Emulex Announces $200M Buyback

NEW YORK (TheStreet) - Emulex (ELX) announced a $200 million share repurchase, expanded cost savings and board changes in an attempt to boost profitability and shareholder value. 

The server component specialist, the subject of sale chatter earlier this year, unveiled its capital return plan after market close on Monday. At current market prices, the $200 million share repurchase represents about 30% of the firm's outstanding shares. The company that the initial $100 million of the buyback will be completed through individual transactions and an Accelerated Share Repurchase (ASR) program, expected to be completed by the end of fiscal 2014.  Emulex will launch the second $100 million buyback immediately after the ASR is completed.

Emulex also expects to generate $30 million in annual cost savings over the fiscal 2013 spending level. This expands on a previously-announced $10 million cost savings initiative tied to the company's connectivity business. 

"We expect to achieve the $30 million annualized expense reductions by simplifying our product portfolio, discontinuing additional lower return on investment programs, pursuing some consolidation opportunities and identifying further efficiencies," said Emulex CEO Jeff Benck, in a statement. "The changes announced today mark important initial steps in our efforts to maximize operational efficiency while continuing our revenue growth initiatives, all as part of a strong commitment to generating incremental increases in stockholder value." 

Emulex expects to complete the cost savings plan in the next few quarters, with the full run-rate benefits realized in fiscal 2015. 

The company is also planning to add "three new experienced executives" to its board and is "actively interviewing" candidates. Emulex will also reduce the size of its board from 12 to 11 members. 

"The Emulex Board has determined that now is the appropriate time to bring additional external talent to the Board as we continue to work to increase shareholder value," said Benck, in the company's statement. 

Former CEO Jim McCluney, currently executive chairman of the Emulex board, will leave the company on Feb. 6, 2014 in accordance with his contract of employment, and will not stand for re-election to the board.

Emulex shares, which have risen more than 21% over the last 6 months, crept up 0.8% to $7.60 in extended trading.

--Written by James Rogers in New York.

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