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) - Get Report

,

Dell

(DELL) - Get Report

,

Hewlett-Packard

(HPQ) - Get Report

,

EMC

(EMC)

,

Cisco

(CSCO) - Get Report

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

TST Recommends

TheStreet

that a

tech rebound

is underway, spurred on by companies' cloud computing efforts.

Analyst Mansky acknowledges that there is still some investor skepticism surrounding Emulex, but points to the company's return to sequential growth as well as its potential for margin expansion.

"The December quarter is tracking above our expectations and consensus," he added. "We believe the company can achieve an annualized earnings power of 75 cents to 80 cents within the next six months."

Analysts surveyed by Thomson Financial expect Emulex to post fiscal second quarter revenue of $90.68 million and earnings of 12 cents a share. For the current fiscal year, the firm is expected to earn 43 cents a share.

This has certainly been an eventful year for the storage specialist, which

spurned

Broadcom's

takeover bid and then became

embroiled

in a

legal battle

with the chip maker.

Investors were nonetheless warming to the company's stock on Friday. Emulex shares rose 17 cents, or 1.66%, to $10.44 despite a broader dip in tech stocks that saw the NASDAQ slip 0.41%

Emulex is not the only storage company feeling analyst love. FBR Capital, for example, reinitiated its coverage of EMC on Thursday and gave the storage giant an outperform rating and a $21 price target.

"While storage is a mature industry, the move toward virtualization within the data center well positions EMC to take advantage of this next-generation technology shift," explained FBR analyst Daniel Ives, citing the company's customer base, brand awareness, and product mix.

EMC owns 80% of virtualization trailblazer

VMware

(VMW) - Get Report

, which was one of the

TheStreet's

top tech picks

for 2010. EMC has also been overhauling its high-end

Symmetrix

storage system.

"Although we do not believe the road ahead will be an easy one, our field checks give us confidence that EMC should see a nice uplift in growth from a refreshed Symmetrix product cycle, coupled with pent-up demand from its massive enterprise installed base," said Ives.

EMC shares crept up 7 cents, or 0.39%, to $16.65 on Friday.

-- Reported by James Rogers in New York

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