Emulex Focus of Trading Inquiry

Emulex Corp. said federal securities regulators and Nasdaq officials are asking the company about events that led to seven shareholder lawsuits accusing company insiders of dumping shares just before the stock fell in February.

The company is cooperating with the U.S. Securities and Exchange Commission and Nasdaq, said Mike Rockenbach, chief financial officer of the Costa Mesa storage network firm.

“I think we acted appropriately,” he said. “I think it’s pretty common for them to ask questions about things that would trigger a shareholder lawsuit.”

Emulex disclosed the inquiries, which began after the first lawsuit was filed in late February, in its quarterly financial report filed Wednesday with the SEC. Agency and Nasdaq officials would not comment.

Rockenbach declined to provide details about the inquiries, saying only that the agencies had questioned the timing of an Emulex Webcast on Feb. 9 warning that customers were deferring orders.

The shareholder lawsuits contend that Emulex executives and officers wrongly profited by selling a total of nearly 388,000 shares for $40.4 million shortly after painting a rosy financial forecast Jan. 18.

The cautionary remarks three weeks later sent Emulex stock plummeting 48% in a day to $40.38 a share.

Among those who dumped stock was Chief Executive Paul F. Folino, who sold 200,000 shares Jan. 24 for $20.8 million.

Emulex executives have said previously that the timing of the sales was coincidental.

Company insiders long have traded stock during specified periods, from three days after earnings announcements through the first two months of a given quarter, Rockenbach said.

Emulex has hired outside counsel to defend against the lawsuits, he said.

The stock lost 21 cents to close at $43.53 a share on Nasdaq. The stock has lost more than 45% of its value since the beginning of the year.