a region that is subject to earthquakes and other
    natural disasters.
      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.
   21




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and/or and/or
  Changes
    in laws, regulations, and financial accounting standards may
    affect our reported results of operations.
    The
    final determination of our income tax liability may be
    materially different from our income tax provisions and
    accruals.
    We may
    need additional capital in the future and such additional
    financing may not be available on favorable terms.
    
    take advantage of unanticipated opportunities, including more
    rapid international expansion or acquisitions of complementary
    businesses or technologies;
    develop new products or services;
    repay outstanding indebtedness; and
    respond to unanticipated competitive pressures.   22




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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 .
 
  Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties.     
  Item 3.
    Legal
    Proceedings.   23




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Item 4.
    Submission
    of Matters to a Vote of Security
    Holders.   24




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##### Table of Contents



PART II
 
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity
    Securities.  Principal
    Market and Prices
    High


Low2006Fourth Quarter

$
19.00


$
15.58Third Quarter


22.00



16.00Second Quarter


21.22



17.17First Quarter


22.68



17.142005Fourth Quarter

$
19.86


$
15.06Third Quarter


18.85



15.35Second Quarter


16.25



10.00First Quarter


14.91



9.26   Number of
    Common Stockholders
    Dividends
      Issuer
    Purchases of Equity Securities
    Equity
    Compensation Plan Information
   25




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Item 6.
    Selected
    Consolidated Financial Data.    Selected
    Consolidated Statements of Operations Data
  Year EndedJuly 2,


July 3,


June 27,


June 29,


June 30,2006


2005(1)


2004(1)


2003(1)


2002(1)(In thousands, except per share data)Net revenues:Fibre Channel

$
402,313


$
375,569


$
363,871


$
304,596


$
247,705IP networking


489



65



529



2,408



4,242Other


11



19



22



1,204



2,794Total net revenues


402,813



375,653



364,422



308,208



254,741Cost of sales


163,993



154,530



143,299



117,840



128,671Gross profit


238,820



221,123



221,123



190,368



126,070Operating expenses:Engineering and development


89,669



79,971



73,211



61,257



47,560Selling and marketing


36,169



32,441



28,035



18,994



19,462General and administrative


23,680



11,636



18,815



40,291



12,983Amortization of goodwill and other
    intangible assets


10,944



11,314



7,597



7



150,409Impairment of goodwill






1,096



583,499







In-process research and development


17,272







11,400







Total operating expenses


177,734



136,458



722,557



120,549



230,414Operating income (loss)


61,086



84,665



(501,434
)


69,819



(104,344
)Nonoperating income, net:Interest income


21,150



13,106



9,149



12,991



11,239Interest expense


(2,494
)


(4,202
)


(4,754
)


(5,510
)


(3,396
)Gain on repurchase of convertible
    subordinated notes






20,514



2,670



28,729



Other income (expense), net


173



(2,273
)


109



(78
)


(26
)Total nonoperating income, net


18,829



27,145



7,174



36,132



7,817Income (loss) before income taxes


79,915



111,810



(494,260
)


105,951



(96,527
)Income tax provision (benefit)


39,464



40,221



38,062



40,262



(293
)Net income (loss)

$
40,451


$
71,589


$
(532,322
)

$
65,689


$
(96,234
)Net income (loss) per share:Basic

$
0.48


$
0.86


$
(6.47
)

$
0.80


$
(1.18
)Diluted

$
0.46


$
0.80


$
(6.47
)

$
0.79


$
(1.18
)Number of shares used in per share
    computations:Basic


83,920



82,819



82,293



82,051



81,487Diluted


91,259



92,970



82,293



87,914



81,487     (1)
    
    Approximately $14.8 million, $11.5 million,
    $5.8 million, and $5.8 million of amortization expense
    resulting from the acquisition of technology intangible assets
    for fiscal years 2005, 2004, 2003, and 2002, respectively, has
    been reclassified from Amortization of goodwill and other
    intangible assets to Cost of sales. 26




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Selected
    Consolidated Balance Sheet Data
  Year EndedJuly 2,


July 3,


June 27,


June 29,


June 30,2006


2005


2004


2003


2002(In thousands)Total current assets

$
707,554


$
584,457


$
541,326


$
498,232


$
597,566Total current liabilities


302,564



76,644



54,496



75,061



39,360Working capital


404,990



507,813



486,830



423,171



558,206Total assets


860,157



801,781



972,981



1,189,769



1,207,364Convertible subordinated notes


235,177



233,382



524,845



208,518



345,000Accumulated deficit


(431,416
)


(471,867
)


(543,456
)


(11,134
)


(76,823
)Total stockholders equity


556,913



477,591



393,154



901,930



823,004  
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Forward-Looking
    Statements
  Form 10-K
  Form 10-K
 27




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Form 10-K,
  Executive
    Overview
       28




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Business
    Combinations
  end-to-end
    out-of-pocket,
      Convertible
    Subordinated Notes Offering
   29




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Results
    of Operations for Emulex Corporation and Subsidiaries
  Form 10-K.
  Percentage of Net Revenues2006


2005


2004Net revenues:Fibre Channel


99.9
%


100.0
%


99.9
%IP networking


0.1







0.1Other










0.0Total net revenues


100.0



100.0



100.0Cost of sales


40.7



41.1



39.3Gross profit


59.3



58.9



60.7Operating expenses:Engineering and development


22.2



21.3



20.1Selling and marketing


9.0



8.7



7.7General and administrative


5.9



3.1



5.2Amortization of other intangible
    assets


2.7



3.0



2.1Impairment of goodwill






0.3



160.1In-process research and development


4.3







3.1Total operating expenses


44.1



36.4



198.3Operating income (loss)


15.2



22.5



(137.6
)Nonoperating income, net:Interest income


5.2



3.5



2.5Interest expense


(0.6
)


(1.1
)


(1.3
)Gain on repurchase of convertible
    subordinated notes






5.5



0.7Other income (expense), net






(0.6
)


Total nonoperating income, net


4.6



7.3



1.9Income (loss) before income taxes


19.8



29.8



(135.7
)Income tax provision


9.8



10.7



10.4Net income (loss)


10.0
%


19.1
%


(146.1
)%  30




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##### Table of Contents



Fiscal
    2006 versus Fiscal 2005
  Net Revenues.
    Net
    Revenues by Product Line
  Percentage of





Percentage of


Increase/


Percentage2006


Net Revenues


2005


Net Revenues


(Decrease)


Change(In thousands)Fibre Channel

$
402,313



100
%

$
375,569



100
%

$
26,744



7
%IP networking


489







65







424



652
%Other


11







19







(8
)


(42
%)Total net revenues

$
402,813



100
%

$
375,653



100
%

$
27,160



7
%   end-of-life
    Net
    Revenues by Major Customers
  Direct Revenues


Total Direct and Indirect Revenues(2)2006


2005


2006


2005Net revenue percentage(1)EMC










23
%


20
%Hewlett-Packard


10
%


12
%


10
%


14
%IBM


29
%


31
%


29
%


31
%Info X


21
%


17
%






     (1)
    
    Amounts less than 10% are not presented.(2)
    
    Customer-specific models purchased or marketed indirectly
    through distributors, resellers, and other third parties are
    included with the OEMs revenues in these columns rather
    than as revenue for the distributors, resellers or other third
    parties.   31




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##### Table of Contents



Net
    Revenues by Sales Channel
  Percentage of





Percentage of


Increase/


Percentage2006


Net Revenues


2005


Net Revenues


(Decrease)


Change(In thousands)OEM

$
257,531



64
%

$
246,869



66
%

$
10,662



4
%Distribution


145,071



36
%


128,256



34
%


16,815



13
%Other


211







528







(317
)


(60
%)Total net revenues

$
402,813



100
%

$
375,653



100
%

$
27,160



7
%       Net
    Domestic and International Revenues
  Percentage of





Percentage of


Increase/


Percentage2006


Net Revenues


2005


Net Revenues


(Decrease)


Change(In thousands)United States

$
219,911



55
%

$
205,633



55
%

$
14,278



7
%Pacific Rim countries


52,811



13
%


56,550



15
%


(3,739
)


(7
%)Europe and rest of the world


130,091



32
%


113,470



30
%


16,621



15
%Total net revenues

$
402,813



100
%

$
375,653



100
%

$
27,160



7
%     Gross Profit.
 32




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##### Table of Contents



Engineering and Development.
  Selling and Marketing.
  General and Administrative.
  Amortization of Other Intangible
    Assets. not-to-compete
  Impairment of Goodwill.
 33




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##### Table of Contents



In-Process Research and Development.
  Nonoperating Income, net.
  Income taxes.
  Fiscal
    2005 versus Fiscal 2004
  Net Revenues.
    Net
    Revenues by Product Line
  Percentage of





Percentage of


Increase/


Percentage2005


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
%      34




---



##### Table of Contents



Net
    Revenues by Major Customers
  Direct Revenues


Total Direct and Indirect Revenues(2)2005


2004


2005


2004Net 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% are not presented.(2)
    
    Customer-specific models sold indirectly through distributors,
    resellers, and other third parties are included with the
    OEMs revenues in these columns rather than as revenue for
    the distributors, resellers or other third parties.      Net
    Revenues by Sales Channel
  Percentage of





Percentage of


Increase/


Percentage2005


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
%    35




---



##### Table of Contents



Net
    Domestic and International Revenues
  Percentage of





Percentage of


Increase/


Percentage2005


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. day-to-day
  Selling and Marketing.
 36




---



##### Table of Contents



General and Administrative.
  Amortization of Other Intangible
    Assets. not-to-compete
  Impairment of Goodwill.
 37




---



##### Table of Contents



In-Process Research and Development
    Expense.
  Nonoperating Income, net.
  Income taxes.
 38




---



##### Table of Contents



Critical
    Accounting Policies
      Revenue Recognition. No. 01-09,
  Warranty.
  Allowance for Doubtful Accounts.
  Intangibles and Other Long-Lived
    Assets.
 39




---



##### Table of Contents



Inventories. first-in,
  Income Taxes.
  Stock-Based Compensation.
  Liquidity
    and Capital Resources
   40




---



##### Table of Contents



41




---



##### Table of Contents



Form 10-K.
    Payments Due by PeriodLessthan


1-3


4-5


After 5Total


1 Year(2)


Years(3)


Years(4)


Years(In thousands)Convertible subordinated notes and
    interest(1)

$
236,295


$
236,295


$



$



$
Leases


12,411



2,452



4,454



4,616



889Inventory purchase commitments


17,843



17,843











Other commitments


1,766



1,766











Total

$
268,315


$
258,356


$
4,454


$
4,616


$
889     (1)
    
    The remaining principal payment related to the outstanding 0.25%
    private placement of approximately $236.0 million was shown
    as a payment in the period for the fiscal year ending
    July 1, 2007 above as holders of these 20 year notes
    may require us to purchase the notes for cash by giving us
    written notice as early as 20 business days prior to each of
    December 15, 2006, December 15, 2008,
    December 15, 2013, and December 15, 2018.(2)
    
    Fiscal year ending July 1, 2007.(3)
    
    Fiscal years ending June 29, 2008 and June 28, 2009.(4)
    
    Fiscal years ending June 27, 2010 and June 26, 2011.  
 Item 7A.
    Qualitative
    and Quantitative Disclosures about Market
    Risk.  Interest
    Rate Sensitivity
      
 Item 8.
    Financial
    Statements and Supplementary
    Data.  Form 10-K.
 42




---



##### Table of Contents



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
  Rule 13a-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
  Internal Control  Integrated
    Framework.
      Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
  
 Item 9B.
    Other
    Information.   43




---



##### Table of Contents



PART III
 
  Item 10.
    Directors
    and Executive Officers of the Registrant.    Form 8-K.
 
  Item 11.
    Executive
    Compensation.   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management.    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of securitiesremaining availableNumber of securities





for future issuanceto be issued upon


Weighted-average


under equityexercise of


exercise price of


compensation plansoutstanding options,


outstanding options,


(excluding securitiesPlan Category

warrants and rights


warrants and rights


related in column (a))(a)


(b)


(c)Equity compensations plans
    approved by security holders(1)


13,301,468


$
23.23



2,695,767
(4)Employee stock purchase plan
    approved by security holders(2)










1,021,332Equity compensations plans not
    approved by security holders(3)


1,311,414


$
10.19



641,112Total


14,612,882


$
22.06



4,358,211     (1)
    
    Consists of the Emulex Corporation Employee Stock Option Plan,
    the Emulex Corporation 2005 Equity Incentive 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% discount to the lower of
    market value at the beginning or end of each 6 month
    offering period. As such, 44




---



##### Table of Contents



the number of shares that may be issued during a given
    6 month period and the purchase price of such shares cannot
    be determined in advance. See Note 11 to our Consolidated
    Financial Statements.(3)
    
    Consists of the Aarohi Communications Inc. (Aarohi) 2001 Stock
    Option Plan, the Vixel Corporation (Vixel) 2000 Non-Officer
    Equity Incentive Plan, the Vixel Corporation 1999 Equity
    Incentive Plan, the Vixel Corporation Amended and Restated 1995
    Stock Option Plan, and the Giganet, Inc. (Giganet) 1995 Stock
    Option Plan. Options issued under these plans were converted
    into options to purchase Emulex Corporation common stock as a
    result of the acquisitions of Aarohi, Vixel, and Giganet.(4)
    
    Includes net restricted stock granted of 305,000 shares
    that are not deemed issued for accounting purposes until vested. 
  Item 13.
    Certain
    Relationships and Related Transactions.   
  Item 14.
    Principal
    Accountant Fees and Services.   
  PART IV
 
  Item 15.
    Exhibits
    and Financial Statement Schedules.  (a)
    Financial
    Statements and Schedules  Consolidated Financial Statements
    Financial Statement Schedule
    Exhibits
    (b)
    Exhibits   45




---



##### 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 2, 2006, July 3, 2005, and June 27, 2004
    (With Report of Independent Registered Public Accounting Firm
    Thereon)
  Page NumberConsolidated Financial
    StatementsReports of
    Independent Registered Public Accounting Firm


47Consolidated
    Balance Sheets  July 2, 2006, and July 3,
    2005


49Consolidated
    Statements of Operations  Years ended July 2,
    2006, July 3, 2005, and June 27, 2004


50Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)  Years ended July 2, 2006, July 3,
    2005, and June 27, 2004


51Consolidated
    Statements of Cash Flows  Years ended July 2,
    2006, July 3, 2005, and June 27, 2004


52Notes to
    Consolidated Financial Statements


53ScheduleSchedule II 
    Valuation and Qualifying Accounts and Reserves


80    46




---



##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of Directors and Stockholders
 Emulex Corporation:
        Internal Control  Integrated
    Framework .
      47




---



##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The Board of Directors and Stockholders
 Emulex Corporation:
  Internal Control  Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated Framework
          48




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 July 2, 2006 and July 3, 2005
  2006


2005(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents

$
224,292


$
120,317Investments


367,054



346,675Accounts and other receivables,
    net of allowance for doubtful accounts of $1,908 and $1,919 in
    2006 and 2005, respectively


61,362



47,730Inventories, net


22,414



36,266Prepaid expenses


4,618



4,508Deferred income taxes


27,814



28,961Total current assets


707,554



584,457Property and equipment, net


66,951



65,976Investments


7,103



54,936Intangible assets, net


77,765



95,806Deferred income taxes


352



Other assets


432



606Total Assets

$
860,157


$
801,781LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
17,847


$
29,778Accrued liabilities


21,910



21,505Income taxes payable


27,630



25,361Convertible subordinated notes


235,177



Total current liabilities


302,564



76,644Convertible subordinated notes






233,382Other liabilities


680



283Deferred income taxes






13,881Total liabilities


303,244



324,190Commitments and contingencies
    (Notes 10 and 12)






Stockholders equity:Preferred stock, $0.01 par
    value; 1,000,000 shares authorized (150,000 shares
    designated as Series A Junior Participating Preferred
    Stock); none issued and outstanding






Common stock, $0.10 par
    value; 240,000,000 shares authorized; 84,455,809 and
    83,201,002 issued and outstanding in 2006 and 2005, respectively


8,446



8,320Additional paid-in capital


979,893



944,545Accumulated deficit


(431,416
)


(471,867
)Accumulated other comprehensive
    loss


(10
)


Deferred compensation






(3,407
)Total stockholders equity


556,913



477,591Total Liabilities and
    Stockholders Equity

$
860,157


$
801,781    49




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended July 2, 2006, July 3, 2005, and
    June 27, 2004
  2006


2005


2004(In thousands, except per share data)Net revenues

$
402,813


$
375,653


$
364,422Cost of sales


163,993



154,530



143,299Gross profit


238,820



221,123



221,123Operating expenses:Engineering and development


89,669



79,971



73,211Selling and marketing


36,169



32,441



28,035General and administrative


23,680



11,636



18,815Amortization of other intangible
    assets


10,944



11,314



7,597Impairment of goodwill






1,096



583,499In-process research and development


17,272







11,400Total operating expenses


177,734



136,458



722,557Operating income (loss)


61,086



84,665



(501,434
)Nonoperating income, net:Interest income


21,150



13,106



9,149Interest expense


(2,494
)


(4,202
)


(4,754
)Gain on repurchase of convertible
    subordinated notes






20,514



2,670Other income (expense), net


173



(2,273
)


109Total nonoperating income, net


18,829



27,145



7,174Income (loss) before income taxes


79,915



111,810



(494,260
)Income tax provision


39,464



40,221



38,062Net income (loss)

$
40,451


$
71,589


$
(532,322
)Net income (loss) per share:Basic

$
0.48


$
0.86


$
(6.47
)Diluted

$
0.46


$
0.80


$
(6.47
)Number of shares used in per share
    computations:Basic


83,920



82,819



82,293Diluted


91,259



92,970



82,293    50




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
 AND COMPREHENSIVE INCOME (LOSS)
 Years ended July 2, 2006, July 3, 2005, and
    June 27, 2004
  Accum-ulated Other


TotalAdditional


Deferred


Accum-


Compre-


Stock-Common Stock


Paid-In


Com-


ulated


hensive


holdersShares


Amount


Capital


pensation


Deficit


Loss


Equity(In thousands, except share data)Balance at June 29, 2003


82,465,813


$
8,247


$
907,976


$
(3,159
)

$
(11,134
)

$



$
901,930Net loss


















(532,322
)






(532,322
)Options issued and deferred
    compensation related to purchase of Vixel Corporation










47,538



(13,926
)










33,612Amortization of deferred
    compensation














6,822











6,822Reversal of deferred compensation
    due to employee terminations










(2,509
)


2,509











Exercise of stock options


1,284,754



128



11,096















11,224Tax benefit from exercise of stock
    options










9,529















9,529Repurchase 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















2,859Balance at June 27, 2004


82,413,845



8,241



936,123



(7,754
)


(543,456
)






393,154Net income


















71,589







71,589Amortization of deferred
    compensation














3,984











3,984Reversal of deferred compensation
    due to employee terminations










(363
)


363











Exercise of stock options


530,565



53



4,391















4,444Tax benefit from exercise of stock
    options










1,882















1,882Issuance of common stock under
    employee stock purchase plan


256,592



26



2,512















2,538Balance at July 3, 2005


83,201,002



8,320



944,545



(3,407
)


(471,867
)






477,591Net income


















40,451







40,451Foreign currency translation
    adjustment






















(10
)


(10
)Comprehensive income


























40,441Reclassification of deferred
    compensation upon adoption of SFAS No. 123R










(3,407
)


3,407











Share-based compensation expense










21,453















21,453Options issued to purchase Aarohi
    Communications, Inc., net of securities registration costs










910















910Exercise of stock options


1,046,804



105



9,886















9,991Tax benefit from exercise of stock
    options










3,347















3,347Issuance of common stock under
    employee stock purchase plan


208,003



21



3,159















3,180Balance at July 2, 2006


84,455,809


$
8,446


$
979,893


$



$
(431,416
)

$
(10
)

$
556,913    51




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 July 2, 2006, July 3, 2005, and June 27,
    2004
  2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
40,451


$
71,589


$
(532,322
)Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Depreciation and amortization of
    property and equipment


16,346



14,932



12,442Amortization of discount on
    convertible subordinated notes


1,795



2,827



2,024Gain on repurchase of convertible
    subordinated notes






(20,514
)


(2,670
)Litigation settlements, net of
    insurance recoveries






(4,649
)


698Share-based compensation expense


21,318



3,984



6,822Amortization of other intangible
    assets


25,691



26,162



19,093Impairment of goodwill






1,096



583,499Impairment of strategic investment
    and related note receivable






2,265



In-process research and development
    expense


17,272







11,400Loss on disposal of property and
    equipment


50



86



83Deferred income taxes


(125
)


10,168



15,820Tax benefit from exercise of stock
    options






2,581



9,529Excess tax benefits from
    share-based compensation


(3,961
)






Allowance for doubtful accounts










141Changes in assets and liabilities:Accounts and other receivables


(13,346
)


13,225



(8,809
)Inventories


13,987



(4,431
)


(19,436
)Prepaid expenses and other assets


360



(695
)


4,791Accounts payable and accrued
    liabilities


(15,357
)


7,888



3,021Reimbursement for (payment of)
    litigation settlements






9,052



(31,506
)Income taxes payable


6,230



15,451



3,976Net cash provided by operating
    activities


110,711



151,017



78,596Cash flows from investing
    activities:Net proceeds from sale of property
    and equipment


98



42



53Additions to property and equipment


(16,644
)


(16,466
)


(48,418
)Net decrease in restricted cash
    related to construction escrow account






23



9,319Payments for purchase of Vixel
    Corporation, net of cash acquired










(294,729
)Payments for purchase of the
    technology assets of Trebia Networks, Inc.










(2,094
)Payments for purchase of Aarohi
    Communications, Inc., net of cash acquired


(34,816
)






Purchases of investments


(2,384,576
)


(725,929
)


(402,118
)Maturities of investments


2,412,073



786,057



422,704Net cash provided by (used in)
    investing activities


(23,865
)


43,727



(315,283
)Cash flows from financing
    activities:Repayment of short term
    indebtedness, notes payable and capital leases










(175,300
)Proceeds from short term
    indebtedness










174,000Proceeds from issuance of common
    stock under stock plans


13,171



6,982



14,083Repurchase of common stock










(40,500
)Net proceeds from issuance of
    0.25% convertible subordinated notes










505,179Repurchase of convertible
    subordinated notes






(273,546
)


(185,609
)Excess tax benefits from
    share-based compensation expense


3,961







Net cash provided by (used in)
    financing activities


17,132



(266,564
)


291,853Effect of exchange rates on cash
    and cash equivalents


(3
)






Net increase (decrease) in cash and
    cash equivalents


103,975



(71,820
)


55,166Cash and cash equivalents at
    beginning of year


120,317



192,137



136,971Cash and cash equivalents at end of
    year

$
224,292


$
120,317


$
192,137    52




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1
    Summary
    of Significant Accounting Policies  Description
    of Business
    Principles
    of Consolidation
    Basis
    of Presentation
      Use of
    Estimates
    Foreign
    Currency Translation
   53




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Cash
    Equivalents
    Investments
    other-than-temporary other-than-temporary.
    Accounts
    Receivable
   54




---



##### Table of Contents





EMULEX
    CORPORATION AND SUBSIDIARIES




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






Inventories




first-in,




Property
    and Equipment








Long-Lived
    Assets








Intangible
    Assets, Net








Revenue
    Recognition






55



---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 01-09,
    Research
    and Development
    Advertising
    Expenses
    Income
    Taxes
    Net
    Income (Loss) per Share
   56




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Supplemental
    Cash Flow Information
   2006

2005

2004(In thousands)Capital expenditures included in
    the accounts payable balance on the Companys Consolidated
    Balance Sheet

$
2,217







    2006

2005

2004(In thousands)Interest

$
597


$
1,282


$
2,888Income taxes


33,985



12,527



9,387   Comprehensive
    Income (Loss)
    Stock-Based
    Compensation
           57




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Fair
    Value of Financial Instruments
    Business
    and Credit Concentrations
        Segment
    Information
   58




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Recently
    Issued Accounting Standards
    Note 2
    Business
    Combinations  Acquisition
    of Aarohi Communications, Inc.
      Cash consideration

$
34,316Direct acquisition costs


739Securities registration costs


23Total cash paid


35,078Less cash received


(262
)Cash paid, net of cash received

$
34,816     Cash consideration

$
34,316Direct acquisition costs


739Securities registration costs


23Fair value of stock options assumed


1,935Fair value of restricted stock
    granted


5,529Contingent consideration (not yet
    paid)


1,027Total purchase price

$
43,569    59




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Total purchase price

$
43,569Less securities registration costs


(23
)Less post-acquisition compensation
    expenses:Unvested portion of stock options
    assumed


(1,002
)Restricted stock granted


(5,529
)Purchase price to be allocated

$
37,015              60




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Current assets

$
1,324Property and equipment


827Net deferred tax asset (long-term)


12,456Other assets


77Current liabilities


(3,205
)Net tangible assets


11,479Identifiable intangible assets:In-process research and development


17,272Core/Developed technology


5,115Customer relationships


2,512Covenants
    not-to-compete


637$
37,015     Core/Developed technology


5 yearsCustomer relationships


7 yearsCovenants
    not-to-compete


2 yearsWeighted-average amortization
    period


5 years     Acquisition
    of Vixel Corporation
    Tangible assets, net of cash
    received of $10,440

$
20,848Liabilities


(12,736
)Net tangible assets acquired


8,112Identifiable intangible assets


124,000Deferred taxes


9,986Goodwill


186,243Deferred compensation


13,926Net assets acquired


342,267Stock options assumed for acquired
    business


(47,538
)Cash paid

$
294,729  61




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 3
    Cash,
    Cash Equivalents, and Investments    2006


2005(In thousands)Cash

$
71,182


$
13,477Money market funds


153,110



106,840Certificates of deposit


5,670



7,050Commercial paper


151,204



39,908Municipal bonds






8,099U.S. Government Agency
    securities


181,948



271,106Corporate bonds


35,335



74,832Other






616Total cash, cash equivalents, and
    investments

$
598,449


$
521,928     2006


2005(In thousands)Cash and cash equivalents

$
224,292


$
120,317Short-term investments (maturities
    less than 1 year)


367,054



346,675Long-term investments (maturities
    of 1 to 5 years)


7,103



54,936Total

$
598,449


$
521,928   Note 4
    Inventories,
    net    2006


2005(In thousands)Raw materials

$
5,038


$
20,269Finished goods


17,376



15,997Total inventories, net

$
22,414


$
36,266  62




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Property
    and Equipment
    2006


2005(In thousands)Production and test equipment

$
61,311


$
50,390Furniture and fixtures


28,608



25,687Buildings and improvements


31,376



30,694Land


12,532



12,532133,827



119,303Less accumulated depreciation and
    amortization


(66,876
)


(53,327
)Total property and equipment, net

$
66,951


$
65,976   Note 6  Intangibles,
    net
    2006


2005(In thousands)Intangible assets subject to
    amortization:Core technology and patents

$
99,070


$
98,742Accumulated amortization, core
    technology and patents


(53,440
)


(39,216
)Developed technology


14,405



9,341Accumulated amortization,
    developed technology


(6,223
)


(3,818
)Customer relationships


40,264



37,962Accumulated amortization, customer
    relationships


(19,828
)


(12,415
)Tradename


4,941



4,969Accumulated amortization, tradename


(1,856
)


(1,161
)Covenants
    not-to-compete


3,064



3,081Accumulated amortization,
    covenants
    not-to-compete


(2,632
)


(1,679
)Intangible assets subject to
    amortization, net

$
77,765


$
95,806       2007

$
26,4622008

$
22,4932009

$
13,2062010

$
9,8532011

$
5,094  63




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Note 7  Accrued
    Liabilities
    2006


2005(In thousands)Payroll and related costs

$
8,546


$
8,204Warranty reserves


2,949



4,085Deferred revenue, sales returns
    and allowances


4,478



3,442Accrued advertising and promotions


1,463



1,674Accrued property, sales, franchise
    and related taxes


1,336



1,280Other


3,138



2,820Total accrued liabilities

$
21,910


$
21,505  64




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       2006


2005(In thousands)Balance at beginning of period

$
4,085


$
4,046Additions to costs and expenses


2,874



3,043Amounts charged against reserve


(4,010
)


(3,004
)Balance at end of period

$
2,949


$
4,085   Note 8  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 65




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  stock was more than 120% of the then current conversion price
    for at least 20 trading days in the period of the 30 consecutive
    trading days ending on the last day of the previous fiscal
    quarter;  
    on or after December 15, 2021, at all times on or after any
    date on which the closing sale price of the Companys
    common stock is more than 120% of the then current conversion
    price of the notes;
    if the Company elects to redeem the notes on or after
    December 20, 2008;
    upon the occurrence of specified corporate transactions or
    significant distributions to holders of the Companys
    common stock; or
    subject to specified exceptions, for the 10 business day period
    after any 5 consecutive trading day period in which the average
    trading prices for the notes for such 5 trading day period was
    less than 98% of the average conversion value of the notes
    during that period.      Note 9  Employee
    Retirement Savings Plans
     66




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 10  Commitments
    and Contingencies
  Leases
  month-to-month
    OperatingLeasesFiscal year:2007

$
2,4522008


2,2222009


2,2332010


2,2972011 and thereafter


3,207Total minimum lease payments

$
12,411   Litigation
     67




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Other
    Commitments and Contingencies
      Note 11  Shareholders
    Equity
  Stock
    Repurchase Program
    Shareholder
    Rights Plan
   68




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock-Based
    Compensation
    2006(In thousands)Total cost of stock-based payment
    plans during the period

$
21,453Amounts capitalized in inventory
    during the period


(648
)Amounts recognized in income for
    amounts previously capitalized in inventory


513Amounts charged against income,
    before income tax benefit


21,318Amount of related income tax
    benefit recognized in income

$
4,131   Employee
    Stock Purchase Plan
    Employee
    Stock Option and Equity Incentive Plans
   69




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                 70




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        WeightedAverageWeighted


Remaining


AggregateAverage


Contractual


IntrinsicOptions


Exercise Price


Term (Years)


Value(In millions)Options outstanding at
    July 3, 2005


14,110,464


$
22.15Granted


2,465,580



18.85Exercised


(1,046,804
)


9.54Canceled


(563,018
)


35.95Forfeited


(353,340
)


17.83Options outstanding at
    July 2, 2006


14,612,882


$
22.06



5.75


$
27.3Options exercisable at
    July 2, 2006


10,042,298


$
23.92



5.29


$
20.2          71




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     All Other Plans

Purchase PlanExpected volatility


35.2%-56.6%



37%Weighted average expected
    volatility


47%



37%Expected dividends


0.0%



0.0%Expected term (in years)


2.4-4.4



0.5Weighted average expected term (in
    years)


3.25



0.5Risk-free rate


5.18%-5.23%



4.82%     2005

2004Risk-free interest rate


2.0%-4.0%



1.0%-3.3%Stock volatility


35.1%-84.0%



40.6%-117.7%Dividend yield


0.0%



0.0%Average expected lives (years)


0.5-2.9



0.5-3.4Weighted-average fair value per
    option granted


$3.49-$6.08



$4.92-$18.04     2005


2004(In thousands, exceptper share data)Net income (loss) as reported

$
71,589


$
(532,322
)Add: Total employee stock-based
    compensation expense included in net income (loss) as reported,
    net of related tax effects


2,742



5,095Deduct: Total employee stock-based
    compensation expense determined under fair value method for all
    awards, net of related tax effects


(22,877
)


(35,872
)Pro forma net income (loss)

$
51,454


$
(563,099
)Pro forma net income (loss) per
    shareBasic  as reported

$
0.86


$
(6.47
)Basic  pro forma

$
0.62


$
(6.84
)Diluted  as reported

$
0.80


$
(6.47
)Diluted  pro forma

$
0.58


$
(6.84
)  72




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 12  Income
    Taxes
    2006


2005


2004(In thousands)Federal:Current

$
35,173


$
25,723


$
18,101Deferred


1,496



12,413



17,019State:Current


4,304



3,162



4,076Deferred


(1,621
)


(1,149
)


(1,199
)Foreign:Current


112



72



65Total income tax expense

$
39,464


$
40,221


$
38,062   paid-in-capital
    2006


2005


2004(In thousands)Domestic

$
79,542


$
111,570


$
(494,481
)Foreign


373



240



221Total

$
79,915


$
111,810


$
(494,260
)  73




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005(In thousands)Deferred tax assets:Capitalization of inventory costs

$
159


$
516Reserves not currently deductible


13,002



9,150Share-based compensation


5,866



1,680Net operating loss carryforwards


28,092



25,725General business and state credit
    carryforwards


11,697



11,523Capitalized research and
    development expenditures


1,943



764Alternative minimum tax credit
    carryforwards






4,031Other


1,274



1,213Total gross deferred tax assets


62,033



54,602Less valuation allowance


(931
)


(931
)Deferred tax assets, net of
    valuation allowance


61,102



53,671Deferred tax liabilities:Various state taxes


4,107



2,987Intangible assets 
    customer relationships


7,821



9,350Intangible assets  core
    technology and patents


20,104



23,360Property and equipment


904



2,663Intangible assets  other






231Total gross deferred tax
    liabilities


32,936



38,591Net deferred tax asset

$
28,166


$
15,080        74




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004(In thousands)Expected income tax expense
    (benefit) at 35%

$
27,970


$
39,133


$
(172,991
)State income tax expense, net of
    federal tax benefit


2,318



1,240



3,234Impairment of goodwill






383



204,225In-process research and
    development expenditures


6,045







3,990Change in valuation allowance
    allocated to income tax expense






931



Extraterritorial income exclusion


(90
)


(142
)


(855
)Research and other credits


(357
)


(1,706
)


(782
)SFAS No. 123R
    share-based compensation


3,220







Other, net


358



382



1,241Total income tax expense

$
39,464


$
40,221


$
38,062         Note 13  Revenue
    by Product Families, Geographic Area, and Significant
    Customers
    end-of-life
  75




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2006


2005


2004(In thousands)Net revenues:Fibre Channel

$
402,313


$
375,569


$
363,871IP networking


489



65



529Other


11



19



22Total net revenues

$
402,813


$
375,653


$
364,422       2006


2005


2004(In thousands)United States

$
219,911



55
%

$
205,633



55
%

$
205,390



56
%Pacific Rim Countries


52,811



13
%


56,550



15
%


36,259



10
%Europe and rest of world


130,091



32
%


113,470



30
%


122,773



34
%Total net revenues

$
402,813



100
%

$
375,653



100
%

$
364,422



100
%         Net Revenues


Accounts Receivable2006


2005


2004


2006


2005Hewlett-Packard


10
%


12
%


18
%






IBM


29
%


31
%


24
%


28
%


41
%Info X


21
%


17
%


12
%


20
%


20
%     Net Revenues2006


2005


2004EMC


23
%


20
%


24
%Hewlett-Packard


10
%


14
%


20
%IBM


29
%


31
%


24
%  76




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##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 14
    Net
    Income (Loss) per Share    2006


2005


2004(In thousands, except per share data)Numerator:Net income (loss)

$
40,451


$
71,589


$
(532,322
)Adjustment for interest expense on
    convertible subordinated notes, net of tax


1,477



2,685



Numerator for diluted net income
    (loss) per share

$
41,928


$
74,274


$
(532,322
)Denominator:Denominator for basic net income
    (loss) per share  weighted average shares outstanding


83,920



82,819



82,293Effect of dilutive securities:Dilutive options outstanding


1,876



1,384



Dilutive common shares from
    assumed conversion of convertible notes convertible subordinated
    notes


5,463



8,767



Denominator for diluted net income
    (loss) per share  adjusted weighted average shares


91,259



92,970



82,293Basic net income (loss) per share

$
0.48


$
0.86


$
(6.47
)Diluted net income (loss) per share

$
0.46


$
0.80


$
(6.47
)Antidilutive options excluded from
    the computations


9,258



8,944



12,373Antidilutive common shares from
    assumed conversion of outstanding convertible subordinated notes
    excluded from the calculation










12,697Average market price of common
    stock

$
18.81


$
14.79


$
23.80    77




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 15  Quarterly
    Financial Data (Unaudited)
    DilutedNet IncomeNet





Net Income


(Loss)Revenues


Gross Profit


(Loss)


Per Share(In thousands, except per share data)2006:Fourth quarter

$
98,871


$
57,962


$
(4,787
)(2)

$
(0.06
)Third quarter


89,295



53,372
(3)


11,593



0.13Second quarter


110,268



64,909
(3)


17,209



0.19First quarter


104,379



62,577
(3)


16,436



0.19Total

$
402,813


$
238,820


$
40,4512005:Fourth quarter

$
108,177


$
65,029
(4)

$
25,301


$
0.28Third quarter


102,580



61,420
(4)


17,788



0.20Second quarter


91,671



54,410
(4)


14,201



0.16First quarter


73,225



40,264
(4)


14,299



0.16
(1)Total

$
375,653


$
221,123


$
71,589     (1)
    
    Amounts have been restated from previously reported information
    to comply with the issuance of
    EITF 04-08.  (2)
    
    Includes In-process research and development charge of
    approximately $17.3 million. See Note 2 for additional
    information.  (3)
    
    Approximately $3.6 million, $3.6 million, and
    $3.7 million of amortization expense resulting from the
    acquisition of technology intangible assets for the third,
    second, and first quarters of fiscal 2006, respectively, have
    been reclassified from Amortization of other intangible assets
    to Cost of sales.(4)
    
    Approximately $3.7 million, $3.7 million,
    $3.7 million, and $3.7 million of amortization expense
    resulting from the acquisition of technology intangible assets
    for the fourth, third, second, and first quarters of fiscal
    2005, respectively, have been reclassified from Amortization of
    other intangible assets to Cost of sales.  Note 16  Subsequent
    Events
  end-to-end
     78




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##### Table of Contents



CONSOLIDATED
    FINANCIAL STATEMENTS
   SCHEDULE OF
    EMULEX CORPORATION AND SUBSIDIARIES
  79




---



##### Table of Contents



Schedule II
  EMULEX
    CORPORATION AND SUBSIDIARIES
  VALUATION
    AND QUALIFYING ACCOUNTS AND RESERVES
    Years ended July 2, 2006, July 3, 2005, and June 27
    2004
 (In thousands)
  Additions





AmountsBalance at


Charged to





Charged


BalanceBeginning


Costs and


Additions


Against


at EndClassification

of Period


Expenses


Other(1)


Reserve


of PeriodYear ended July 2, 2006:Allowance for doubtful accounts

$
1,919


$



$



$
11


$
1,908Sales returns, allowances and
    reserves

$
3,442


$
10,523


$



$
10,787


$
3,178Warranty reserve

$
4,085


$
2,874


$



$
4,010


$
2,949Year ended July 3, 2005:Allowance for doubtful accounts

$
2,081


$



$



$
162


$
1,919Sales returns, allowances and
    reserves

$
3,206


$
16,438


$



$
16,202


$
3,442Warranty reserve

$
4,046


$
3,043


$



$
3,004


$
4,085Year ended June 27, 2004:Allowance for doubtful accounts

$
1,844


$
141


$
108


$
12


$
2,081Sales returns, allowances and
    reserves

$
1,897


$
12,118


$



$
10,809


$
3,206Warranty reserve

$
2,349


$
2,880


$
853


$
2,036


$
4,046     (1)
    
    Represents the acquisition of Vixel Corporation 80




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##### Table of Contents



SIGNATURES
    EMULEX CORPORATIONDate: September 14, 2006

By: /s/  James
    M. McCluneyJames
    M. McCluney
    Chief Executive Officer and President     Signature

TitlePrincipal Executive Officer:/s/  James
    M. McCluney(James
    M. McCluney)

Chief Executive Officer,
    President and DirectorPrincipal Financial and Accounting
    Officer:/s/  Michael
    J.
    Rockenbach(Michael
    J. Rockenbach)

Exec. Vice President, Chief
    Financial Officer, Secretary and Treasurer/s/  Paul
    F. Folino(Paul
    F. Folino)

Executive Chairman/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  81




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Description of Exhibit3
.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 between the Company and its executive officers other
    than Paul F. Folino (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*

Amended Key Employee Retention
    Agreement with Paul F. Folino, effective September 5, 2006
    (incorporated by reference to Exhibit 10.1 to the Companys
    Current Report on
    Form 8-K
    filed September 6, 2006) 82




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##### Table of Contents



Exhibit No.

Description of Exhibit10
.10*

Amended Key Employee Retention
    Agreement with James M. McCluney, effective September 5,
    2006 (incorporated by reference to Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed September 6, 2006)10
.11

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
.12

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
.13

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
.14*

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
.15*

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
.16*

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
.17

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
.18*

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
.19*

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
.20*

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
.21*

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
.22*

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
.23*

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
.24

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, 200510
.25*

Description of Compensation
    Arrangements with Non-Employee Directors.10
.26*

Description of Compensation
    Arrangements for Certain Executive Officers.10
.27*

Executive Bonus Plan of Emulex
    Corporation (incorporated by reference to Exhibit 10.26 of
    the Companys 2005 Annual Report on
    Form 10-K).10
.28*

Executive Bonus Plan of Emulex
    Corporation, as amended and restated effective September 5,
    2006 (incorporated by reference to Exhibit 10.3 of the
    Companys Current Report on
    Form 8-K
    filed September 6, 2006). 83




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##### Table of Contents



Exhibit No.

Description of Exhibit10
.29*

Aarohi Communications, Inc. 2001
    Stock Option Plan (incorporated by reference to
    Exhibit 99.1 to the Companys Registration Statement
    on
    Form S-8
    filed May 8, 2006)10
.30*

Form of Aarohi Communications,
    Inc. Stock Option Agreement(incorporated by reference to
    Exhibit 99.2 to the Companys Registration Statement
    on
    Form S-8
    filed May 8, 2006)10
.31*

Form of Aarohi Communications,
    Inc. Stock Option Agreement (alternate form) (incorporated by
    reference to Exhibit 99.3 to the Companys
    Registration Statement on
    Form S-8
    filed May 8, 2006)10
.32*

Form of Aahrohi Communications,
    Inc. Notice of Grant of Stock Option (incorporated by reference
    to Exhibit 99.4 to the Companys Registration
    Statement on
    Form S-8
    filed May 8, 2006)10
.33*

Form of Emulex Corporation Stock
    Option Assumption Documents for holders of options granted under
    the Aarohi Communications, Inc. 2001 Stock Option Plan
    (incorporated by reference to Exhibit 99.5 to the
    Companys Registration Statement on
    Form S-8
    filed May 8, 2006)10
.34*

Emulex Corporation 2005 Equity
    Incentive Plan (incorporated by reference to Appendix B to the
    Companys Definitive Proxy Statement for its Annual Meeting
    of Stockholders held on December 1, 2005)10
.35*

Form of 2005 Equity Incentive Plan
    Restricted Stock Award Agreement (incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended April 2, 2006)10
.36*

Form of Notice of Grant of
    Restricted Stock Award under 2005 Equity (incorporated by
    reference to Exhibit 10.2 to the Companys Quarterly
    Report on
    Form 10-Q
    for the period ended April 2, 200610
.37

Second Amendment to Lease dated
    May 26, 2006 by and between Brass Creekside, L.P. and
    Emulex Design & Manufacturing Corporation (incorporated
    by reference to the Companys Current Report on
    Form 8-K
    filed June 5, 2006)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. 84