UPDATE: Bank of America Downgrades Emulex Corporation to Underperform, Lowers PT on Secular/Execution Risk

In a report published Thursday, Bank of America analyst Scott D. Craig downgraded the rating on Emulex Corporation ELX from Buy to Underperform, and lowered the price target from $8.50 to $5.00. In the report, Bank of America noted, “We are downgrading ELX to Underperform. Our prior Buy rating was based on a sizable share buyback program and restructuring, even with risks to revenue (i.e. secular growth challenges in Fibre Channel [FC], integration risk with Endace, etc.). However, management expects a significantly faster than expected secular decline in FC and there are increased execution issues in Endace. The accelerated rate of decline in FC (~60% of sales) was very surprising at ~10%/year vs. prior expectations of 3-5%. We expect the Street to lower revenue/EPS estimates drastically over the next several days, and investors will likely have a hard time finding reasons to buy/own the stock, at least near-term.” Emulex Corporation closed on Wednesday at $7.15.