Emulex Poised For Big 2010: Analyst

COSTA MESA, Calif. (TheStreet) -- Emulex(ELX) could be poised for a breakout year in 2010 as CFOs reopen their corporate coffers and embark on major technology updates.

"We reiterate our 'Buy' rating on Emulex and designate it our top pick for 2010," wrote Paul Mansky, an analyst at Cannacord Adams, on Friday. "We view Emulex as incrementally attractive given anticipated Other Equipment Manufacturer (OEM) wins ramping in the first half of 2010."

Emulex, which makes storage adapters and embedded switches, already boasts a host of partners using its technology in their servers and storage systems. These include IBM(IBM), Dell(DELL), Hewlett-Packard(HPQ ), EMC(EMC), Cisco(CSCO) and Sun(JAVA).

Mansky, who gave Emulex a $14 price target, predicts a major refresh of high-end servers driven by quad-core processors and upcoming eight-core x86 chips. "Within this, Emulex stands out in that it will not only benefit in traditional 8-Gbit/s Fibre Channel, but also in Converged Network Adapters."

Converged Network Adapters, or CNAs, offload processing from server CPUs thus increasing the amount of space available for other tasks. Already rated the market share leader in Fibre Channel over Ethernet (FCOE) CNAs by analyst Dell'Oro Group, the company is expected to increase its OEM tally during the coming months.

"Coupled with the strong finish to calendar year 2009, we see outperformance through much of the year," wrote Mansky, saying that Emulex should add to its 15 OEM deals by late spring.

Emulex, however, saw its recent first-quarter profit plunge on falling sales. Undeterred, Emulex CEO Jim McCluney recently told TheStreet that a tech rebound is underway, spurred on by companies' cloud computing efforts.