##### 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 1, 2007Oro

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)
      Securities registered pursuant to Section 12(b) of the
    Act:
  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   Securities registered pursuant to Section 12(g) of the
    Act:
 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.




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PART I
  All references to years refer to our fiscal years ended
    July 1, 2007, July 2, 2006, and July 3, 2005, 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.
  ®
  ® ®
     2




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Industry
    Protocols Overview
  Fibre
    Channel
        Internet
    SCSI
    Fibre
    Channel Over Ethernet
   3




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Data
    Center Storage Market
    switch-on-a-chip tm
    Storage
    I/O Interconnects
   4




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one-and-a-half
    Our
    Products
    Host
    Server Products
      Embedded
    Storage Products
     5




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Intelligent
    Network Products
       6




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Overall
    Intellectual
    Property
        Engineering
    and Development
    Selling
    and Marketing
    Seasonality
   7




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




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and/or and/or
  Manufacturing
    and Suppliers
       9




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Employees
    Executive
    Officers of the Registrant
    Name

Position

AgePaul F. Folino(1)

Executive Chairman


62James M. McCluney(2)

Chief Executive Officer and
    President


56William F. Gill(3)

Executive Vice President,
    Worldwide Sales


50Sadie A. Herrera(3)

Executive Vice President, Human
    Resources and Facilities


58Marshall D. Lee(3)

Executive Vice President,
    Engineering


51Michael J. Rockenbach

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


46Michael E. Smith(3)

Executive Vice President,
    Worldwide Marketing


45Randall G. Wick(3)

Vice President, General Counsel


54     (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
 10




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Mr. Lee
  Mr. Rockenbach
  Mr. Smith
  Mr. Wick
    Item 1A.
    Risk
    Factors.  Our
    acquisitions of Aarohi Communications, Inc. on May 1, 2006
    and Sierra Logic, Inc. on October 2, 2006, involve numerous
    risks which may have a material adverse effect on our business
    and operating results.
    
    complexities in creating and maintaining uniform standards,
    controls, procedures, and policies;
    different geographic locations of the principal operations of
    Emulex, Aarohi and Sierra Logic and difficulties relating to
    management of the former Aarohi operations and personnel in
    India;
    currency conversion exposure for payroll and other expenses of
    Aarohis principal product development facility in
    Bangalore, India;
    difficulties with integrating acquired technology into our
    existing technology in a timely and efficient manner that would
    allow us to fully realize the benefits of this acquisition.     11




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A
    downturn in information technology spending in general, or
    spending on computer and storage systems in particular, could
    adversely affect our revenues and results of
    operations.
    A
    significant portion of our business depends upon the continued
    growth of the storage networking market, and our business will
    be adversely affected if such growth does not occur or occurs
    more slowly than we anticipate.
  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.
     12




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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.
    
    changes in the size, mix, timing and terms of OEM
    and/or other
    customer orders;
    changes in the sales and deployment cycles for our products
    and/or
    desired inventory levels for our products;
    acquisitions or strategic investments by our customers,
    competitors or us;
    timing and market acceptance of new or enhanced product
    introductions by us, our OEM customers
    and/or
    competitors;
    market share losses or difficulty in gaining incremental market
    share;
    fluctuations in product development, procurement, resource
    utilization and other operating expenses;
    component shortages; 13




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
    reduced demand from our customers if there is a shortage of, or
    difficulties in acquiring, components or other products, such as
    Fibre Channel or SATA disk drives and optical modules, used in
    conjunction with our products in the deployment of systems;
    inability of our electronics manufacturing service providers to
    produce and distribute our products in a timely fashion;
    difficulties with updates, changes or additions to our
    information technology systems;
    breaches of our network security, including viruses;
    changes in general social and economic conditions, including but
    not limited to natural disasters, terrorism, public health and
    slower than expected market growth, with resulting changes in
    customer technology budgeting and spending;
    changes in technology, industry standards or consumer
    preferences;
    seasonality; and
    changes in our accounting or other policies resulting from the
    adoption of new laws, regulations or pronouncements.    Our
    relatively small backlog of unfilled orders, possible customer
    delays or deferrals and our tendency to generate a large
    percentage of our quarterly sales near the end of the quarter
    contribute to possible fluctuations in our operating results
    that could have an adverse impact on our results of operations
    and stock price.
    Our
    industry is subject to rapid technological change and we must
    keep pace with the changes to successfully
    compete.
   14




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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.
   15




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Advancement
    of storage disk capacity technology may not allow for additional
    revenue growth.
    A
    decrease in the average unit selling prices and/or an increase
    in the manufactured cost of our products could adversely affect
    our revenue, gross margins and financial
    performance.
    Delays
    in product development could adversely affect our
    business.
    
    difficulties in hiring and retaining necessary employees and
    independent contractors;
    difficulties in reallocating engineering resources and other
    resource limitations;
    unanticipated engineering or manufacturing complexity, including
    from third party suppliers of intellectual property such as
    foundries of our ASICs;
    undetected errors or failures in 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.
   16




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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
    electronics manufacturing service (EMS) providers;
    changes in business strategies of our suppliers and EMS
    providers;
    increases in manufacturing costs due to lower volumes or more
    complex manufacturing process than anticipated;
    disruption in shipping channels;
    natural disasters;
    inability or unwillingness of our suppliers or EMS providers to
    continue their business with us;
    environmental, tax or legislative changes in the location where
    our products are produced or delivered, including implementation
    of European Union 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 and the
    WEEE directive requiring certain recycling markings and
    recycling procedures for electronic products placed on the
    European market;
    difficulties associated with foreign operations; and
    market shortages.       17




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If our
    intellectual property protections are inadequate, it could
    adversely affect our business.
      and/or and/or and/or
      Third
    party claims of intellectual property infringement could
    adversely affect our business.
   18




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The
    inability or increased cost of attracting, motivating, or
    retaining key managerial and technical personnel could adversely
    affect our business.
    Our
    international business activities subject us to risks that could
    adversely affect our business.
    
    imposition of or changes in governmental controls, taxes,
    tariffs, trade restrictions, and regulatory requirements;
    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.    Potential
    acquisitions or strategic investments may be more costly or less
    profitable than anticipated and may adversely affect the price
    of our common stock.
   19




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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;
    diversion of managements attention from other business
    concerns;
    risks of entering markets in which we have limited or no prior
    experience;
    risks associated with assuming the legal obligations of the
    acquired company;
    minority interest in a company, resulting from a strategic
    investment, that could have an impact on our results;
    risks related to the effect that the acquired companys
    internal control processes might have on our financial reporting
    and managements report on our internal controls over
    financial reporting;
    potential loss of key employees of the company we invested in or
    acquired;
    there may exist unknown defects of an acquired companys
    products or assets that may not be identified due to the
    inherent limitations involved in the due diligence process of an
    acquisition; and
    changes in generally accepted accounting principles regarding
    the accounting treatment for acquisitions to less favorable
    treatment than is currently allowed.    Our
    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; 20




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
    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 regions that are subject to earthquakes and other
    natural disasters.
      Our
    shareholder rights plan, certificate of incorporation and
    Delaware law could adversely affect the performance of our
    stock.
    Our
    system of internal controls may be inadequate.
   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.    Global
    warming issues may cause us to alter the way we conduct our
    business.
   22




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

Low2007Fourth Quarter

$
23.42


$
17.89Third Quarter


20.34



17.01Second Quarter


21.64



17.85First Quarter


18.52



14.072006Fourth Quarter

$
19.00


$
15.58Third Quarter


22.00



16.00Second Quarter


21.22



17.17First Quarter


22.68



17.14   Number of
    Common Stockholders
    Dividends
      Issuer
    Purchases of Equity Securities
      24




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TotalNumber of

Dollar ValueShares

of SharesAverage

Purchased

That MayTotal

Price

as Part of

Yet BeNumber

Paid

Publicly

Purchasedof Shares

per

Announced

Under thePeriod

Purchased

Share

Plan

PlanApril 2, 2007 -
    April 29, 2007













$
111,950,000April 30, 2007 - May 27,
    2007













$
111,950,000May 28, 2007 - July 1,
    2007


1,500,000


$
21.36



1,500,000


$
79,913,000Total


1,500,000


$
21.36



1,500,000


$
79,913,000   Equity
    Compensation Plan Information
   25




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Stock
    Performance Graph
    COMPARISON
    OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
    EMULEX CORPORATION COMMON STOCK, S&P 500 INDEX AND
    S&P COMPUTER STORAGE AND PERIPHERALS INDEX
  
    *
    
    Assumes the value of the investment in the Companys common
    stock and each index was $100 on July 1, 2002. 26




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Item 6.
    Selected
    Consolidated Financial
    Data.    Selected
    Consolidated Statements of Operations Data
  Year EndedJuly 1,


July 2,


July 3,


June 27,


June 29,2007(1)


2006(1)


2005(1),(2)


2004(1),(2)


2003(1),(2)(In thousands, except per share data)Net revenues:Host Server Products

$
357,279


$
340,566


$
320,171


$
335,225


$
304,027Embedded Storage Products


107,578



59,203



49,057



17,685



Intelligent Network Products


3,907



29











Other


1,423



3,015



6,425



11,512



4,181Total net revenues


470,187



402,813



375,653



364,422



308,208Cost of sales


195,579



163,993



154,530



143,299



117,840Gross profit


274,608



238,820



221,123



221,123



190,368Operating expenses:Engineering and development


117,833



89,669



79,971



73,211



61,257Selling and marketing


47,870



36,169



32,441



28,035



18,994General and administrative


31,416



23,680



11,636



18,815



40,291Amortization of other intangible
    assets


12,082



10,944



11,314



7,597



7Impairment of other intangible
    assets


2,001















Impairment of goodwill










1,096



583,499



In-process research and development


19,225



17,272







11,400



Total operating expenses


230,427



177,734



136,458



722,557



120,549Operating income (loss)


44,181



61,086



84,665



(501,434
)


69,819Nonoperating income, net:Interest income


20,000



21,150



13,106



9,149



12,991Interest expense


(1,179
)


(2,494
)


(4,202
)


(4,754
)


(5,510
)Gain on repurchase of convertible
    subordinated notes










20,514



2,670



28,729Other (expense) income, net


(3,919
)


173



(2,273
)


109



(78
)Total nonoperating income, net


14,902



18,829



27,145



7,174



36,132Income (loss) before income taxes


59,083



79,915



111,810



(494,260
)


105,951Income tax provision


29,649



39,464



40,221



38,062



40,262Net income (loss)

$
29,434


$
40,451


$
71,589


$
(532,322
)

$
65,689Net income (loss) per share:Basic

$
0.35


$
0.48


$
0.86


$
(6.47
)

$
0.80Diluted

$
0.34


$
0.46


$
0.80


$
(6.47
)

$
0.79Number of shares used in per share
    computations:Basic


84,545



83,920



82,819



82,293



82,051Diluted


89,089



91,259



92,970



82,293



87,914  27




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(1)
    
    Net revenues have been reclassified into Host Server Products,
    Embedded Storage Products, Intelligent Network Products, and
    Other categories for all fiscal years presented.(2)
    
    Approximately $14.8 million, $11.5 million, and
    $5.8 million of amortization expense resulting from the
    acquisition of technology intangible assets for fiscal years
    2005, 2004, and 2003, respectively, has been reclassified from
    Amortization of other intangible assets to Cost of sales.  Selected
    Consolidated Balance Sheet Data
  Year EndedJuly 1,


July 2,


July 3,


June 27,


June 29,2007


2006


2005


2004


2003(In thousands)Total current assets

$
399,054


$
707,554


$
584,457


$
541,326


$
498,232Total current liabilities


70,340



302,564



76,644



54,496



75,061Working capital


328,714



404,990



507,813



486,830



423,171Total assets


659,288



860,157



801,781



972,981



1,189,769Convertible subordinated notes






235,177



233,382



524,845



208,518Accumulated deficit


(401,982
)


(431,416
)


(471,867
)


(543,456
)


(11,134
)Total stockholders equity


581,907



556,913



477,591



393,154



901,930   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Forward-Looking
    Statements
  Form 10-K
  Form 10-K
 28




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Form 10-K,
  Executive
    Overview
       29




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Business
    Combinations
         30




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Convertible
    Subordinated Notes Offering
       31




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Results
    of Operations for Emulex Corporation and Subsidiaries
  Form 10-K.
  Percentage of Net Revenues2007


2006


2005Net revenues:Host Server Products


76.0
%


84.5
%


85.2
%Embedded Storage Products


22.9



14.7



13.1Intelligent Network Products


0.8







Other


0.3



0.8



1.7Total net revenues


100.0



100.0



100.0Cost of sales


41.6



40.7



41.1Gross profit


58.4



59.3



58.9Operating expenses:Engineering and development


25.0



22.2



21.3Selling and marketing


10.2



9.0



8.7General and administrative


6.7



5.9



3.1Amortization of other intangible
    assets


2.6



2.7



3.0Impairment of other intangible
    assets


0.4







Impairment of goodwill










0.3In-process research and development


4.1



4.3



Total operating expenses


49.0



44.1



36.4Operating income


9.4



15.2



22.5Nonoperating income, net:Interest income


4.3



5.2



3.5Interest expense


(0.3
)


(0.6
)


(1.1
)Gain on repurchase of convertible
    subordinated notes










5.5Other (expense) income, net


(0.8
)






(0.6
)Total nonoperating income, net


3.2



4.6



7.3Income before income taxes


12.6



19.8



29.8Income tax provision


6.3



9.8



10.7Net income


6.3
%


10.0
%


19.1
%   Fiscal
    2007 versus Fiscal 2006
  Net Revenues.
 32




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Net
    Revenues by Product Line
    Percentage of





Percentage of


Increase/


Percentage2007


Net Revenues


2006


Net Revenues


(Decrease)


Change(Dollars in thousands)Host Server Products

$
357,279



76
%

$
340,566



84
%

$
16,713



5
%Embedded Storage Products


107,578



23



59,203



15



48,375



82
%Intelligent Network Products


3,907



1



29







3,878



nmfOther


1,423







3,015



1



(1,592
)


(53
)%Total net revenues

$
470,187



100
%

$
402,813



100
%

$
67,374



17
%     Not meaningful (nmf).        Net
    Revenues by Major Customers
    Total Directand IndirectDirect Revenues


Revenues(2)2007


2006


2007


2006Net revenue percentage(1)EMC










18
%


23
%Hewlett-Packard


13
%


10
%


13
%


10
%IBM


22
%


29
%


25
%


29
%Info X


17
%


21
%






  33




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##### Table of Contents



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





Percentage of


Increase/


Percentage2007


Net Revenues


2006


Net Revenues


(Decrease)


Change(Dollars in thousands)OEM

$
335,562



71
%

$
257,531



64
%

$
78,031



30
%Distribution


134,322



29
%


145,071



36
%


(10,749
)


(7
)%Other


303







211







92



44
%Total net revenues

$
470,187



100
%

$
402,813



100
%

$
67,374



17
%     Net
    Revenues by Geographic Territory
    Percentage of





Percentage of


Increase/


Percentage2007


Net Revenues


2006


Net Revenues


(Decrease)


Change(Dollars in thousands)United States

$
218,996



47
%

$
219,911



55
%

$
(915
)


Pacific Rim


80,637



17
%


52,811



13
%


27,826



53
%Europe and rest of the world


170,554



36
%


130,091



32
%


40,463



31
%Total net revenues

$
470,187



100
%

$
402,813



100
%

$
67,374



17
%    34




---



##### Table of Contents



Gross Profit.
  Engineering and Development.
  Selling and Marketing.
  General and Administrative.
 35




---



##### Table of Contents



Amortization of Other Intangible
    Assets.
  Impairment of Other Intangible
    Assets.
  In-Process Research and
    Development.
  Nonoperating Income, net.
  Income taxes.
 36




---



##### 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(Dollars in thousands)Host Server Products

$
340,566



84
%

$
320,171



85
%

$
20,395



6
%Embedded Storage Products


59,203



15



49,057



13



10,146



21
%Intelligent Network Products


29















29



100
%Other


3,015



1



6,425



2



(3,410
)


(53
)%Total net revenues

$
402,813



100
%

$
375,653



100
%

$
27,160



7
%         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
%






  37




---



##### Table of Contents



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





Percentage of


Increase/


Percentage2006


Net Revenues


2005


Net Revenues


(Decrease)


Change(Dollars 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
    Revenues by Geographic Territory
    Percentage of





Percentage of


Increase/


Percentage2006


Net Revenues


2005


Net Revenues


(Decrease)


Change(Dollars in thousands)United States

$
219,911



55
%

$
205,633



55
%

$
14,278



7
%Pacific Rim


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
%    38




---



##### Table of Contents



Gross Profit.
  Engineering and Development.
  Selling and Marketing.
  General and Administrative.
  Amortization of Other Intangible
    Assets.
  Impairment of Goodwill.
 39




---



##### Table of Contents



In-Process Research and Development.
  Nonoperating Income, net.
  Income taxes.
  Critical
    Accounting Policies
      Revenue Recognition.
 40




---



##### Table of Contents



No. 01-09,
  Warranty.
  Allowance for Doubtful Accounts.
  Intangibles and Other Long-Lived
    Assets.
  Inventories. first-in,
  Goodwill.
    Income Taxes.
 41




---



##### Table of Contents



Stock-Based Compensation.
  Liquidity
    and Capital Resources
       42




---



##### Table of Contents



Form 10-K.
    Payments Due by PeriodTotal


2008


2009


2010


2011


2012


Thereafter(In thousands)Leases(1)

$
18,682


$
3,293


$
4,015


$
3,947


$
4,020


$
2,356


$
1,051Purchase commitments


25,395



23,790



1,605















Other commitments


3,379



3,266



39



39



32



3



Total

$
47,456


$
30,349


$
5,659


$
3,986


$
4,052


$
2,359


$
1,051     (1)
    
    Lease payments include common area maintenance (CAM) charges.  Item 7A.
    Qualitative
    and Quantitative Disclosures about Market
    Risk.  Interest
    Rate Sensitivity
    Item 8.
    Financial
    Statements and Supplementary Data.  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial
    Disclosure.   43




---



##### Table of Contents



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.    PART III
  Item 10.
    Directors,
    Executive Officers, and Corporate
    Governance.     44




---



##### Table of Contents



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)


12,449,370


$
22.65



2,959,409
(4)Employee stock purchase plan
    approved by security holders(2)










777,219Equity compensations plans not
    approved by security holders(3)


1,063,279


$
10.13



325,748Total


13,512,649


$
21.66



4,062,376     (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 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 11 to our Consolidated Financial Statements.(3)
    
    Consists of the Sierra Logic, Inc. (Sierra Logic) 2001 Stock
    Option Plan, 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 Sierra Logic, Aarohi, Vixel, and
    Giganet. 45




---



##### Table of Contents



(4)
    
    Includes net restricted stock granted of 1,314,776 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
   46




---



##### 



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 1, 2007, July 2, 2006, and July 3,
    2005
 (With Report of Independent Registered Public Accounting Firm
    Thereon)
  
  Page NumberConsolidated Financial
    StatementsReports of
    Independent Registered Public Accounting Firm


48Consolidated
    Balance Sheets  July 1, 2007, and July 2,
    2006


50Consolidated
    Statements of Income  Years ended July 1, 2007,
    July 2, 2006, and July 3, 2005


51Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)  Years ended July 1, 2007, July 2,
    2006, and July 3, 2005


52Consolidated
    Statements of Cash Flows  Years ended July 1,
    2007, July 2, 2006, and July 3, 2005


53Notes to
    Consolidated Financial Statements


54ScheduleSchedule
    II  Valuation and Qualifying Accounts and
    Reserves


82EXHIBIT 10.24EXHIBIT 21EXHIBIT 23EXHIBIT 31.AEXHIBIT 31.BEXHIBIT 32     47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share-Based
    Payment
  Internal Control  Integrated
    Framework
      48




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated Framework
        49




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 July 1,
    2007 and July 2, 2006
  2007


2006(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents

$
69,036


$
224,292Investments


202,288



367,054Accounts and other receivables,
    net of allowance for doubtful accounts of $1,902 and $1,908 in
    2007 and 2006, respectively


67,529



61,362Inventories


28,973



22,414Prepaid expenses


4,114



4,618Deferred income taxes


27,114



27,814Total current assets


399,054



707,554Property and equipment, net


64,294



66,951Investments






7,103Goodwill


62,347



Intangible assets, net


108,342



77,765Deferred income taxes






352Other assets


25,251



432Total Assets

$
659,288


$
860,157LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
19,761


$
17,847Accrued liabilities


29,483



21,910Income taxes payable


21,096



27,630Convertible subordinated notes






235,177Total current liabilities


70,340



302,564Other liabilities


802



680Deferred income taxes


6,239



Total liabilities


77,381



303,244Commitments and contingencies
    (Note 10)






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; 86,906,540 and
    84,455,809 issued at July 1, 2007 and July 2, 2006,
    respectively


8,691



8,446Additional paid-in capital


1,045,221



979,893Accumulated deficit


(401,982
)


(431,416
)Accumulated other comprehensive
    income (loss)


64



(10
)Treasury stock, at cost;
    3,589,278 shares at July 1, 2007


(70,087
)


Total stockholders equity


581,907



556,913Total Liabilities and
    Stockholders Equity

$
659,288


$
860,157    50




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
 Years Ended July 1, 2007, July 2, 2006, and
    July 3, 2005
  2007


2006


2005(In thousands, except per share data)Net revenues

$
470,187


$
402,813


$
375,653Cost of sales


195,579



163,993



154,530Gross profit


274,608



238,820



221,123Operating expenses:Engineering and development


117,833



89,669



79,971Selling and marketing


47,870



36,169



32,441General and administrative


31,416



23,680



11,636Amortization of other intangible
    assets


12,082



10,944



11,314Impairment of other intangible
    assets


2,001







Impairment of goodwill










1,096In-process research and development


19,225



17,272



Total operating expenses


230,427



177,734



136,458Operating income


44,181



61,086



84,665Nonoperating income, net:Interest income


20,000



21,150



13,106Interest expense


(1,179
)


(2,494
)


(4,202
)Gain on repurchase of convertible
    subordinated notes










20,514Other (expense) income, net


(3,919
)


173



(2,273
)Total nonoperating income, net


14,902



18,829



27,145Income before income taxes


59,083



79,915



111,810Income tax provision


29,649



39,464



40,221Net income

$
29,434


$
40,451


$
71,589Net income per share:Basic

$
0.35


$
0.48


$
0.86Diluted

$
0.34


$
0.46


$
0.80Number of shares used in per share
    computations:Basic


84,545



83,920



82,819Diluted


89,089



91,259



92,970    51




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AND COMPREHENSIVE INCOME (LOSS)
 Years ended July 1, 2007, July 2, 2006, and
    July 3, 2005
  Accum-ulated Other








TotalCommon Stock


Additional


Accum-


Compre-


Deferred





Stock-Shares





Paid-In


ulated


hensive


Com-


Treasury


holdersOutstanding


Amount


Capital


Deficit


Income/(Loss)


pensation


Stock


Equity(In thousands, except share data)Balance at June 27, 2004


82,413,845


$
8,241


$
936,123


$
(543,456
)





$
(7,754
)





$
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



(471,867
)






(3,407
)






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
)










556,913Net income














29,434















29,434Foreign currency translation
    adjustment


















74











74Comprehensive income






























29,508Share-based compensation expense










28,057



















28,057Options issued to purchase Sierra
    Logic, Inc., net of securities registration costs










7,410



















7,410Restricted stock vested


101,900



10



(10
)


















Restricted stock withheld for taxes


(25,602
)


(2
)


(540
)


















(542
)Exercise of stock options


2,130,320



213



18,823



















19,036Tax benefit from exercise of stock
    options










7,951



















7,951Issuance of common stock under
    employee stock purchase plan


244,113



24



3,637



















3,661Purchase of treasury stock


(3,589,278
)






















(70,087
)


(70,087
)Balance at July 1, 2007


83,317,262


$
8,691


$
1,045,221


$
(401,982
)

$
64


$



$
(70,087
)

$
581,907    52




---



##### Table of Contents



EMULEX
    CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 July 1,
    2007, July 2, 2006, and July 3, 2005
  2007


2006


2005(In thousands)Cash flows from operating
    activities:Net income

$
29,434


$
40,451


$
71,589Adjustments to reconcile net income
    to net cash provided by operating activities:Depreciation and amortization of
    property and equipment


17,654



16,346



14,932Amortization of discount on
    convertible subordinated notes


823



1,795



2,827Gain on repurchase of convertible
    subordinated notes










(20,514
)Litigation settlements, net of
    insurance recoveries










(4,649
)Share-based compensation expense


28,030



21,318



3,984Amortization of other intangible
    assets


37,887



25,691



26,162Impairment of goodwill










1,096Impairment of strategic investment
    and related note receivable


4,975







2,265In-process research and development
    expense


19,225



17,272



Loss on disposal of property and
    equipment


148



50



86Deferred income taxes


(2,960
)


(125
)


10,168Tax benefit from exercise of stock
    options










2,581Excess tax benefits from
    share-based compensation


(6,809
)


(3,961
)


Impairment of other intangible
    assets


2,175







Changes in assets and liabilities:Accounts and other receivables


(3,598
)


(13,346
)


13,225Inventories


(2,309
)


13,987



(4,431
)Prepaid expenses and other assets


325



360



(695
)Accounts payable, accrued
    liabilities, and other liabilities


2,082



(15,357
)


7,888Reimbursement for litigation
    settlements










9,052Income taxes payable


2,811



6,230



15,451Net cash provided by operating
    activities


129,893



110,711



151,017Cash flows from investing
    activities:Net proceeds from sale of property
    and equipment


76



98



42Additions to property and equipment


(13,141
)


(16,644
)


(16,466
)Net decrease in restricted cash
    related to construction escrow account










23Payments for purchase of Sierra
    Logic, Inc., net of cash acquired


(134,188
)






Restricted cash placed in escrow
    related to Sierra Logic, Inc. acquisition


(24,316
)






Strategic investment in
    privately-held company


(4,975
)






Payments for purchase of Aarohi
    Communications, Inc., net of cash acquired






(34,816
)


Purchases of investments


(2,234,859
)


(2,384,576
)


(725,929
)Maturities of investments


2,406,728



2,412,073



786,057Net cash (used in) provided by
    investing activities


(4,675
)


(23,865
)


43,727Cash flows from financing
    activities:Retirement of debt assumed in
    conjunction with Sierra Logic, Inc. acquisition


(3,425
)






Retirement of convertible
    subordinated notes


(236,000
)






Proceeds from issuance of common
    stock under stock plans


22,697



13,171



6,982Repurchase of common stock


(70,087
)






Tax withholding payments reimbursed
    by restricted stock


(542
)






Repurchase of convertible
    subordinated notes










(273,546
)Excess tax benefits from
    share-based compensation


6,809



3,961



Net cash (used in) provided by
    financing activities


(280,548
)


17,132



(266,564
)Effect of exchange rates on cash
    and cash equivalents


74



(3
)


Net (decrease) increase in cash and
    cash equivalents


(155,256
)


103,975



(71,820
)Cash and cash equivalents at
    beginning of year


224,292



120,317



192,137Cash and cash equivalents at end of
    year

$
69,036


$
224,292


$
120,317    53




---



##### 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
   54




---



##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    Equivalents
    Investments
        Accounts
    Receivable
   55




---



##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in,
  Property
    and Equipment
  and/or
  Goodwill
        Long-Lived
    Assets
   56




---



##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Intangible
    Assets, Net
    Revenue
    Recognition
  No. 01-09, No. 01-09).
  Warranty
    Research
    and Development
    Advertising
    Expenses
    Income
    Taxes
   57




---



##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net
    Income per Share
    Supplemental
    Cash Flow Information
    2007

2006

2005(In thousands)Capital expenditures included in
    accounts payable in the Companys consolidated balance
    sheets

$
939


$
2,217



     2007

2006

2005(In thousands)Interest

$
336


$
597


$
1,282Income taxes


29,631



33,985



12,527   Comprehensive
    Income (Loss)
    Stock-Based
    Compensation
     58




---



##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Fair
    Value of Financial Instruments
    Business
    and Credit Concentrations
       59




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment
    Information
    Recently
    Issued Accounting Standards
    No. 48-1, FIN No. 48-1). FIN No. 48-1 FIN No. 48-1.
    instrument-by-instrument
 60




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 2
    Business
    Combinations  Sierra
    Logic, Inc.
      (In thousands)Current and other assets,
    including cash acquired of $5,192

$
12,257Current deferred tax asset


1,312Property and equipment


1,159Acquired IPR&D


21,800Intangible assets


73,000Goodwill


62,497Total assets acquired


172,025Current liabilities


(10,748
)Noncurrent deferred tax liability


(14,286
)Total liabilities assumed


(25,034
)Net assets acquired

$
146,991      61




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##### Table of Contents



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

5 yearsCustomer relationships

5 yearsBacklog

3 monthsWeighted-average amortization
    period

5 years           62




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve Months EndedJuly 1,


July 2,2007


2006(Unaudited)(In thousands, except per share data)Net revenues

$
477,620


$
425,404Net income

$
26,178


$
23,367Net income per basic share

$
0.31


$
0.28Net income per diluted share

$
0.30


$
0.26   Aarohi
    Communications, Inc.
      (In thousands)Current and other assets

$
634Property and equipment


827Net noncurrent deferred tax asset


12,961Acquired IPR&D


17,272Intangible assets


8,264Total assets acquired


39,958Current liabilities


(5,142
)Net assets acquired

$
34,816    63




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3
    Cash,
    Cash Equivalents, and Investments    2007


2006(In thousands)Cash

$
12,236


$
2,685Money market funds


56,800



221,607Certificates of deposit






5,670Commercial paper


180,580



151,204U.S. Government Agency securities


12,603



181,948Corporate bonds


9,105



35,335Total cash, cash equivalents, and
    investments

$
271,324


$
598,449     2007


2006(In thousands)Cash and cash equivalents

$
69,036


$
224,292Short-term investments (maturities
    less than one year)


202,288



367,054Long-term investments (maturities
    of one to five years)






7,103Total

$
271,324


$
598,449   Note 4
    Inventories,
    net    2007


2006(In thousands)Raw materials

$
11,128


$
5,038Finished goods


17,845



17,376Total inventories, net

$
28,973


$
22,414   Note 5
    Property
    and Equipment    2007


2006(In thousands)Production and test equipment

$
70,368


$
61,311Furniture and fixtures


30,819



28,608Buildings and improvements


31,495



31,376Land


12,532



12,532145,214



133,827Less accumulated depreciation and
    amortization


(80,920
)


(66,876
)Total property and equipment, net

$
64,294


$
66,951  64




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6
    Goodwill
    and Intangible Assets, net    CarryingAmount(In thousands)Goodwill, as of July 2, 2006

$
Sierra Logic, Inc. acquisition
    goodwill


62,497Excess tax benefits


(150
)Goodwill, as of July 1, 2007

$
62,347     2007


2006(In thousands)Intangible assets subject to
    amortization:Core technology and patents

$
95,471


$
99,070Accumulated amortization, core
    technology and patents


(65,347
)


(53,440
)Developed technology


81,982



14,405Accumulated amortization,
    developed technology


(19,731
)


(6,223
)Customer relationships


40,608



40,264Accumulated amortization, customer
    relationships


(27,170
)


(19,828
)Tradename


4,896



4,941Accumulated amortization, tradename


(2,546
)


(1,856
)Covenants not-to-compete


3,575



3,064Accumulated amortization,
    covenants not-to-compete


(3,396
)


(2,632
)Intangible assets subject to
    amortization, net

$
108,342


$
77,765        65




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008

$
35,4432009


26,7642010


23,5092011


18,8642012


3,762$
108,342   Note 7
    Accrued
    Liabilities    2007


2006(In thousands)Payroll and related costs

$
15,879


$
8,546Warranty reserves


3,832



2,949Deferred revenue and accrued
    rebates


3,724



4,478Accrued advertising and promotions


839



1,463Accrued property, sales, franchise
    and related taxes


1,710



1,336Other


3,499



3,138Total accrued liabilities

$
29,483


$
21,910     2007


2006(In thousands)Balance at beginning of period

$
2,949


$
4,085Accrual for warranties issued


3,685



2,874Settlements made (in cash or in
    kind)


(2,802
)


(4,010
)Balance at end of period

$
3,832


$
2,949   Note 8
    Convertible
    Subordinated Notes  th th
   66




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 9
    Employee
    Retirement Savings Plans      Note 10
    Commitments
    and Contingencies  Leases
   67




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    OperatingLeasesFiscal year:2008

$
3,2612009


3,9832010


3,9152011


3,9902012


2,350Thereafter


1,051Total minimum lease payments

$
18,550   Litigation
     68




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##### 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
  1 100
 69




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-Based
    Compensation
    Year Ended


Year EndedJuly 1, 2007


July 2, 2006(In thousands)Total cost of stock-based payment
    plans during the period

$
28,057


$
21,453Amounts capitalized in inventory
    during the period


(652
)


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


625



513Amounts charged against income,
    before income tax benefit

$
28,030


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

$
6,700


$
4,131   Employee
    Stock Purchase Plan
    Employee
    Stock Option and Equity Incentive Plan
   70




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             71




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               72




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##### 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 2, 2006


14,612,882


$
22.06Options granted


1,965,050



13.87Options exercised


(2,130,320
)


8.94Options canceled


(723,083
)


47.50Options forfeited


(211,880
)


16.97Options outstanding at,
    July 1, 2007


13,512,649


$
21.66



4.89


$
49.1Options vested and expected to
    vest at July 1, 2007


13,095,678


$
21.80



4.87


$
47.2Options exercisable at
    July 1, 2007


10,088,984


$
23.15



4.62


$
33.1       All Other Plans


Purchase Plan2007


2006


2007


2006Expected volatility


30
% - 38%


35.2
% - 56.6%


29
% - 31%


37
%Weighted average expected
    volatility


34
%


47
%


30
%


37
%Expected dividends














Expected term (in years)


1.4 - 4.4



2.4 - 4.4



0.24 - 0.5



0.5Weighted average expected term (in
    years)


3.23



3.25



0.49



0.5Risk-free rate


4.51
% - 4.95%


5.18
% - 5.23%


5.01
%-5.08%


4.82
%  73




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverage GrantNumber of


Date FairShares


ValueAwards outstanding and unvested at
    July 2, 2006


305,000


$
17.98Awards granted


1,174,726


$
18.32Awards vested


(101,900
)

$
18.36Awards forfeited


(63,050
)

$
18.58Awards outstanding and unvested at
    July 1, 2007


1,314,776


$
18.22           2005Risk-free interest rate


2.0
%-4.0%Stock volatility


35.1
%-84.0%Dividend yield


0.0
%Average expected lives (years)


0.5-2.9Weighted-average fair value per
    option granted

$
3.49-$6.08  74




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2005(In thousands,except pershare data)Net income as reported

$
71,589Add: Total employee stock-based
    compensation expense included in net income as reported, net of
    related tax effects


2,742Deduct: Total employee stock-based
    compensation expense determined under fair value method for all
    awards, net of related tax effects


(22,877
)Pro forma net income

$
51,454Pro forma net income per shareBasic  as reported

$
0.86Basic  pro forma

$
0.62Diluted  as reported

$
0.80Diluted  pro forma

$
0.58   Note 12
    Income
    Taxes    2007


2006


2005(In thousands)Federal:Current

$
28,907


$
35,173


$
25,723Deferred


(11,961
)


1,496



12,413State:Current


3,633



4,304



3,162Deferred


9,001



(1,621
)


(1,149
)Foreign:Current


69



112



72Total income tax expense

$
29,649


$
39,464


$
40,221   paid-in-capital
    2007


2006


2005(In thousands)Domestic

$
58,852


$
79,542


$
111,570Foreign


231



373



240Total

$
59,083


$
79,915


$
111,810  75




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006(In thousands)Deferred tax assets:Capitalization of inventory costs

$
217


$
159Reserves not currently deductible


11,848



13,002Share-based compensation


11,387



5,866Net operating loss carryforwards


24,847



28,092General business and state credit
    carryforwards


15,198



11,697Capitalized research and
    development expenditures


3,771



1,943Capital loss carryforwards


2,625



931Property and equipment


144



Other


964



343Total gross deferred tax assets


71,001



62,033Less valuation allowance


(2,625
)


(931
)Deferred tax assets, net of
    valuation allowance


68,376



61,102Deferred tax liabilities:Various state taxes


5,580



4,107Intangible assets 
    customer relationships


5,358



7,821Intangible assets  core
    technology and patents


36,563



20,104Property and equipment






904Total gross deferred tax
    liabilities


47,501



32,936Net deferred tax asset

$
20,875


$
28,166        76




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005(In thousands)Expected income tax expense at 35%

$
20,679


$
27,970


$
39,133State income tax expense, net of
    federal tax benefit


1,785



2,318



1,240Impairment of goodwill










383In-process research and
    development expenditures


6,729



6,045



Change in valuation allowance
    allocated to income tax expense


1,693







931Extraterritorial income exclusion


(2,066
)


(90
)


(142
)Research and other credits


(1,607
)


(357
)


(1,706
)Stock-based compensation


2,928



3,220



Other, net


(492
)


358



382Total income tax expense

$
29,649


$
39,464


$
40,221         Note 13
    Revenue
    by Product Families, Geographic Area, and Significant
    Customers  Revenues
    by Product Families
    77




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2007


2006


2005(In thousands)Net revenues:Host Server Products

$
357,279


$
340,566


$
320,171Embedded Storage Products


107,578



59,203



49,057Intelligent Networking Products


3,907



29



Other


1,423



3,015



6,425Total net revenues

$
470,187


$
402,813


$
375,653   Revenues
    by Geographic Area
    2007


2006


2005(In thousands)United States

$
218,996



47
%

$
219,911



55
%

$
205,633



55
%Pacific Rim


80,637



17
%


52,811



13
%


56,550



15
%Europe and rest of world


170,554



36
%


130,091



32
%


113,470



30
%Total net revenues

$
470,187



100
%

$
402,813



100
%

$
375,653



100
%     Significant
    Customers
    AccountsNet Revenues


Receivable2007


2006


2005


2007


2006Hewlett-Packard


13
%


10
%


12
%






IBM


22
%


29
%


31
%


26
%


28
%Info X


17
%


21
%


17
%


15
%


20
%     Net Revenues2007


2006


2005EMC


18
%


23
%


20
%Hewlett-Packard


13
%


10
%


14
%IBM


25
%


29
%


31
%  78




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##### Table of Contents



EMULEX CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 14
    Net
    Income per Share    2007


2006


2005(In thousands, except per share data)Numerator:Net income

$
29,434


$
40,451


$
71,589Adjustment for interest expense on
    convertible subordinated notes, net of tax


702



1,477



2,685Numerator for diluted net income
    per share

$
30,136


$
41,928


$
74,274Denominator:Denominator for basic net income
    per share  weighted average shares outstanding


84,545



83,920



82,819Effect of dilutive securities:Dilutive potential common shares,
    using treasury stock method


2,023



1,876



1,384Dilutive common shares from
    assumed conversion of convertible subordinated notes


2,521



5,463



8,767Denominator for diluted net income
    per share  adjusted weighted average shares


89,089



91,259



92,970Basic net income per share

$
0.35


$
0.48


$
0.86Diluted net income per share

$
0.34


$
0.46


$
0.80Antidilutive options excluded from
    the computations


8,486



9,258



8,944Average market price of common
    stock

$
18.81


$
18.81


$
14.79    79




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##### Table of Contents



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





Net Income


(Loss)Revenues


Gross Profit


(Loss)


per Share(In thousands, except per share data)2007:Fourth quarter

$
126,268


$
77,042


$
13,162


$
0.15Third quarter


120,211



70,585



11,386



0.13Second quarter


121,390



65,782



(10,076
)(1)


(0.12
)First quarter


102,318



61,199



14,962



0.17Total

$
470,187


$
274,608


$
29,4342006:Fourth quarter

$
98,871


$
57,962


$
(4,787
)(1)

$
(0.06
)Third quarter


89,295



53,372
(2)


11,593



0.13Second quarter


110,268



64,909
(2)


17,209



0.19First quarter


104,379



62,577
(2)


16,436



0.19Total

$
402,813


$
238,820


$
40,451     (1)
    
    Includes In-process research and development charges of
    approximately $21.6 million and $17.3 million for the
    second quarter of fiscal 2007 and the fourth quarter of fiscal
    2006, respectively. See Note 2 for additional information.(2)
    
    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. 80




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##### Table of Contents



SCHEDULE OF
    EMULEX CORPORATION AND SUBSIDIARIES
  81




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##### Table of Contents



Schedule II  EMULEX
    CORPORATION AND SUBSIDIARIES
  VALUATION
    AND QUALIFYING ACCOUNTS AND RESERVES
    Years ended July 1, 2007, July 2, 2006, and
    July 3, 2005
  Additions


AmountsBalance at


Charged to


Charged


BalanceBeginning


Costs and


Against


at EndClassification

of Period


Expenses


Reserve


of Period(In thousands)Year ended July 1, 2007:Allowance for doubtful accounts

$
1,908


$



$
6


$
1,902Sales returns, allowances and
    reserves

$
3,178


$
11,840


$
11,688


$
3,330Warranty reserve

$
2,949


$
3,685


$
2,802


$
3,832Year 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


$
4,085    82




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##### Table of Contents



SIGNATURES
      By:
    /s/  James
    M. McCluney         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)

Executive 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  83




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Description of Exhibit2
.1

Agreement and Plan of Merger,
    dated August 29, 2006, relating to the Companys
    acquisition of Sierra Logic, Inc. (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on Form 8-K
    filed on August 29, 2006)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).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 B to the Companys Definitive
    Proxy Statement for its Annual Meeting of Stockholders held on
    November 30, 2006).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 and James M. McCluney (incorporated by
    reference to Exhibit 10.7 to the Companys Quarterly Report
    on Form 10-Q for the quarterly period ended December 31, 2006).10
.8*

Key Employee Retention Agreement
    for Paul F. Folino, as amended, 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)10
.9*

Key Employee Retention Agreement
    for James M. McCluney, as amended, 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
.10

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
.11

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). 84




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##### Table of Contents



Exhibit No.

Description of Exhibit10
.12

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
.13*

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
.14*

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
.15*

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
.16

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
.17*

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
.18*

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
.19*

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
.20*

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
.21*

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, 200510
.24*

Description of Compensation
    Arrangements with Non-Employee Directors.10
.25*

Description of Compensation
    Arrangements for Certain Executive Officers (incorporated by
    reference to Exhibit 10.26 to the Companys Annual Report
    on Form 10-K for the fiscal year ended July 2, 2006).10
.26*

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)10
.27*

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
.28*

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) 85




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##### Table of Contents



Exhibit No.

Description of Exhibit10
.29*

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
.30*

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
.31*

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
.32*

Emulex Corporation 2005 Equity
    Incentive Plan (incorporated by reference to Appendix A to the
    Companys Definitive Proxy Statement for its Annual Meeting
    of Stockholders held on November 30, 2006)10
.33*

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
.34*

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
.35

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)10
.36*

Sierra Logic, Inc. 2001 Stock
    Option Plan (incorporated by reference to Exhibit 99.1 to the
    Companys Registration Statement on Form S-8 filed on
    October 5, 2006)10
.37*

Form of Sierra Logic, Inc. Stock
    Option Agreement and Notice of Grant of Stock Option
    (incorporated by reference to Exhibit 99.2 to the Companys
    Registration Statement on Form S-8 filed on October 5, 2006)10
.38*

Form of Emulex Corporation Stock
    Option Assumption Documents for holders of options granted under
    the Sierra Logic, Inc. 2001 Stock Option Plan (incorporated by
    reference to Exhibit 99.3 to the Companys Registration
    Statement on Form S-8 filed on October 5, 2006)10
.39

Standard Form Business Center
    Lease dated March 18, 2003, and its Amendment No. One, Addendum
    Two, and Addendum Three by and between Eureka Development
    Company LLC and Sierra Logic, Inc. (incorporated by reference to
    Exhibit 10.8 to the Companys Quarterly Report on Form 10-Q
    for the quarterly period ended December 31, 2006)10
.40

Amendment No. 4 to Sublease
    Agreement by and between Emulex Communications Corporation and
    WJ Communications Inc. (incorporated by reference to Exhibit
    10.1 to the Companys Current Report on Form 8-K filed on
    August 2, 2006)10
.41

Deed of Lease between Aarohi
    Communications Private Limited and M/s M.K. Chakrapani &
    Co. relating to the Companys offices in Bangalore, India
    (incorporated by reference to Exhibit 10.3 to the Companys
    Quarterly Report on Form 10-Q for the period ended October 1,
    2006)21


List of the Companys
    subsidiaries.23


Consent of Independent Registered
    Public Accounting Firm.31A


Certification of the Principal
    Executive Officer Pursuant to 17 CFR 240.13a-14 (a), as
    Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.31B


Certification of the Principal
    Financial Officer Pursuant to 17 CFR 240.13a-14 (a), as
    Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.32


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. 86