Irvine’s Broadcom Corp. may have a tough time making the case that Emulex Corp. is infringing on its patents for an emerging technology known as fibre channel over Ethernet, according to one analyst.
The chipmaker filed a lawsuit last month in which it alleged one-time acquisition target Emulex infringed on 10 of its patents for chips related to high-speed networking and data storage technologies.
The suit covers technologies that brought Broadcom head to head with the Costa Mesa-based maker of electronics for data storage networks earlier this year.
The hostile takeover bid ended with Broadcom walking away after Emulex rebuffed a final offer.
To some, the lawsuit gives the appearance of Broadcom going after an emerging rival for a slice of the converged networking market, which is seen by some as big game in a few years.
Fibre channel over Ethernet, as the technology is known, is set to bridge speedy, specialized data storage networks and everyday networks of servers and desktop computers, cutting down on energy costs.
Some on Wall Street say Emulex may have an edge on Broadcom because of its long history in the fibre channel market.
“While Broadcom has won or settled litigation with some large enterprises in the past, we believe it may be hard for Broadcom to convince the court that Emulex is infringing on Broadcom’s patents in fibre channel over Ethernet, because Broadcom never really had an established fibre channel technology,” said Kaushik Roy, an analyst at Wedbush Morgan Securities LLC in San Francisco.
Emulex has staked out an early lead in the market with a slew of design wins—including with storage industry heavyweight IBM Corp.
“It appears that Emulex might have some time-to-market advantage,” Roy said in a research note.
In its takeover maneuvering, Broadcom had sought Emulex’s highly specialized software, which would have allowed Broadcom to offer fibre channel over Ethernet electronics using its own Ethernet chips.
Some say the lawsuit is evidence that Broadcom is trying to address a looming competitive threat to its Ethernet market share.
In an uncharacteristic move, Broadcom took a page from Emulex’s book and in August released a statement declaring its market position in controller chips that run 10 gigabit Ethernet networks.
The company said it has nearly 70% of the market based on its second-quarter shipments of 10 gigabit Ethernet controller units.
Analyst Roy sees Emulex’s prospects improving despite Broadcom’s legal jab.
He recently increased his estimates for 2010 and 2011 and upped his price target to $10 per share, up from $9.
Emulex was recently trading at around $10.50 per share on a market value of about $845 million.
Semicoa Gets Investment
Costa Mesa’s Semicoa Semiconductors Inc. disclosed in a government filing last month that it took a $16 million investment from private equity parent Vance Street Capital LLC.
Semicoa spent the last year as part of Irvine-based chipmaker Microsemi Corp.
Microsemi, a larger competitor, bought Semicoa for $25 million in 2007.
A few months ago, Semicoa regained its independence as part of a settlement the Department of Justice struck with Microsemi, which faced an antitrust lawsuit after the government looked into the deal as creating a monopoly on a certain type of chips.
Microsemi agreed to undo the deal to settle the suit and sold off Semicoa to Los Angeles-based private equity firm Vance Street Capital in August.
Semicoa is busy hiring executives and workers—many who were laid off after the acquisition. It’s picked up some 30 in the past month or so.
It recently added Brian Triggs, a Raytheon Co. veteran, as the director of radiation hardening program quality and strategic partnership.
Bits and Pieces
Santa Ana’s Ingram Micro Inc., the world’s top distributor of technology products, software and consumer electronics, inked a distribution deal with Aliso Viejo’s QLogic Corp. Ingram Micro is set to distribute QLogic’s electronics for data storage networks, including its latest fibre channel over Ethernet adapters … Fountain Valley’s D-Link Systems Inc., a maker of networking gear owned by Taiwanese parent D-Link Corp., continued its executive hiring streak. The company named Kevin Lahm, formerly of 3Com Corp., as associate vice president of North America field system engineers. This is D-Link’s second hire from 3Com. Nick Tidd, D-Link’s top local guy, is a 3Com veteran … Ford Motor Co. Chief Executive Alan Mulally is set to give the opening keynote speech at the 2010 International Consumer Electronics Show in Las Vegas. More than two dozen OC companies come to CES each year to meet with analysts, members of the press and show off their new products.
