Emulex: '09 Roadmap Will Get Us There

The data center specialist is placing its faith in converged networks and built-in encryption.
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Tech component manufacturer

Emulex

(ELX)

is well-positioned to withstand the worst of the economic downturn, according to CEO Jim McCluney, who unveiled the company's new product strategy Wednesday.

"We're in troubled times, but we're in good shape," he told analysts and partners at an event at the New York Stock Exchange. "As we get through the economic situation here, I believe that the company will be stronger than ever before."

Emulex

, which recently saw its second-quarter revenue decrease 17% year over year to $108.7 million, nonetheless exited the quarter with $285 million in cash and no debt, according to McCluney.

"We have not had to raise any money or debt, which is a good thing in this market," he said, adding that the firm's gross margins are at a healthy level in the mid 60% range.

Emulex, which competes with

QLogic

(QLGC)

and

Brocade

(BRCD)

, used the event to launch a slew of new products, including a 10-Gbit/s Converged Network Adapter (CNA) for combining data and storage networking traffic, and an 8-Gbit/s server Host Bus Adapter (HBA) with built-in encryption from

EMC

(EMC)

RSA division.

The news prompted some modest gains for Emulex's shares Thursday, and the company's stock rose 2 cents, or 0.4%, to close at $5.69, reversing the broader decline in tech stocks which saw the Nasdaq fall 1.7%.

Emulex's CNA, dubbed OneConnect, is essentially a small motherboard that supports networking technologies such as Ethernet, Fibre Channel Over Ethernet (FCOE) and iSCSI. Other firms are also throwing their weight behind this type of technology, underlining users' desire to build much more converged networks. Earlier this week, for example,

ServerEngines

announced two 10-Gbit/s CNAs for

IBM's

(IBM) - Get Report

BladeCenter and System x hardware.

OneConnect is nonetheless a step in the right direction for the company, according to John Webster, principal IT advisor at technology research firm Illuminata.

"The CNA is an interesting little animal from the standpoint of using it as a place to manage things, particularly in a virtualized server environment," he explains. "It turns out to be a funnel for lots of different things."

Key to this is the CNA's OneCommand software, which could eventually link up with systems management software such as IBM's Tivoli,

CA

(CA) - Get Report

's Unicenter, and

Hewlett-Packard

(HPQ) - Get Report

's OpenView offerings, he added.

Although Emulex has not yet announced any OneCommand partnerships, McCluney told

TheStreet.com

that he is keen to link up with the likes of Tivoli, CA and OpenView.

"We want software that fits in with these environments because these are the software

products that users are using," he said. "It also gives us the opportunity for new revenue streams for the company."

Emulex also claims to offer users a greater degree of security through its 8-Gbit/s Fibre Channel HBA, which is also a small server motherboard.

"We believe the best place

for encryption is right where the server is -- then it's encrypted all the way to the drive," said McCluney, touting the HBA as alternative to dedicated encryption devices and switch-based encryption, which is offered by the likes Brocade.

Emulex's new CNA and HBA will both be available in the second half of 2009, as will the company's OneCommand software.