Original URL: http://www.theregister.co.uk/2013/07/04/bloomberg_blurts_emulex_is_for_sale/

Emulex 'hired Goldman Sachs to find themselves a buyer' - report

Company tight-lipped, 'insiders' spill beans

By Chris Mellor

Posted in Storage, 4th July 2013 09:43 GMT

SAN storage adaptor supplier Emulex has hired Goldman Sachs to find a buyer, according to Bloomberg.

Neither Emulex nor Goldman Sachs have confirmed the story, which Bloomberg says it heard from two people "with knowledge of the situation".

The rationale for such a sale is strong. The Fibre Channel HBA market, which Emulex and near-equal market share competitor QLogic dominate is a pretty low growth market as iSCSI access to block storage over Ethernet is preventing FC going down-market.

Faster Ethernet speeds are catching up with the current 8 and 16Gbit/s FC speed, and FCoE (Fibre Channel over Ethernet) is a potential successor or replacement for FC.

Ethernet gear supplier Broadcom mounted a hostile takeover for Emulex in 2009, offering $11.00/share, which Emulex rebuffed, assuring shareholders they would get more value if Emulex management ran the company than if Broadcom took over.

But Emulex's stock performance since then has fallen short of management's 2009 assurances. Instead of $600 million revenues in 2012 as Emulex predicted, revenues were $501.8 million. Such underperformance dragged prices down and they have continued going downhill since the failed Broadcom bid, trading for less than $8.00/share for over a year. Four things helped dampen the shares further:

The Endace acquisition succeeded and it appeared Emulex was weathering the activist investor storm, but apparently not, if the Bloomberg report is to be believed. McCluney and the board must have decided Emulex's growth prospects are slight and its time to cut and run for the retirement hills, giving someone else a chance to take the reins of their stodgy company and whip it into action.

Emulex competitor QLogic is also in trouble, having changed its CEO and implemented restructuring plans to save costs.

Bloomberg mentions Broadcom and Brocade as potential Emulex buyers. ®