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Emulex raises 2Q and 2001 targets, buys Giganet

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Emulex (Nasdaq: EMLX) boosted its financial goals for the current quarter and fiscal 2001, and unveiled a deal to buy network technology vendor Giganet for more than $600 million in stock.

After market close Thursday, Emulex said it now expects to earn $1.48 per share, excluding acquisition charges, on fiscal 2001 revenue of $285 million. First Call's survey of nine analysts had been predicting full year earnings of $1.43 per share.

Demand for Emulex's storage networking adapters is greater than expected, the company said. Emulex now expects revenue in the December quarter to increase 28 to 30 percent sequentially, compared to earlier goals of 20 to 25 percent growth.

Emulex reported revenue of $55.5 million in the first quarter, which ended in September.

The prospect of higher-than-expected revenue from Emulex came just a day after storage area networking giant EMC (NYSE: EMC) forecast a strong December quarter and 2001.

Also Thursday, Emulex announced a plan to issue about 4 million shares to buy privately-held Giganet, whose virtual interface technology speeds up IP-based storage networks and databases. The deal is worth $620 million, based on Thursday's closing price.

Shares of Emulex fell to 149.0625 in afterhours activity on the Island electronic communications network, immediately following the announcements.

Emulex had more than 36 million shares outstanding at the end of the September quarter.

The companies expect the deal to close in Emulex's fiscal third quarter, which ends April 1. A one-time charge of $10 million will be recorded in the third quarter, Emulex said, to write off in-process R&D at Giganet.

Giganet will become Emulex's IP Networking Group. Giganet gives Emulex, chiefly known for its adapters used in Fibre Channel storage networks, an IP product.

"As a result of this acquisition, storage area networking and network attached storage OEMs will be able to obtain best-of-breed storage networking host bus adapters spanning both Fibre Channel and Ethernet, all from a single supplier," said Paul Folino, president and CEO of Emulex. "Furthermore, we expect Giganet's technology leadership in VI architectures to provide critical time-to-market benefits for Emulex customers, as VI emerges as a core enabling technology for higher speed gigabit networking architectures."

Earlier Thursday, brokerage firm C.E. Unterberg Towbin downgraded Emulex to "neutral" from a "buy" rating.>