Emulex ( ELX) shares surged Tuesday on a $763.5 million unsolicited buyout offer from Broadcom ( BRCM).

The bid, which came in the form of a Broadcom letter to Emulex management, calls for Broadcom to pay $9.25 a share in cash for Emulex' stock, a 40% premium over the $6.61 closing price Monday.

Emulex makes chips and components for so-called fibre channel data storage systems. The stock was up 45% in pre-market trading Tuesday.

The news comes on the same day that Broadcom swung to a big loss on weak first-quarter sales. The communications chipmaker had a net loss of $91.9 million, or 19 cents a share, down from a profit of $74.3 million, or 14 cents a share in the year-ago period. Analysts expected a 23-cent loss, according to Thomson Reuters.

Sales, excluding a one-time $19 million royalty payment from Verizon ( VZ) were $832.4 million, down from the $994.4 million excluding a $35.6 million royalty in the year-ago period. Including royalties, Broadcom's first-quarter sales were $853.4 million, compared with $1.03 billion last year.

Broadcom generated $90.7 million in cash from operations, down from the $240 million generated in the year-ago quarter. Broadcom has $1.28 billion, down from $2 billion a year ago.

"As we progressed through the first quarter, customer bookings strengthened, which is reflected in our anticipated sequential revenue growth in the second quarter of 2009," CEO Scott McGregor said in a press release.

On a conference call with analysts, Broadcom said second-quarter sales should be around $937.5 million, better than the $862 million analysts are expecting, according to Yahoo Finance.

The crushing decline of the chip industry seems to easing a bit, according to Texas Instruments ( TXN), which reported strong first quarter results and a sunny outlook Monday. And while Broadcom's first quarter wasn't as bad as expected, the hostile bid for Emulex has put investors in a selling mood. Broadcom was down $1.79, or 8%, to $20 early Tuesday.