Emulex Corp. Chief Executive Jim McCluney is banking on a big rebound at the end of the year.
The Costa Mesa company’s stock took a hit a few weeks ago amid a slump in the market and a lackluster outlook for the September quarter.
Shares of Emulex, which makes parts for computer storage networks, are down some 20% from last year’s high. The company counted a recent market value of about $1.5 billion.
Emulex’s competitors, including Aliso Viejo-based QLogic Corp., have fallen as much as 30% from their highs of last year.
McCluney warned of slowing orders from two customers, who are working to burn through excess inventory.
Next month marks McCluney’s first anniversary as chief executive. He said he isn’t too worried about the market’s recent slump.
“People still need to store their data and move their data between computers,” he said. “Demand continues to be pretty robust for storage.”
He points to Emulex’s record revenue for the June quarter as evidence.
The company posted sales of $126 million in the quarter, up 28% from a year earlier and beating analysts’ estimates of $124 million. It swung to a profit of $13 million versus a loss of $5 million a year ago.
“We are continuing to grow dramatically year over year,” McCluney said. “We see the rebound coming back and we feel confident that we’ll get through this little bit of softness here in September.”
More design wins are set to be announced toward the end of the year, McCluney said.
McCluney, who had been president and chief operating officer since 2003, took the reins from Paul Folino, who’s now executive chairman. McCluney first joined the company when Emulex bought Bothell, Wash.-based Vixel Corp. in 2003.
McCluney’s goal always has been to diversify Emulex’s customers.
As it stands, about 70% of sales come from a single line of business, host bus adapter cards that connect computers to servers.
McCluney headed up two acquisitions in 2006 to help add to its lineup.
Emulex spent $39 million for San Jose-based Aarohi Communications Inc. and $180 million for Roseville-based Sierra Logic Inc.
Emulex’s offerings now include routers, switches, controllers and software.
McCluney said he’s particularly proud of the successful integration of those companies.
Another focus for McCluney: working on keeping the market share Emulex has gained on its biggest rival for host bus adapters, QLogic.
Emulex recently got a boost after nabbing design wins for new servers made by IBM Corp. and Fujitsu Siemens Computers BV.
It eked out a 4 percentage point gain, giving it 40% of the market in the second quarter, according to Redwood City-based market tracker Dell’Oro Group.
QLogic still is in the lead with about 44% of the market in the second quarter, on par with the 43% it had in the previous quarter.
Emulex is aggressively going after more market share.
McCluney’s strategy is to grow faster than the market by tapping younger technologies, such as blade servers and virtualized servers, which are designed to add more storage capacity in a slim package.
“Our market has become more mature over the last several years,” McCluney said. “That’s why we really put the focus on growing faster than the market. The prospects are 8%, 9% or 10% over the next couple years. We have to go faster than that by winning market share.”
McCluney is keeping the momentum going to get to the next big goal,$1 billion in yearly sales.
Other acquisitions are likely on the horizon, he said. The company is sitting on about $271 million in cash as of the June quarter.
