Emulex Corp. Shares Plunge 26%
Shares of Emulex Corp., which have risen sharply over the last year but have been volatile, plunged 26% Tuesday after an influential Wall Street analyst downgraded the data-storage equipment maker’s rating.
On a day when most Nasdaq stocks fell, Emulex shares dropped $57.14 to $160.92, carving about $2 billion from the Costa Mesa company’s market value.
Emulex develops fiber channel technology that clears up bottlenecks in computer networks, increasing their ability to move and store data. Its chips are used in mainframes that run the Unix operating system.
But many companies are moving toward smaller computers that run Windows NT software and use chips made by QLogic Corp., said Robert Montague of Morgan Keegan. As a result, he predicted that Emulex would match but not outperform the market.
QLogic was spun off from Emulex in 1994. Since then, the Aliso Viejo-based company has emerged as its former parent company’s main competitor.
The Unix operating system, however, still dominates among corporate computer networks, said Emulex spokeswoman Karen Mulvany. And she said Emulex is designing new chips for the growing number of Windows NT systems.
“Nobody is talking about any kind of retreat in terms of the growth of the industry or our position in it,” Mulvany said.
Despite the one-day drop, Emulex’s shares are still about double their value last fall.
Like many in its industry, Emulex’s stock has been erratic. It rose precipitously last year, gaining 860% to rank among Orange County’s top gainers, and had added an additional 48% surge this year. On Monday, just hours before Montague’s report, Emulex shares hit $225.50 a share, an all-time high.
But it also has suffered several dramatic, short-term swoons.
Last year’s rise in stock reflects the company’s markedly improved financial results after posting a loss in 1998. It earned $5.3 million in fiscal 1999 and has outpaced Wall Street’s expectations.
Bloomberg News contributed to this report.
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Stock Drop
Emulex stock fell to $160.92 on Tuesday, a 26% drop from Monday’s close. Weekly closing stock prices since January and closes for Monday and Tuesday:
2000
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Jan. 7 $111.81 14 119.00 21 136.38 28 102.63 Feb. 4 108.00 11 123.88 18 140.00 25 157.13 Mar. 3 190.25 10 215.50 17 182.50 24 209.00
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Monday’s close: $218.06
Tuesday’s close: $160.92
Researched by JANICE JONES DODDS/Los Angeles Times
Source: Bloomberg News
