Emulex to Buy Storage Switch Maker Vixel

Emulex , a provider of host bus adapters (HBAs) for storage
networks, moved to acquire storage switch maker Vixel
for $310 million in cash, at $10 per share.

Costa Mesa, Calif.’s Emulex competes with QLogic, HP and JNI in the market for HBAs, which provide
input/output (I/O) processing and physically connect servers and storage
devices with little or no help from the server CPU. Software in the HBAs
manage the adapters, which are attached to each server. They provide storage
management capabilities such as load balancing, fail-over and SAN

By acquiring Bothell, Wash.’s Vixel, which makes embedded switch ASICs and
subsystems that help storage networking original equipment manufacturers
(OEMs) improve the functionality of their products, Emulex becomes more
attractive to the OEMs because of its increased breadth of storage
networking infrastructure.

OEMs use HBAs in conjunction with their storage arrays, tape libraries and
appliances to free the CPU to perform other database and application tasks.
Now Emulex can offer Vixel’s line of InSpeed storage switches, which channel
data from multiple input ports to the specific output port that will take
the data toward its intended destination, with its HBAs for a more rounded

FC SAN components hardware revenue totaled $1.47 billion in 2002, up 3
percent from 2001 hardware revenue of $1.43 billion, according to research
concern Gartner. Brocade, Emulex, McDATA, and QLogic increased their revenue
share from 78 percent to 85 percent of the market total.

Paul F. Folino, Chairman and CEO of Emulex, said in a conference call that
the InSpeed line will help his company boost its revenue growth as well.

“Our key goal is to accelerate Emulex’s revenue growth potential,” Folino
said. “This acquisition enables us to tap into the incremental emerging
market for embedded storage switch solutions, a market that could yield a
total available market opportunity of $450 million by 2007. Vixel’ embedded
switch TAM adds an incremental 30 percent or more on top of Gartner’s
estimate of $1.3 billion for the Fibre Channel HBA market in 2007.”

Emulex already sells HBAs to IBM, EMC Dell, Fujitsu Siemens and Hitachi
Data Systems, among others. Vixel’s InSpeed storage switching business has
delivered double digit sequential revenue growth in each of the past four
quarters, driven by design wins with HP, Network Appliance, Fujitsu, NEC,
Apple and BlueArc.

Any Vixel shares not acquired by Emulex in the tender offer will be acquired
in a second step merger in which remaining Vixel shareholders will receive
the same cash price paid in the tender offer. Emulex will also assume all
existing vested and unvested Vixel stock options. The tender offer is
expected to be completed in November.

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