Emulex comments on Broadcom's self-serving and misleading statements

COSTA MESA, USA: Emulex Corp. President and Chief Executive Officer, Jim McCluney, today commented on statements and presentation materials issued yesterday by Broadcom Corp.

"Broadcom's nearly 50 pages of documents issued yesterday are littered with misleading statements and mischaracterizations meant to distract Emulex stockholders from the core issues of value and leverage. We urge stockholders to see through Broadcom's rhetoric and concentrate on what we believe are the facts -- Broadcom's tender offer is inadequate and their related consent solicitation aims to capture leverage over Emulex stockholders by ultimately seeking to replace Emulex's Board with hand-picked Broadcom nominees who we believe, if elected, will pursue Broadcom's self serving agenda of acquiring Emulex on-the-cheap to the detriment of Emulex's stockholders. Giving Broadcom a consent is giving them leverage with no benefit to stockholders. Why call a special meeting to facilitate a grossly inadequate offer?"

"The key issue for stockholders to consider is that Emulex is well positioned for significant and rapid growth through our leadership in the converged networking market. We are securing design wins, in many cases against Broadcom, which is threatening their current and future Ethernet business. We believe Broadcom has now made it clear that they recognize this problem. In our view, Broadcom is simply attempting to mitigate the damage to its business and capture the significant future value that rightly belongs to all Emulex stockholders.

"In fact, at a June 3 analyst conference, Broadcom's CEO Scott McGregor admitted what Emulex has said all along, that Broadcom simply cannot compete effectively in converged networking without making an acquisition. More importantly, McGregor said that Broadcom recognizes that its 'best option' is to buy Emulex, underscoring Emulex's significant future prospects and value creation opportunities through our current strategy. We note that this acknowledgement is a marked change from the misleading statements Broadcom used initially upon launching their offer to suggest that they could just as easily build their way into converged networking."

"At the June 3 conference, McGregor stated that Broadcom's only alternatives outside an acquisition of an established Fibre Channel market participant are either to do nothing, or organically build a Fibre Channel offering and then try to harden it if an OEM agrees to use it. However, McGregor admitted that doing nothing could result in significant lost opportunity across 'five' to 'ten years' and building something would at minimum require 'dilutive' spending on R&D over a number of years. Even if the R&D effort was successful in creating an offering, we believe Broadcom would be too late to the market to compete effectively against an established incumbent with strong OEM relationships and a third or fourth generation offering."

"The materials filed yesterday by Broadcom continue their pattern of making misleading statements. As an example, Broadcom continues to talk about what they believe is an 'attractive' implied premium of their offer despite knowing well that (a) Emulex's stock price at the time of their offer did not reflect the long-term significant value of the Company's numerous new yet undisclosed to the public design wins and strong positioning in the converged networking market, and (b) given considerable recent recovery in the broader markets and in the valuations of our comparables, Emulex would likely be currently trading at a much higher valuation on fundamentals than when Broadcom first made their offer on April 21.

"We believe our stockholders clearly recognize that Broadcom's hostile takeover attempt is opportunistic and unacceptable, as evidenced by the meager less than three percent of outstanding shares tendered into the offer to-date."

"The Board is focused on delivering value and will continue to take actions it believes are in the best interests of stockholders. We continue to strongly urge our stockholders to NOT TENDER into the grossly inadequate offer and to NOT CONSENT to the bylaw amendments that will decrease Emulex's leverage. We appreciate our stockholders' support and look forward to continuing our dialogue with them regarding Broadcom's statements and what we believe are the true facts."

To reject Broadcom's tender offer, Emulex stockholders do NOT need to take any action. Similarly, to reject Broadcom's consent solicitation, stockholders do NOT need to take any action on Broadcom's GOLD consent card. Instead, Emulex stockholders should sign and return Emulex's WHITE consent revocation card when available, which will enable the Company to keep informed of stockholder sentiment.