UPDATE: Credit Suisse Initiates Emulex at Underperform on Industry Transition Challenges
Credit Suisse initiated coverage on Emulex (NYSE: ELX) with an Underperform rating and a $6 price target.
Credit Suisse noted, "Fibre Channel gross margins are in the mid to high- 60% range, significantly higher than the 10GbE, which are in the low to mid-50% range. As the industry standardizes on Ethernet, we expect Emulex to be challenged to maintain its margins and garner revenue. We expect gross margins to step down to 62.2%/61.4% in FY13/14 from 63.3% in FY12 and operating margins to decline to 13.9%/14.3% in FY13/14 from 16.9% in FY12."
Emulex closed at $7.26 on Wednesday.
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