Broadcom Corporation
(
BRCM
) recently announced that the United States District Court for the
Central District of California has issued a decision
whereby the court granted Broadcom a permanent injunction against
certain products of
Emulex Corporation
(
ELX
).
The company has been involved in a patent infringement suit with
Emulex since 2009. In September 2009, Broadcom filed a
complaint against Emulex Corporation wherein it alleged that the
latter infringed ten of its patents relating to networking
technologies.
Later, in subsequent filings, Broadcom added two additional
patents but withdrew six patents, bringing the total to six
asserted patents. Emulex denied the charges stating that the
asserted patents are invalid and not infringed. Recently, the court
found that Emulex infringed U.S. Patent No. 7,058,150 and
7,471,691.
Management stated that Patent No. 7,058,150 relates to the
use of a phase interpolator to optimize clock and data recovery in
a high speed chip and Patent No. 7,471,691 relates to the
techniques used in Fibre Channel Loop networking.
Consequently, the permanent injunction
forbids Emulex from importing, manufacturing, using and
selling the enjoined products in the United States. The
injunction also has a sunset period.
During the sunset period of both the patents, Emulex can sell
the enjoined products but only to customer devices for which the
customer had placed a firm order for production, prior to the start
of the sunset period. The enjoined products are Emulex's
BladeEngine 2 (BE2), BladeEngine 3 (BE3) and Lancer (XE201) chips
and certain of Emulex's Fibre Channel switch products. In
addition, Broadcom is entitled a royalty of 9% on such sales.
The news pushed the stock price up by 2.57% in regular trading
to close at $38.78. The stock gained 0.83% to close at $39.10.
Meanwhile, earnings estimates have increased by $0.11 in the
last sixty days. Broadcom reported a net income of $254
million or $0.45 per diluted share in the fourth quarter of 2011
compared to a net income of $266 million or $0.47 per diluted share
in the year-ago quarter and a net income of $270 million or $0.48
per share in the previous quarter. The net income per share came
reported in the quarter beat the Zacks Consensus Estimate of
$0.40.
We continue to maintain a Neutral recommendation on Broadcom
Corporation. Our Neutral recommendation is supported by Zacks #3
Rank, which translates into a short-term rating of Hold.
BROADCOM CORP-A (
BRCM
): Free Stock Analysis Report
EMULEX CORP (
ELX
): Free Stock Analysis Report
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