Shares of Costa Mesa’s Emulex Corp., a maker of electronics that speed up the flow of data in corporate networks, rose Tuesday after an analyst upgraded the stock.
Emulex’s shares closed up 5% on a market value of $825 million.
Wedbush Securities Inc. analyst Kaushik Roy in San Francisco boosted his rating on Emulex’s stock to “neutral” from “underperform” and raised his price target to $12 per share, up from a previous rating of $11 per share.
Emulex’s stock was trading at around $10 per share on Tuesday.
Roy said Emulex should see sales growth soon, citing Emulex’s aggressive move into a new technology called converged networking.
Converged networks combined everyday 10-gigabit Ethernet networks with heftier data storage networks and promise to help companies trim computer room costs.
“Emulex has bet the farm on 10-gigabit Ethernet and rightfully so,” he said in a research note. “We now think the worst is in the past for Emulex and the fundamentals are improving.”
He also cited a design win Emulex scored with Hewlett-Packard Co. that’s set to begin producing revenue soon.
“This is a huge win for Emulex,” he said. “This is a win over competitor Broadcom Corp. … and should translate to market share gains.”
Last week, Emulex agreed to buy a Broadcom offshoot that’s critical to its converged networking strategy.
It’s set to acquire Sunnyvale-based ServerEngines Corp. for about $159 million in cash and stock.
Under the terms of the deal, expected to close next month, Emulex could tack on another 4 million shares, or about $40 million, if ServerEngines meets business goals.
ServerEngines was founded in 2004 by former Broadcom engineers who came to the chipmaker when it bought Silicon Valley’s ServerWorks for $1.8 billion in 2001.
