Emulex fends off Broadcom once more

The company rejects Broadcom's attempt to take a $764 million offer directly to shareholders

Emulex has once again rejected an attempt by Broadcom to take over the company, reiterating its stance that the bid undervalues the company and does not adequately compensate its shareholders.

Emulex's board of directors on Friday formally rejected a tender offer to purchase Emulex directly from shareholders at US$9.25 a share, said Jeff Benck, COO of Emulex in an interview Friday.

Broadcom took the offer to shareholders on Wednesday after Emulex's board rejected an unsolicited bid to purchase the company for what would amount to about $764 million in cash. Broadcom made that bid public in a letter to Emulex shareholders on April 21.

Broadcom also had approached Emulex late last year about a deal but talks broke down in January.

"We really felt like this undervalued our long-term prospects as a company," Benck said. "It's an all-cash offer and based on the price that it's at, [shareholders] wouldn't have the benefit of the potential future growth of the company."

In an e-mailed statement, Broadcom disagreed, saying Emulex shareholders have a right to voice their opinions on the offer.

"We believe Emulex shareholders have a very clear choice between the attractive premium, all cash, highly certain value we are offering and Emulex's track record of underperformance," Broadcom said.

Both companies are based in Orange County, California - Emulex in Costa Mesa and Broadcom in Irvine.

Broadcom produces semiconductors used mainly in communications products, such as communications networks, cell phones and cable set-top boxes. Emulex also provides technology for connecting storage, servers and networks in data centers.

Another reason the board rejected the offer is that it feels Broadcom aims to take unfair advantage of Emulex after the latter's OEM design wins over Broadcom, Benck said.

Emulex recently unveiled some significant deals to place its converged storage- and data-networking technology in large OEM systems, though the names of those companies have not been announced publicly, he said. Broadcom was a competitor in these deals, Benck said.

Emulex typically works with large storage vendors like Hewlett-Packard, IBM and EMC.

"[The deals] are not driving revenue yet," he said, but they're significant because "the business we're in is about capturing the sockets and wins. ...[Broadcom] is the bigger guy, but we're winning against them in the marketplace."

Broadcom and Emulex did not compete when Emulex mainly offered storage networking and Fibre Channel products, but increased convergence of storage and data networks now puts them in head-to-head competitive situations, he added.

In its April 21 letter to the board, Broadcom cited Emulex's Fibre Channel expertise as one of the reasons it wanted to buy the company.

At the time, it said the two companies did not have much product overlap, another reason the deal would be beneficial to them and their shareholders.

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