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Emulex Stock Climbs 43% After Report

High technology: Fourth-quarter results for Costa Mesa company surpassed analysts' expectations.

August 05, 2000|From Bloomberg News

Emulex Corp. shares surged 43% Friday, a day after the Costa Mesa company reported fiscal fourth-quarter sales and profit that exceeded analysts' forecasts.

Emulex, which makes computer cards that speed data transmission, rocketed $20.38 to $67.94 a share in Nasdaq trading, adding about $736 million in market value. The shares were still far below the record $225.50 reached March 27.

Net income in the quarter ended July 2 more than tripled on higher sales of the company's products that speed information between computers and networks of data-storage systems. Computer and storage-system makers such as Compaq Computer Corp. and EMC Corp. are buying more from Emulex as online commerce and Internet use boost demand for data-storage space.

"They came through with a pretty good report that obviously has been well-received," said Alan Alpers, senior portfolio manager at Navellier & Associates Inc., which owns about 1.6 million shares of Emulex.

Late Thursday, the company said net income rose to $9.57 million, or 25 cents a share, from $3.05 million, or 10 cents a share, a year earlier. Analysts had expected Emulex to report earnings of 21 cents a share, the average estimate, according to a survey by First Call/Thomson Financial. Sales almost doubled to $40.8 million.

Sales in Emulex's main business, which makes products based on the so-called fibre-channel standard used in storage networks, increased 23% from the previous quarter and now account for 94% of the company's revenue, said Robertson Stephens analyst Ara Mizrakjian, who rates Emulex a "buy." He boosted his fiscal 2001 forecasts for the company, predicting that sales would climb to $214.2 million rather than $193 million and that earnings per share would total $1.13 instead of 96 cents.

Emulex shares climbed more than 11-fold last year. The company now has a market value of about $2.45 billion.

The stock lost about half its value April 14 on concern about slowing sales growth and increasing competition from rivals such as Brocade Communications Systems Inc., whose storage-network switches compete with Emulex's hubs.

At the time, "people were expecting huge sequential growth," and Emulex "posted what I consider OK results," Mizrakjian said.

Emulex's main rivals in selling networking cards, QLogic Corp. and JNI Corp., also saw their shares advance Friday. QLogic's stock rose $4.44 to $75.81. JNI moved up $6.25 to $48.

U.S. Bancorp Piper Jaffray analyst Ashok Kumar, who rates Emulex a "trading buy," said investors were relieved that the company was able to exceed reduced expectations. He cautioned that fibre-channel products may lose popularity in the future to equipment that runs on cheaper Internet technology.

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