Monday, April 20, 2009

Broadcom Reports 24% Q1 Drop, Bids to Acquire Emulex for Fibre Channel

Broadcom reported net revenue for the first quarter of 2009 of $853.4 million, a decrease of 24.2% compared with the $1.127 billion reported for the fourth quarter of 2008 and a decrease of 17.3% compared with the $1.032 billion reported for the first quarter of 2008. Net loss (GAAP) was $91.9 million, or $.19 net loss per share (basic and diluted), compared with GAAP net loss of $159.2 million, or $.32 net loss per share (basic and diluted), for the fourth quarter of 2008, and GAAP net income of $74.3 million, or $.14 per share (diluted), for the first quarter of 2008.

"As we progressed through the first quarter, customer bookings strengthened, which is reflected in our anticipated sequential revenue growth in the second quarter of 2009."

Broadcom also announced a bid to acquire Emulex Corporation, which specializes in Fibre Channel solutions, for $9.25 per share in cash, representing a total equity value of approximately $764 million. The offer represents a 40 percent premium above the closing price of Emulex common stock on April 20, 2009, a 62 percent premium to trailing 30 day average price per share and an approximately 85 percent premium to enterprise value.

Broadcom said the acquisition would enable it to accelerate the development of converged solutions for enterprise networks.

Scott A. McGregor, President and Chief Executive Officer of Broadcom, said, "This combination is strategically compelling and provides significant value to the shareholders of both companies. Broadcom has long and successful experience, through over 40 transactions, of integrating companies into Broadcom, so this is a highly achievable proposal to deliver value to customers and employees of both companies.

"A combination of Broadcom and Emulex addresses our customers' growing need to apply the economics of Ethernet to the Fibre Channel storage space to achieve low-cost network converged solutions," stated Scott A. McGregor, CEO of Broadcom. "The logical evolution of the enterprise network is for a transition to a converged fabric architecture that incorporates a broad array of technologies. Our combined entity can be a one-stop shop for key networking and storage technologies for the enterprise and for our industry. Our preference is to proceed in a friendly, collaborative manner, and we hope that Emulex's Board will see the merits of this combination and appreciate the substantial value being offered to its shareholders."