Mail Stop 4561
February 21, 2006
Mr. Paul F. Folino
Chief Executive Officer
Emulex Corporation
3333 Susan Street
Costa Mesa, California
Re: Emulex Corporation
Form 10-K for the Fiscal Year Ended July 3, 2005
Form 10-Q for the Fiscal Quarter Ended October 2, 2005
Form 10-Q for the Fiscal Quarter Ended January 1, 2006
File No. 001-31353
Dear Mr. Folino:
We have reviewed the above referenced filings and have
the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended July 3, 2005
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Fiscal 2005 versus Fiscal 2004
Net Revenues, page 30
1. Your net revenues discussion for fiscal year 2005 versus 2004
and
fiscal year 2004 versus 2003 states that you believe net revenues
are
being generated primarily as a result of your product
certifications
and qualifications with OEM customers. Explain the significance
of
such certifications and qualifications. In addition, explain
whether
you consider such certifications and qualifications key indicators
of
financial condition and operating performance as addressed in SEC
Release 33-8350, Section III.B.1.
2. We note your disclosure on page 10 which states, "The markets
for
our products are highly competitive and are characterized by rapid
technological advances, price erosion, frequent new product
introductions and evolving industry standards." If your increase
in
revenue from fiscal year 2003 to 2004 or 2004 to 2005 was the
result
of such various factors, tell us your consideration for disclosing
the quantification and analysis of such factors. See Regulation
S-K,
Item 303 (a) (3) (iii) and Section III.B.4 of SEC Release 33-8350.
Item 9A. Controls and Procedures, page 43
3. We note your Chief Executive and Chief Financial Officers
concluded your disclosure controls and procedures are "effective
to
ensure that we are able to record, process, summarize and report
the
information we are required to disclose in the reports we file
with
the SEC within the required time periods" here and in your Form
10-Qs
for the quarterly periods ended October 2, 2005 and January 1,
2006.
Clarify, if true, that your officers concluded that your
disclosure
controls and procedures are also effective to ensure that
information
required to be disclosed is accumulated and communicated to your
management, including principal executive and financial officers,
as
appropriate to allow timely decisions regarding required
disclosure.
We refer you to Exchange Act Rule 13a-15(b) (2) (e).
Consolidated Statement of Operations, page 54
4. We note you classify the amortization of technology as
operating
expense based on your disclosure on page 33. Tell us your
consideration for classifying the amortization of such intangible
assets as cost of sales. In this respect, we note your disclosure
with respect to acquired technologies from the acquisition of
Vixel
Corporation which indicates you estimated the present value of
cash
flows generated by the products to which the technologies are
associated. Therefore, as part of your response, tell us whether
your products include the technologies that you are amortizing.
Form 8-Ks filed August 11, 2005, October 27, 2005 and January 26,
2006
5. We note your use of non-GAAP financial measures. Please
address
the following with respect to such measures.
* We note you provide non-GAAP condensed consolidated statements
of
income. We further note that your filings include discussions of
non-GAAP gross margins, operating margins, diluted earnings per
share, etc. However, you only provide a reconciliation of GAAP
net
income to non-GAAP net income. Tell us your consideration for
reconciling each non-GAAP financial measure to its most directly
comparable financial measure calculated and presented in
accordance
with GAAP pursuant to Regulation G.
* Demonstrate the usefulness of each non-GAAP measure in assessing
performance when these items are a result of your operations and
have
contributed to your performance. Refer to Question 8, Frequently
Asked Questions Regarding the Use of Non-GAAP Financial Measures.
As
part of your response, ensure to demonstrate the way that
management
uses each non-GAAP measure to conduct or evaluate your business.
* If you are able to overcome the burden of demonstrating the
usefulness of each measure, ensure future uses of non-GAAP
measures
include all of the disclosures identified in Item 10 of Regulation
S-
K and the guidance set forth in the Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures.
*****
As appropriate, please amend your filing and respond to these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comment and provides any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Christopher White, Staff Accountant, at (202)
551-3461 or me at (202) 551-3488 if you have any questions
regarding
our comments on the financial statements and related matters.
Sincerely,
Stephen Krikorian
Accounting Branch Chief
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Mr. Paul F. Folino
Emulex Corporation
February 21, 2006
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