Updated from April 24

Wall Street is clobbering

Emulex

(ELX)

. In recent trading Friday, shares of the storage-equipment manufacturer were down $4.96, or 20%, to $19.42.

The beating was apparently prompted by a downgrade to underperform by Thomas Weisel, which said results and guidance reported Thursday indicate slowing growth in the company's core host bus adapter (HBA) market. Thomas Weisel has done banking for Emulex.

There were similar cautious comments elsewhere, with U.S. Bancorp Piper Jaffray analyst Ashok Kumar outlining coming competition from

Intel

(INTC) - Get Report

. Kumar's firm has an investment banking relationship with Emulex.

Emulex pushed its fiscal third-quarter revenue up 14% to a record $79.6 million, the company reported after the close on Thursday. The company said the current quarter's revenue and earnings would meet Wall Street expectations.

Net income was a loss of $248,000, or break-even on a per-share basis, compared with a loss of 20 cents a share a year ago, according to generally accepted accounting principles. Pro forma earnings were 22 cents a share, a penny better than the consensus of analysts polled by Thomson Financial/First Call. A year ago, pro forma net income was $13.7 million, or 16 cents a share excluding $39 million in charges primarily associated with the acquisition of Giganet.

Reported revenue in the first quarter beat analysts' projections by $5 million, or about 6%.

Based in Costa Mesa, Calif., Emulex sells sophisticated storage subsystems called host bus adapters, or HBAs.

HBAs are a key component of most storage area networks, or SANs, a technology that helps large companies manage massive amounts of data by giving them their own networks. The result: greater security, lower costs and better performance for the rest of the corporate network.

Emulex and its leading competitior,

QLogic

TST Recommends

,

(QLGC)

have roughly 60% of the HBA market.

Gross margins in the first quarter increased by 2 points year-over-year to 63%, while G&A expenses were up 800% to $30.6 million, primarily due to a $27 million charge for shareholder litigation settlements.

R&D expenses were also up, increasing from 18% of revenue a year ago, to 20% of revenue, or $15.8 million.

Looking forward to the fourth quarter, Emulex expects year-over-year revenue growth of 14% to 17%, or revenue in a range of about $80 million to $82 million, and earnings per diluted share of up to 22 cents, just shy of Wall Street's expectations.

Emulex's largest customers include

EMC

(EMC)

IBM

(IBM) - Get Report

,

Dell Computer

(DELL) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

.