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Emulex tells Broadcom to go away

And come back with more money

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Emulex' board of directors has unanimously rejected Broadcom's takeover offer because it "significantly undervalues Emulex and is not in the best interest of Emulex stockholders." Interesting. Does Emulex want more cash?

Broadcom is offering $9.25 per share in cash.

Emulex exec chairman Paul Folino said: "It is an opportunistic attempt by Broadcom to capture substantial current and long-term value that properly belongs to Emulex stockholders. The Board is very enthusiastic about Emulex’s future prospects and the long-term value we expect to deliver through the Company’s current strategy."

President and CEO Jim MCluney, referring to converged networking (Ethernet), stuck the knife in deeper: "As Broadcom is uniquely aware, Emulex has recently won tier-one original equipment manufacturer contracts at the expense of Broadcom and our other competitors, and as such, we are well positioned to gain share in this rapidly growing segment."

Okay, we understand. Emulex is worth more.

Folino sent a letter to Broadcom's board explaining all this in detail. He's handicapped a bit in being unable to say who the design wins are with, and it looks like Emulex and QLogic are engaged in a pissing competition with no-one able to really judge what's going on except the OEMs offering the design wins.

He talked up Emulex' prospects, writing: "Our leadership in network convergence enables us to expand into new product categories that have significantly increased our value to OEMs and will more than double our current addressable market. We expect to see meaningful revenue from these products in calendar year 2010 and beyond, and hence, they will be a key value-driver for Emulex over the long-term."

He addressed Emulex' financial problems, promising jam tomorrow: "Additionally, we have made significant operational improvements in the Company’s cost and tax structure, while at the same time increasing our international operations over the last several quarters. We believe these changes will enable Emulex to more efficiently serve our global customer base and ultimately result in increased profitability and value-creation over the long-term."

Then he talked numbers: "Your unsolicited proposal is an opportunistic attempt to take advantage of Emulex’s depressed stock price due to unprecedented macroeconomic conditions. Your proposal is approximately 37 per cent below the Company’s 52-week high of $14.74 per share."

Finally, he said Broadcom got things wrong with regard to prior communications and urged the company "that any statements you plan to release to the public or make to stockholders or customers in the future be accurate." Ouch.

The final words in the letter say: "We believe your proposal to acquire Emulex significantly undervalues our Company and is not in the best interests of Emulex stockholders."

El Reg's translation is "Please come back with a higher offer, in private." ®

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