Emulex Corp. might just have some good news in its coming quarterly report after some rough waters for the Costa Mesa company.
Banc of America Securities analyst Keith Bachman wrote in a recent note he got some better-than-expected results for the network equipment company after checking with industry sources.
“After inconsistent performance in the past few quarters, and mixed signals from midrange server demand, we performed some mid-quarter channel checks on Emulex, and were positively surprised on feedback from various sources,” he wrote.
The company is on track to meet expectations for the current quarter, and there is “some potential for upside,” Bachman said.
The analyst has a “buy” rating on the stock.
The past couple of months have been up and down for Emulex.
Before Emulex could report results for the quarter ended March 31, the company,a maker of host bus adapters and other networking gear,cut its adjusted earnings estimate range to $16.8 million to $17.6 million, down from $22.6 million to $23.5 million. Analysts had expected $22.6 million.
Some major customers delayed purchases of host bus adapters, Emulex said.
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Emulex HQ: gaining market share with Sun Microsystems |
But the company ended up earning $19.4 million, and received a couple of upgrades.
In late April, it struck a deal to buy San Jose networking company Aarohi Communications Inc. for about $40 million.
Bachman pointed to a couple of positives for Emulex, including overall growth for the host bus adapter market and market share gains with customer Sun Microsystems Inc.
Emulex battles cross-county rival Aliso Viejo-based QLogic Corp. in host bus adapters.
Options for Quest
Aliso Viejo-based Quest Software Inc. is the first Orange County company to reveal an inquiry from the Securities and Exchange Commission regarding stock option grants.
Early this month, the maker of business software said it had received word of an “informal” review by the SEC. It said little except that the company would fully cooperate.
This issue first popped up in May, helping drag the stock down by more than 20%.
But the day of the SEC news, Quest’s shares actually rose a tad, about 1%. Not much, but up nonetheless on word of an SEC probe.
Many investors probably already had priced in a lot of their fears.
Several companies are under some kind of investigation. The issue: whether companies picked low points for their stocks as the dates for granting options.
Backdating instantly gives executives a paper profit on the options. It also nixes the motivating force behind options,encouraging holders to work toward boosting the stock price. Backdating also can violate tax and disclosure rules.
Quest has come under scrutiny from analysts over possible backdating violations.
In May, Quest saw an analyst downgrade its shares to “in-line” from “outperform,” given the overhang of the options issue, according to Goldman Sachs Group Inc.’s Sarah Friar.
Friar in a note said her look at Quest found “somewhat well-timed option grants.”
A third of Quest’s grants from 1998 to 2002 are at lows for 40-day periods, she said. Friar said her discussions with management suggest “no wrongdoing.”
Quest scores well on corporate governance issues, according to Friar.
Irvine-based Broadcom Corp., a chipmaker, and Irvine-based Meade Instruments Corp., a telescope maker, have been fingered in recent reports for potential backdating. Both have denied any wrongdoing.
Consolidation No Profit Fix
Don’t plan on a let-up on prices for disk drives.
The chief of Scotts Valley-based Seagate Technology LLC, Bill Watkins, recently said consolidation in the drive business isn’t going to lead to better profits, according to an interview on TheStreet.com.
In case you missed it, late last month Seagate wrapped up its $1.9 billion buy of Maxtor Corp. of Milpitas.
Western Digital Corp. in Lake Forest is one of Seagate’s biggest rivals.
“Pricing pressure is not going to ease,” Watkins said in the recent interview.
Seagate and Western Digital dominate the U.S. market. But big Asian players, including Japan’s Hitachi Ltd. and South Korea’s Samsung Electronics Co., are holding nothing back in their pursuit of market share, the article said. Hitachi has plowed $500 million into the drive business, according to Watkins.
The Asian push isn’t going to help profits, he said.
Mixed Tempo Jazz
In an updated SEC filing, Newport Beach-based Jazz Semiconductor Inc. said it posted a loss in the first quarter, but had some good news as well.
Amid falling prices, the contract chipmaker, which said in April it plans to go public, posted a net loss of $726,000 during the first quarter, down from a $7.1 million loss a year ago. Jazz posted a $3 million profit in the fourth quarter.
First-quarter revenue improved, climbing 13% to $55.9 million from a year earlier and up 1% from the fourth quarter.
The company also made progress in a key bid: gaining business besides that of former parent Newport Beach-based Conexant Systems Inc. and offshoot Woburn, Mass.-based Skyworks Solutions Inc.
In 2005, 60.5% of revenue came from Conexant and Skyworks. In the first quarter, their share dropped 56%.
