EMULEX CORP /DE/, 10-K, 1996-08-23

EMULEX CORP /DE/
10-K, 1996-08-23
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to

COMMISSION FILE NO. 0-11007

EMULEX CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 51-0300558
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(Address of principal executive offices) (Zip Code)

(714) 662-5600
(Registrant's telephone number, including area code)
------------------------------------
Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $.20 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
(Title of class)
-------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

As of August 13, 1996, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was $78,280,290.00.

As of August 13, 1996, the registrant had 5,997,362 shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III (items 10, 11, 12 and 13) is incorporated
by reference to portions of the registrant's definitive proxy statement for the
1996 Annual Meeting of Stockholders which will be filed with the Securities and
Exchange Commission within 120 days after the close of the 1996 year.

<PAGE> 2
PART I

Item I. BUSINESS.

INTRODUCTION

Emulex was organized as a California corporation in 1979. In 1987 Emulex
changed its state of incorporation from California to Delaware by the formation
of a Delaware corporation (the "Registrant"), which acquired all of the stock of
the California corporation. The California corporation continues to operate as a
wholly-owned subsidiary of the Delaware corporation. Unless the context
indicates otherwise, the "Company" and "Emulex" each refer to the Registrant and
its subsidiaries.

In 1994, Emulex completed a major transition departing its historic storage
controller business and spinning off its wholly-owned SCSI subsidiary, QLogic
Corporation (see note 2 to the Consolidated Financial Statements). In May 1993,
Paul Folino was elected President and CEO of Emulex and in the ensuing quarters
he assembled a new management team to complement the group already in place,
including a new chief financial officer, vice president of research and
development and vice president of sales. The new management team streamlined
operations, expanded distribution channels by adding a new two-tier distribution
network and refocused the Company's product development and marketing efforts
toward networking markets such as printer servers, remote access and Fibre
Channel.

All references to years refer to the Company's fiscal years ended June 30,
1996, July 2, 1995 and July 3, 1994, as applicable, unless the calendar year is
specified. References to dollar amounts are in thousands, except share data,
unless otherwise specified.

INDUSTRY BACKGROUND

The data communications industry encompasses a broad spectrum of
technologies which facilitate the transfer of computer data from one location to
another. These technologies extend from computer to peripheral communications
managed by input/output ("I/O") solutions, to computer communications within a
building or campus environment which typically occur over a local area network
("LAN"), to computer communications between remote locations, which require wide
area network ("WAN") solutions. While its various technologies and market needs
are diverse, management believes the data communications industry as a whole is
being shaped by three major trends:

The ever-increasing need for higher bandwidth. While microprocessors have
made continual gains in computing capability, I/O channel and LAN speeds have
not kept pace and are increasingly responsible for overall performance
constraints. New technologies such as the ANSI Fibre Channel standard are
emerging to relieve this performance bottleneck.

The worldwide growth in remote enterprise access. Enterprise access stems
from the growing interconnection of remote offices and remote users to the
central enterprise. As part of this trend, the dramatic expansion in information
services, financial services, airline reservations and on-line transaction
processing is propelling the need for real-time, mission critical communication
to and from centralized facilities. In addition, the proliferation of laptops,
home PCs and modems, and the drive to enhance the productivity of traveling and
telecommuting workers has led to the need to connect those remote computers to
the corporate LAN with a user-friendly remote access solution.

Direct peripheral access to LANs. Peripherals, such as printers and storage
devices, are increasingly being attached directly to the LAN itself rather than
to a single computer or server. Direct attachment improves the overall
efficiency of the network by enabling peripherals to be placed anywhere on the
LAN, eliminating bandwidth bottlenecks imposed by port or channel interfaces,
and reducing server overhead.

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PRODUCTS

Emulex is a supplier of software and hardware-based network access
products. The Company primarily markets through two-tier distribution, where the
end-user is typically the operator of a large network, and to large original
equipment manufacturers ("OEMs"). In 1996, approximately 39 percent of Emulex's
revenue was derived from OEMs. Emulex designs, manufactures, and markets three
major distinct product families: network access servers, printer servers and
high-speed Fibre Channel products.

Network Access

Emulex's network access server products provide connectivity between
resources across both local and wide area networks. The three major product
lines within the network access family are wide area network adapters,
communications servers, and the Company's new remote access server ("RAS")
family. Emulex's marketing efforts are concentrated in the expanding WAN adapter
and RAS markets, which address the need for remote users to connect to corporate
computing resources.

Emulex supplies WAN adapters for a number of OEM programs, and has shipped
over 3 million ports worldwide to date. WAN adapters are board-level products
that can be installed in a computer to provide a communications link.
Traditionally, Emulex's WAN adapters have primarily focused on wide area
networking requirements for the PC platform. In 1996, the Company introduced a
family of PCI WAN adapters that addresses the networking requirements of
workstations and UNIX servers, as well as the DCP_link family of server-based
routers that targets the commercial end-user sector of the router market.

Emulex initiated shipments into the remote access server market in the
fourth quarter of 1995, as the Company commenced full production of its 2-port
ConnectPlus product family. The 8-port ConnectPlus Pro line commenced shipments
in the first quarter of 1996. These products enable a remotely located PC to
communicate with a local area network as if it were a local client. The
Company's remote access products have received a number of favorable technical
reviews, and in the second quarter of 1996, Emulex was selected to supply
Siemens with remote access servers linking their ordering centers with up to
35,000 of their customers.

Printer Servers

Emulex's family of printer server products improve performance by attaching
printers directly to the LAN, instead of to a file server. During 1996, the
Company introduced several new printer server products and enhancements. Emulex
introduced its NET wizard printer server administrator, which provides a
Windows-based network management tool, and Version 5.0 of its printer server
software, which allows for easier installation and management of Emulex printer
servers on most popular network operating systems. Emulex also announced an
agreement with Novell Inc. that enables the Company to bundle the new Novell
Embedded Systems Technology ("NEST") across Emulex's entire family of printer
servers.

Focusing on the needs of the OEM market, Emulex introduced the PS1000
internal printer server which plugs into the accessory port of any printer
designed under the Peerless Systems Corporation's Standard Printer I/O
architecture. This architecture, which has been selected in over 13 printers,
has the potential to become a new industry standard.

Recently, as network-ready workgroup printers have become increasingly
common, the printer server market began to shift from aftermarket products to
OEM-based solutions. In 1996, Emulex achieved design wins with 11 OEMs covering
17 different printers, many of which are just now entering production or are
slated for 1997 volume shipments. In March 1996, the Company commenced shipments
as the exclusive supplier of printer servers for a new series of workgroup
printers recently introduced by IBM Corporation.

Fibre Channel

Fibre Channel is an emerging high speed ANSI standard backed by over 90
companies including Hewlett-Packard, Seagate and Sun. The interface operates at
very high speeds of 1 to 4 gigabits per second, and is designed for two needs:
I/O channel communications between computers and peripherals, as well as high
speed local area network applications. In today's increasingly distributed
computing environment, channel and LAN applications are merging, and Fibre
Channel is designed to meet this need for a single, high performance standard
interface.

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During the first quarter of 1996, Emulex shipped limited quantities of its
complete FireFly Fibre Channel chipset. The Company followed up in the second
quarter with pre-production shipments of its first Fibre Channel systems
products, the LightPulse(TM) PCI adapter and the LightPulse(TM) Fibre Channel
hub. Emulex's PCI adapter introduction was especially notable for its pricing of
under $2,000, offering ten times the performance of FDDI products at a
comparable cost. The Company's two Fibre Channel systems products were released
to manufacturing for full production during the fourth quarter.

With the availability of working Fibre Channel solutions, system vendors
are now starting to develop complete solutions built around Fibre Channel
technology. During the third and fourth quarters of fiscal 1996, Emulex captured
its first two volume Fibre Channel design wins. Emulex now has evaluation orders
with over 60 OEMs in the computer and storage arena for design-in activities. In
August 1996, Data General announced that its AViiON server and CLARiiON storage
divisions had both selected Emulex to supply Fibre Channel connectivity
solutions.

PATENTS AND LICENSES

The Company has applied and plans to continue to apply for patents and to
copyright its trademarks both in the United States and in foreign countries when
it seems to be advantageous to do so. However, the Company believes that there
can be no assurances that patents or copyrights will be issued or that any
patent or copyright issued will provide significant protection or could be
successfully defended.

As is the case with many companies in the electronics industry, it may be
desirable in the future for the Company to obtain technology licenses from other
companies. The Company has occasionally received notices of claimed infringement
of intellectual property rights and may receive additional such claims in the
future. The Company evaluates all such claims and, if necessary, will seek to
obtain appropriate licenses. There can be no assurance that any such licenses,
if required, will be available on acceptable terms. Failure to obtain such
patents or licenses in the future could have a material adverse effect on the
Company's business, results of operations and financial condition.

SELLING AND MARKETING

The Company markets its products worldwide to OEMs, Value Added Resellers
("VARs"), systems integrators, industrial distributors, resellers and end-users.
Emulex offers repair services through third-party organizations and also
directly through the Company. At the end of 1996, the domestic sales
organization included 23 sales and support staff, including a vice president,
located in Costa Mesa and 8 satellite offices. At the end of 1996, the
international sales organization included 17 sales and support staff located in
4 international sales offices in Europe and the Pacific Rim.

The Company's export revenues were 40, 47 and 42 percent of consolidated
net revenues for 1996, 1995 and 1994, respectively. The majority of export
shipments are to the European marketplace.

Although the Company has broadened its line of product offerings in an
attempt to limit fluctuations in its quarterly results of operations, the
Company's markets are both cyclical and seasonal in nature which may cause the
Company's quarterly results of operations to vary significantly.

IBM Corporation accounted for 15 percent of total net revenues in 1996.
Reuters and Xerox accounted for 16 and 13 percent of total net revenues in 1995,
respectively. No customer accounted for more than 10 percent of total net
revenues in 1994. The Company derived approximately 39 percent of its net
revenues from sales to OEMs in 1996. Emulex's operating results could be
adversely affected if sales to one or more of such customers significantly
decline or if any one of these customers develop alternative sources for
Emulex's products.

ORDER BACKLOG

At June 30, 1996, the Company had unshipped product orders of approximately
$7,839 compared with approximately $1,931 at July 2, 1995. Approximately $6,900
of the June 30, 1996 backlog related to orders from

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Xerox, IBM and Reuters. At year end, all backlog was scheduled for delivery
within six months or less with the exception of orders pending release dates.
Orders are subject to rescheduling and/or cancellation with little or no
penalty. Purchase order release lead times depend upon the scheduling practices
of the individual customer, and the rate of booking new orders fluctuates from
month to month. Therefore, the level of backlog at any one time is not
necessarily indicative of trends in the Company's business.

ENGINEERING AND DEVELOPMENT

At June 30, 1996, the Company employed approximately 83 engineers, other
technicians and support personnel engaged in the development of new products and
the improvement of existing products. Engineering and development expenses were
$11,387, $10,674 and $8,498 for 1996, 1995 and 1994, respectively.

COMPETITION

The Company's high-performance communications server products address both
the UNIX-based and DEC-based computer market and compete with a number of
companies, including DEC. In the remote access market, competition includes
Shiva, 3Com, Ascend and others. Competition for the Company's WAN adapters is
primarily IBM, which holds the largest market share. The Company's primary
competitor for its Hewlett Packard ("HP") compatible network printing products
is HP, which offers its own network printer server. The Company's printer server
products also compete with a number of other manufacturers in the non-HP printer
marketplace including Intel. Primary competition for the Company's Fibre Channel
products includes HP and a number of smaller companies. The Company believes it
competes successfully due to its broad product line, which includes low cost,
high value products, as well as high-performance products. The Company operates
in a volatile and dynamic market, and more aggressive market and product
positioning by certain of these significantly larger competitors could have a
material adverse effect on the Company's business and financial position.

MANUFACTURING AND SUPPLIES

The Company's products consist primarily of electronic component parts
assembled on internally designed printed circuit boards which are sold as
board-level products. Most component parts can be purchased from two or more
sources. However, certain other component parts, which represent a small
percentage of the overall number of parts used by the Company, can only be
obtained from single sources. In addition, the Company designs its own
semiconductor which are embedded in its printer server and Fibre Channel
products, and these are manufactured by third party semiconductor foundries. An
inability or an unwillingness on the part of a single source supplier to provide
the Company with the quantity of parts that it needs in a timely fashion could
have an adverse impact on the Company's ability to manufacture and ship products
in accordance with customer requirements. In addition to hardware, the Company
designs software to provide functionality to its hardware products. This
software is sold primarily as embedded programs within the hardware products,
but may be purchased separately as a software-only update for the Company's
products.

At June 30, 1996, the Company had 169 manufacturing employees, including
120 permanent and 49 temporary employees, primarily at its manufacturing
facility in Puerto Rico. Assembly operations conducted by the Company are
typical of the electronics industry, and no unusual methods, procedures, or
equipment are required. The Company does, however, utilize automated assembly
and handling equipment, including surface mount technology production
capabilities in its Puerto Rico facility. The sophisticated nature of the
products, in most cases, requires extensive testing by specialized test devices
operated by skilled personnel. The Company has purchased and developed several
types of specialized test equipment to reduce the cost of this process, and
maintains internal test engineering groups for continuing support of test
operations.

EMPLOYEES

The Company had 348 employees at June 30, 1996, including 298 with
permanent status and 50 temporaries. None of the Company's employees is
represented by a labor union.

<PAGE> 6

After the close of the fourth quarter, the Company initiated a
consolidation of its operations to reduce its ongoing expense base and focus its
activities in the Fibre Channel, printer server and wide area networking
markets. Emulex's remote access and host software businesses, previously
headquartered out of a Bellevue, Washington facility, have been relocated to
Emulex headquarters in Costa Mesa. In addition, the Company has downsized its
Pacific Rim sales organization to focus its efforts on its new reseller
relationship with Canon Sales Co. As a result, the Company expects to reduce its
workforce by approximately 27 permanent employees or 9% and incur a
consolidation charge of approximately $1.3 million during the first quarter of
fiscal 1997.

RISK FACTORS

Rapid Technological Change and New Product Development

The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards and frequent introductions of
new products and enhancements. The Company believes that its future success will
depend in large part on its ability to enhance its existing products and to
introduce new products on a timely basis to meet changes in customer
preferences, emerging technologies and evolving industry standards. There can be
no assurance that the Company will be successful in developing, manufacturing
and marketing new products or product enhancements that respond to technological
changes or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products or that its new products will
adequately meet the requirements of the marketplace and achieve market
acceptance. Nor can there be any assurance that the Company will be able to
develop or license from third parties the underlying core technologies necessary
for new products and enhancements. Additionally, there can be no assurance that
services, products or technologies developed by others will not render the
Company's products or technologies uncompetitive or obsolete. If the Company is
unable, for technological or other reasons, to develop new products or
enhancements of existing products in a timely manner in response to changing
market conditions or customer preferences, the Company's business, results of
operations and financial condition would be materially and adversely affected.

Early Stage of the Fibre Channel Market

The Company has invested and continues to invest substantially in the
engineering of products to address the Fibre Channel market, which is at an
early stage of development. Approximately 35 percent of the Company's 1996
engineering and development expenditures were invested in Fibre Channel designs.
There can be no assurance that the Fibre Channel market will continue to expand
or that the Company's investment in Fibre Channel will achieve a profitable
return.

Competition

The markets for the Company's products are highly competitive and are
characterized by rapid technological advances, price erosion, frequent new
product introductions and evolving industry standards. The industry consists of
major domestic and international companies, many of which have substantially
greater financial, technical, marketing and distribution resources than the
Company, as well as emerging companies attempting to obtain a share of the
existing market. The Company's competitors continue to introduce products with
improved price/performances characteristics, and the Company will have to do the
same to remain competitive. The Company operates in a volatile and dynamic
market, and more aggressive market and product positioning by certain
competitors could have a material adverse effect on the Company's business,
results of operations and financial position.

Reliance on Third Party Suppliers

The Company relies on third party suppliers who supply the components used
in the Company's products. Most components are readily available from alternate
sources. However, the unavailability of certain components from current
suppliers, especially components custom designed for the Company, could result
in delays in the shipment of the Company's products as well as additional
expense associated with obtaining and

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qualifying a new supplier or redesigning the Company's product to accept more
readily available components. In addition, certain key components used in the
Company's products are available only from single sources and the Company does
not have long term contracts ensuring the supply of such components. As the
Company typically attempts to maintain less than 90 days supply of such
components, there can be no assurance that components will be available to meet
the Company's future requirements at favorable prices, if at all. The Company's
future inability to obtain components or to redesign its products to accept
available components, in a timely manner, could materially and adversely affect
the Company's business and financial condition. In addition, any significant
increase in component prices or inability to ship products due to a lack of
components could adversely affect the Company's results of operations.

International Operations

Sales in the United States accounted for approximately 60 percent and 53
percent of the Company's net revenues in 1996 and 1995, respectively; sales in
Europe accounted for approximately 35 percent and 38 percent of the Company's
net revenues in 1996 and 1995, respectively; and sales in the PacRim accounted
for 5 percent and 9 percent of the Company's net revenues in 1996 and 1995,
respectively. The Company expects that sales in the United States and Europe
will continue to account for a substantial majority of the Company's revenues
for the foreseeable future. There can be no assurance that the Company will
achieve significant penetration in other markets.

The Company's worldwide price list uses U.S. dollars in all markets. An
increase in the value of the U.S. dollar relative to foreign currencies would
make the Company's products more expensive and therefore potentially less
competitive in those markets. Additional risks inherent in the Company's
international business activities generally include unexpected changes in
regulatory requirements, tariffs and other trade barriers, costs and risks of
localizing products for foreign countries, longer accounts receivable payment
cycles, potentially adverse tax consequences, repatriation of earnings and the
burdens of complying with a wide variety of foreign laws. In addition, revenues
of the Company earned in various countries where the Company does business may
be subject to taxation by more than one jurisdiction, thereby adversely
affecting the Company's earnings. There can be no assurance that such factors
will not have an adverse effect on the revenues from the Company's future
international sales and, consequently, the Company's results of operations.

Dependence of Key Personnel

The Company's success depends to a significant degree on the performance
and continued service of its senior management and certain key employees.
Competition for such highly skilled employees with technical, management,
marketing, sales product development and other specialized skills is intense,
and there can be no assurance that the Company will be successful in recruiting
and retaining such personnel. In addition, there can be no assurance that
employees will not leave the Company and, after leaving, compete against the
Company. The loss of key management, technical and sales personnel could have a
material adverse effect on the Company's business, financial condition and
operating results.

Fluctuations in Quarterly Operating Results

Because the Company generally ships products within a short period after
receipt of an order, the Company typically does not have a material backlog of
unfilled orders, and revenues in any quarter are substantially dependent on
orders booked in that quarter. Typically the Company generates a large
percentage of its quarterly revenues in the last month of the quarter. Adding
further to the variability of sales are certain large OEM customers that tend to
order sporadically and in large amounts. A small variation in the timing of
orders is likely to adversely and disproportionately affect the Company's
quarterly results of operations as the Company's expense levels are based, in
part, on its expectations of future sales and only a small portion of the
Company's expenses vary directly with its sales. Therefore, the Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall of demand in relation
to the Company's quarterly expectations or any material delay of customer orders
could have an immediate and adverse impact on the Company's quarterly results of
operations and financial condition.

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Recent History of Losses from Continuing Operations

The Company incurred losses from continuing operations of $9,288 and $7,677
for 1996 and 1994, respectively, and had income from continuing operations of
$3,938 for 1995. Results for 1995 included charges of $785 for the impairment of
goodwill and $685 to write off capitalized software development costs. Results
for 1994 included consolidation charges of $2,413 and a charge for impairment of
goodwill of $1,001. While the Company expects to return to profitability, there
can be no assurances that revenues will return to the levels experienced in the
prior year or that the Company would be profitable at such revenue levels.

Reliance on OEMs, Distributors and Key Customers

In 1996, the Company derived approximately 50 percent of its revenue from
distributors and 39 percent from OEMs. The Company's agreements with
distributors and OEMs are typically non-exclusive and in many cases may be
terminated by either party without cause, and many of the Company's distributors
and OEMs carry competing product lines. Therefore, there can be no assurance
that any distributor or OEM will continue to purchase the Company's products.
The loss of important distributors or OEMs could adversely affect the Company's
business, results of operations and financial condition. Among the Company's key
OEMs, IBM Corporation accounted for 15 percent of the Company's 1996 revenues.

Possible Volatility of Stock Price

As is the case with many technology based companies, the market price of
the Company's common stock has been, and is likely to continue to be, extremely
volatile. Factors such as new product introductions by the Company or its
competitors, fluctuations in the Company's quarterly operating results, the gain
or loss of significant contracts, pricing pressures and general conditions in
the computer market, and general events and circumstances beyond the Company's
control may have a significant impact on the market price of the Company's
common stock. In addition, the stock market recently has experienced significant
price and volume fluctuations which have particularly affected the market price
for many high technology companies like the Company.

Item 2. PROPERTIES.

The Company's corporate offices and principal product development
facilities are currently located in an approximately 55,000 square foot leased
building in Costa Mesa, California. The lease expires in calendar year 1999.

Emulex Caribe, Inc., one of the Company's subsidiaries, has its corporate
offices and production facilities located in two adjacent buildings owned by
that subsidiary in Dorado, Puerto Rico. The two buildings have an aggregate of
approximately 41,000 square feet. The Company believes these facilities are
sufficient to meet its production needs through the next year.

The Company leases approximately twelve sales offices throughout the world.

The Company's future facilities requirements will depend upon the Company's
business, but the Company believes additional space, if required, may be
obtained on reasonable terms.

Item 3. LEGAL PROCEEDINGS.

The Company is not aware of any pending legal proceedings which could have
a material adverse effect on the financial position or operations of the
Company.

The Company believes that it is in compliance with all city, state, and
federal rules and regulations as pertaining to environmental impact and use.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of 1996.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The executive and certain other officers of the Company or its principal
operating subsidiary are as follows:

<TABLE>
<CAPTION>
Name Position Age
- ---- -------- ---

<S> <C>
Paul F. Folino President and Chief Executive Officer and Director 51
Walter J. McBride Sr. Vice President, Chief Financial Officer, Secretary and Treasurer 43
Michael A. Peitler (1) Sr. Vice President, Worldwide Sales 54
Charles N. Goff (1) Vice President, Manufacturing 62
Peter M. Biege (1) Vice President and General Manager, RAS Division 46
Teresa W. Blackledge (1) Vice President, Marketing 41
Sadie A. Herrera (1) Vice President, Human Resources 47
Ronald P. Quagliara (1) Vice President, Research and Development 47
</TABLE>

- -----------

(1) These persons serve in the indicated capacities as officers of the
Registrant's principal operating subsidiary; they are not officers of the
Registrant.
- ------------

Mr. Folino joined the Company in May 1993 as president and chief executive
officer and as a director. From January 1991 to May 1993, Mr. Folino was
president and chief operating officer of Thomas-Conrad Corporation, a
manufacturer of local area networking products, and from June 1990 to December
1990, he was managing director of Thomas-Conrad GmbH, a German affiliate of
Thomas-Conrad Corporation.

Mr. McBride joined the Company in November 1993 as senior vice president,
chief financial officer, secretary and treasurer. Mr. McBride was vice president
of corporate development at Nellcor, Incorporated, a medical instruments
company, from 1991 to 1993. From 1988 to 1991, he served as vice president of
finance and chief financial officer of Calcomp, Inc., a computer peripherals
manufacturer.

Mr. Peitler joined the Company in September 1993 as vice president, sales,
and was promoted to senior vice president, sales in September 1994. Mr. Peitler
had been senior vice president of sales at Thomas-Conrad Corporation, a local
area networking products manufacturer, since September 1991. From February 1988
to June 1990, he was president and managing director of Datapoint Canada, Inc.,
a manufacturer of networking products.

Mr. Biege joined the Company as vice president and general manager of
InterConnections, Inc. in December 1993. From 1988 to December 1993, Mr. Biege
was district sales manager of Apple Computer, a manufacturer of personal
computers.

Ms. Blackledge joined the Company in May 1991 as marketing manager and was
promoted to vice president, marketing in September, 1994. From July 1982 to
April 1991, Ms. Blackledge held a variety of marketing, planning and research
positions with the Digital Communications Division of Rockwell International.

Mr. Goff joined the Company in 1985 as manager, warehouse operations and
after holding several operations management positions was promoted to vice
president, manufacturing in September 1994. Mr. Goff worked for Printronix, a
manufacturer of high speed dot-matrix printers, for over 10 years prior to
joining the Company.

Ms. Herrera joined the Company in 1988 as benefits administrator and was
promoted to vice president, human resources in May 1995. At the time of her
promotion, Ms. Herrera was senior director, human resources. Ms. Herrera had
over 15 years of human resource management experience with the Remex Division of
Ex-Cell-O/Textron Corporation and other companies prior to joining the Company.

Mr. Quagliara joined the Company in March 1995 as vice president, research
and development. Prior to joining the Company, Mr. Quagliara spent five years
with Ascom Timeplex, Inc., a manufacturer of router

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bridges and other networking equipment. Most recently he was vice president and
general manager of Acsom's LAN Interworking Business Unit.

None of the executive officers of the parent Company or officers of its
principal operating subsidiary has any family relationship with any other
executive officer of the Company, other officer of its principal operating
subsidiary or director of the Company.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

PRINCIPAL MARKET AND PRICES

The Company's common stock is traded on the Nasdaq National Market under
the symbol EMLX. The following table sets forth for the indicated periods the
high and low sales prices of the common stock, as reported on the Nasdaq
National Market.

On February 28, 1994, subsequent to receiving stockholder approval, the
Company declared a special distribution (the "Distribution") to stockholders, on
a share-for-share basis, of all outstanding shares of common stock of QLogic
effective on the record date, February 25, 1994.

<TABLE>
<CAPTION>
HIGH LOW
---- ---

<S> <C> <C> <C>
1995 First Quarter................................... 10 1/8 6 1/2
Second Quarter.................................. 13 7/8 8 1/2
Third Quarter................................... 20 1/8 12 1/2
Fourth Quarter.................................. 24 3/8 17 1/4

1996 First Quarter................................... 28 1/2 13
Second Quarter.................................. 16 3/4 10 1/8
Third Quarter................................... 14 3/8 6 3/8
Fourth Quarter.................................. 21 3/8 13
</TABLE>

NUMBER OF COMMON STOCKHOLDERS

The approximate number of record holders of common stock of the Company as
of August 13, 1996 was 446.

DIVIDENDS

The Company has never paid cash dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain its earnings for the development of its business.

On January 19, 1989, the Board of Directors declared a dividend
distribution of one preferred stock purchase right for each outstanding share of
common stock. The rights were distributed on February 2, 1989 to stockholders of
record on the close of business on that date. See Note 6 to the Consolidated
Financial Statements, "Stock Options and Purchase Rights," for further
information on preferred stock purchase rights.

At a special meeting of stockholders of the Company held on February 24,
1994, the stockholders voted on a single, unified proposal which in part
provided for the distribution to stockholders, on a share-for-share basis, of
all outstanding shares of common stock of QLogic. On February 28, 1994,
subsequent to stockholders approving the aforementioned proposal, the Company
declared a special distribution to the Company's stockholders of all the shares
of QLogic effective on the record date, February 25, 1994. See Note 2 to the
Consolidated Financial Statements, "Discontinued Operations".

9
<PAGE> 11

Item 6. SELECTED FINANCIAL DATA.

The following table summarizes certain selected consolidated financial
data. Certain reclassifications have been made to the 1994, 1993 and 1992 data
to conform to the 1996 and 1995 presentation. The consolidated balance sheet
data presented in the following tables have not been retroactively restated for
the spin off of QLogic Corporation (See Note 2 to the Consolidated Financial
Statements).

Selected Statement of Operations Data

<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------------------------
June 30, July 2, July 3, June 27, June 28,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(in thousands, except per share data)

<S> <C> <C> <C> <C> <C>
Net revenues ............................. $ 51,338 $ 75,475 $ 61,558 $ 55,056 $ 58,639
Cost of sales ............................ 34,538 44,412 38,248 29,948 33,006
-------- -------- -------- -------- --------
Gross profit ........................... 16,800 31,063 23,310 25,108 25,633

Operating expenses:
Engineering and development ............ 11,387 10,674 8,498 8,608 7,643
Selling and marketing .................. 11,381 12,170 13,361 14,926 14,499
General and administrative ............. 4,940 5,435 5,393 2,504 1,552
Amortization of goodwill ............... -- 337 467 600 409
Impairment of goodwill ................. -- 785 1,001 -- --
Consolidation charges .................. -- -- 2,413 1,890 --
-------- -------- -------- -------- --------
Total operating expenses ................. 27,708 29,401 31,133 28,528 24,103
-------- -------- -------- -------- --------

Operating income (loss) .................. (10,908) 1,662 (7,823) (3,420) 1,530

Nonoperating income (expense) ............ 483 1,120 123 (6) 177
-------- -------- -------- -------- --------

Income (loss) from continuing
operations before income taxes ......... (10,425) 2,782 (7,700) (3,426) 1,707

Income tax expense (benefit) ............. (1,137) (1,156) (23) (34) 529
-------- -------- -------- -------- --------

Income (loss) from continuing operations . (9,288) 3,938 (7,677) (3,392) 1,178

Discontinued operations:
Income (loss) from discontinued
operations, net of income tax ........ -- -- (4,558) 6,498 (6,372)

Gain (loss) on disposal of discontinued
operations, net of income tax ........ -- -- (2,994) 408 (18,252)
-------- -------- -------- -------- --------

Net income (loss) ........................ $ (9,288) $ 3,938 $(15,229) $ 3,514 $(23,446)
======== ======== ======== ======== ========

Income (loss) from continuing
operations per common
and common equivalent share ............ $ (1.56) $ 0.64 $ (1.39) $ (0.61) $ 0.22

Gain (loss) from discontinued operations
and disposal of discontinued operations,
net of income tax, per common and
common equivalent share ................ -- -- (1.36) 1.25 (4.55)
-------- -------- -------- -------- --------

Net income (loss) per common
and common equivalent share ............ $ (1.56) $ 0.64 $ (2.75) $ 0.64 $ (4.33)
======== ======== ======== ======== ========

Weighted-average number of common
and common equivalent shares ........... 5,936 6,172 5,537 5,533 5,416
======== ======== ======== ======== ========
</TABLE>

10
<PAGE> 12

Selected Balance Sheet Data

<TABLE>
<CAPTION>
June 30, July 2, July 3, June 27, June 28,
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(in thousands)

<S> <C> <C> <C> <C> <C>
Total current assets .................. $31,579 $39,014 $26,152 $53,442 $56,131
Total current liabilities ............. 15,494 13,970 9,223 20,580 27,873
------- ------- ------- ------- -------
Working capital ....................... $16,085 $25,044 $16,929 $32,862 $28,258

Total assets .......................... $39,300 $47,550 $37,354 $77,956 $80,579
Long-term capitalized lease obligations 204 253 506 1,805 1,722
Retained earnings ..................... 14,204 23,492 19,554 48,184 44,670
Stockholders' equity .................. 22,030 30,678 25,559 53,482 48,384
</TABLE>

11
<PAGE> 13

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

SUBSEQUENT EVENTS

After the close of the fourth quarter, the Company initiated a
consolidation of its operations to reduce its ongoing expense base and focus its
activities in the Fibre Channel, printer server and wide area networking
markets. Emulex's remote access and host software businesses, previously
headquartered out of a Bellevue, Washington facility, have been relocated to
Emulex headquarters in Costa Mesa. In addition, the Company has downsized its
Pacific Rim sales organization to focus its efforts on its new reseller
relationship with Canon Sales Co. As a result, the Company expects to reduce its
workforce by 9% and incur a consolidation charge of approximately $1.3 million
during the first quarter of fiscal 1997.

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and notes thereto included elsewhere in this Form 10-K. Except for
the historical information contained herein, the discussion in this Form 10-K
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-K
should be read as being applicable in all related forward-looking statements
wherever they appear in this Form 10-K. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

During the third quarter of 1994, the Company spun off QLogic Corporation,
a wholly owned subsidiary, as a separate, publicly-traded company. The financial
statement presentation and the discussion of the results of operations reflect
the discontinuance of this business. See Note 2 to the Consolidated Financial
Statements for a discussion of discontinued operations. All references to years
refer to the Company's years ended June 30, 1996, July 2, 1995 and July 3, 1994,
as applicable, unless the calendar year is specified. References to dollar
amounts are in thousands unless otherwise specified.

<TABLE>
<CAPTION>
Percentage of Net Revenues
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net revenues ........................... 100.0% 100.0% 100.0%
Cost of sales .......................... 67.3 58.8 62.1
------ ------ ------
Gross profit ......................... 32.7 41.2 37.9
Operating expenses:
Engineering and development .......... 22.2 14.2 13.8
Selling and marketing ................ 22.1 16.1 21.7
General and administrative ........... 9.6 7.2 8.8
Amortization of goodwill ............. -- 0.5 0.8
Impairment of goodwill ............... -- 1.0 1.6
Consolidation charges ................ -- -- 3.9
------ ------ ------
Total operating expenses ............... 53.9 39.0 50.6
------ ------ ------
Operating income (loss) ................ (21.2) 2.2 (12.7)
Nonoperating income .................... 0.9 1.5 0.2
------ ------ ------
Income (loss) from continuing
operations before income taxes ....... (20.3) 3.7 (12.5)
Income tax benefit ..................... (2.2) (1.5) --
------ ------ ------
Income (loss) from continuing operations (18.1) 5.2 (12.5)
Discontinued operations:
Loss from discontinued operations,
net of income tax .................. -- -- (7.4)
Loss on disposal of discontinued
operations, net of income tax ...... -- -- (4.8)
------ ------ ------
Net income (loss) ...................... (18.1)% 5.2% (24.7)%
====== ====== ======
</TABLE>

12
<PAGE> 14
EMULEX CORPORATION AND SUBSIDIARIES

NET REVENUES

Net revenues for 1996 decreased $24,137, or 32.0 percent, from 1995. This
decrease in net revenues resulted primarily from lower sales to OEMs, which were
$20,111 in the current year, down $19,495, or 49.2 percent, from the $39,606
recorded in the prior year. This lower level of OEM sales is attributable to a
combined $21,568, or 85.7 percent, reduction in shipments to Xerox, Cisco
Systems and Reuters, offset by a $2,073, or 14.3 percent, increase in shipments
to other OEM accounts. While Xerox took delivery of their new generation of
printer servers during the second quarter of the current year, volumes were
lower than a year earlier for the previous generation of printer servers.
Additionally, one product as anticipated reached the end of its life cycle in
the fourth quarter of 1995 with Cisco Systems. Sales to Reuters declined from
the levels recorded a year earlier due to the completion of certain of Reuters'
modernization projects in Europe. However, in the fourth quarter of 1996, Emulex
received over $2,500 in orders from Reuters related to a new program.
Approximately half of these new Reuters orders shipped in the fourth quarter of
1996.

Export revenues decreased by $14,500, or 41.2 percent, to $20,700 in 1996.
Exports accounted for 40.3 percent of the Company's net revenues in 1996, down
from 46.6 percent in 1995. Domestic revenues decreased $9,637, or 23.9 percent,
to $30,638 in 1996. During 1996, IBM Corporation accounted for 14.7 percent of
net revenues.

Net revenues for 1995 increased by $13,917, or 22.6 percent, over 1994. The
increase was primarily due to increases in printer server product line revenues
of $13,041, or 75.0 percent, over 1994. In 1995, WAN adapter revenues increased
$4,878, or 23.5 percent, over 1994. Additionally, two new product lines, remote
access servers and Fibre Channel, contributed revenue of $949 and $71,
respectively, all in the fourth quarter of 1995. These increases were partially
offset by decreases in revenues from communication servers and other product
lines of $3,575 and $1,447, respectively.

Export revenues increased 36.2 percent to $35,200 in 1995. Exports
accounted for 46.6 percent of the Company's net revenues in 1995, up from 42.0
percent in 1994. Domestic revenues grew $4,563, or 12.8 percent, to $40,275 in
1995. During 1995, Reuters and Xerox accounted for 16.2 and 13.0 percent of net
revenues, respectively.

GROSS PROFIT

Gross profit in 1996 decreased by $14,263 to $16,800, down 45.9 percent
from the previous year. Gross profit for 1996 was 32.7 percent of net revenues,
down from 41.2 percent in 1995. Fiscal 1995 gross profit includes a $685 charge
for the impairment of capitalized software development costs. Without this
charge, 1995 gross margins were 42.1 percent of net revenues. The decrease in
1996 gross profit percentage from a year earlier is primarily attributable to a
lower absorption of manufacturing overhead which resulted from a lower level of
production activity in the current year.

Gross profit in 1995 increased $7,753, up 33.3 percent compared to the
prior year. In 1995, gross profit as a percent of net revenues was 41.2 percent,
up from 37.9 percent in 1994. In 1994, the Company recorded charges of $1,119 to
write down inventories to net realizable value, and $570 to write off certain
fixed assets no longer in use. Excluding these charges and the 1995 impairment
charge referred to in the preceding paragraph, gross profit would have been 42.1
percent in 1995 and 40.6 percent in 1994.

OPERATING EXPENSES

During 1996, operating expenses decreased $1,693, or 5.8 percent, from the
levels recorded a year earlier. However, due to lower net revenues in 1996 when
compared to 1995, operating expenses as a percent of net revenues increased to
53.9 percent in 1996 from 39.0 percent in 1995. The results for 1995 include
$785 for the write-off of goodwill associated with the 1992 acquisition of
InterConnections, Inc. Without this write-off, operating expenses in 1995 were
37.9 percent of net revenues. Engineering and development expenses increased in
the current year by $713, or 6.7 percent, reflecting management's continuing
commitment to product development and design. Engineering and development
expenses were 22.2 percent of net revenues in

13
<PAGE> 15
1996 compared to 14.2 percent in 1995. Selling and marketing expenses decreased
by $789, or 6.5 percent, mainly due to lower commissions and related expenses.
Selling and marketing expenses were 22.1 percent of net revenues in 1996
compared to 16.1 percent in the prior year. General and administrative expenses
were $495, or 9.1 percent, lower than in the prior year, primarily as a result
of reduced staffing levels compared to the preceding year. General and
administrative expenses were 9.6 percent of net revenues in 1996 compared to 7.2
percent in the prior year. There was no goodwill amortization in the current
year compared to $337 in the prior year. The decrease in goodwill amortization
is due to the 1995 write-off of goodwill mentioned earlier in this paragraph.

Operating expenses in 1995 decreased $1,732, or 5.6 percent, from 1994
levels, declining from 50.6 percent of net revenues in 1994 to 39.0 percent in
1995. In 1994, operating expenses included $2,413 and $1,001 for consolidation
charges and impairment of goodwill, respectively. Excluding these charges and
the 1995 goodwill write-off discussed above, recurring operating expenses
declined from 45.0 percent of net revenues in 1994 to 37.9 percent in 1995. In
1995, engineering and development expenses increased by $2,176, or 25.6 percent.
Engineering and development expenses, in 1995, were 14.2 percent of net
revenues, up from 13.8 percent in 1994. Selling and marketing expenses were down
by $1,191 in 1995, or 8.9 percent, compared with 1994, primarily due to the
Company's 1994 consolidation efforts. Selling and marketing expenses dropped
from 21.7 percent of net revenues in 1994 to 16.1 percent in 1995. General and
administrative expenses were essentially unchanged despite the increase in
activity, increasing by $42 in 1995, while dropping from 8.8 percent of net
revenues in 1994 to 7.2 percent in 1995. Goodwill amortization decreased from
$467 in 1994 to $337 in 1995.

NONOPERATING INCOME

Nonoperating income, which consists primarily of interest income, interest
expense, a gain from the disposition of a building, and foreign exchange
translation, was $483 in 1996, decreasing by $637, or 56.9 percent, from the
$1,120 recorded in 1995. Net interest income in 1996 decreased by $832, or 80.2
percent, from the 1995 level of $1,037, primarily due to $538 of nonrecurring
1995 interest income related to a tax refund and lower levels of
interest-bearing deposits during the current year. The $312 gain in the current
year resulted from the sale of a production facility in Puerto Rico.

In 1995, nonoperating income increased $997 from 1994 to $1,120. This
increase was mainly due to higher levels of interest-bearing deposits during
1995 and the nonrecurring second quarter 1995 interest income mentioned in the
preceding paragraph.

INCOME TAXES

The Company recorded a tax benefit of $1,137 in 1996 compared to a benefit
of $1,156 in 1995. The benefit in the current year included a $750 tax recovery
from a tax sharing agreement with QLogic, the Company's former subsidiary (see
Note 2 to the Consolidated Financial Statements). In the prior year, the benefit
included a federal tax refund of $1,581. The Company had $38,026 and $10,065 of
net operating loss carryforwards for federal and state income tax purposes,
respectively, at June 30, 1996, which are available to offset future federal and
state taxable income through 2011 and 2001, respectively. Additionally, the
Company had $2,003 of business credit carryforwards, available through 2010, and
$1,865 of alternative minimum tax credit carryforwards available over an
indefinite period to further reduce future federal regular income taxes. The
Company also has $609 of research and experimentation credit carryforwards for
state purposes available through 2011.

The Company is currently undergoing an examination by the California
Franchise Tax Board for the Company's California income tax returns for years
1989, 1990 and 1991. In the opinion of management, this examination will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.

NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 123 ("Statement 123"),
"Accounting for Stock-Based Compensation," issued in October 1995 and effective
for years beginning after December 15, 1995, encourages, but

14
<PAGE> 16

does not require, a fair value based method of accounting for employee stock
options or similar equity instruments. Statement 123 allows an entity to elect
to continue to measure compensation cost under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APBO No. 25"), but
requires pro forma disclosures of net earnings and earnings per share as if the
fair value based method of accounting had been applied. The Company expects to
adopt Statement 123 in 1997. While the Company is still evaluating Statement
123, the Company currently expects to elect to continue to measure compensation
costs under APBO No. 25, and comply with the pro forma disclosure requirements.
If the Company makes this election, Statement 123 will not have a material
impact on the Company's financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased by $8,673 during 1996 to
$1,635. This decrease in available cash balances since July 2, 1995 resulted
primarily from the net loss experienced in the current year. Operating
activities, which include changes in working capital balances, used $7,839 of
cash in 1996 compared to providing $5,411 of cash in the prior year. Investing
activities, which were limited to the acquisition and disposition of property,
plant and equipment, used $1,157 of cash in the current year compared to using
$2,345 in the comparable period a year ago. Financing activities, which were
limited to payments under capital lease obligations and proceeds from the
exercise of employee and board of director stock options, provided $397 of cash
during 1996 compared to providing $920 of cash in the prior year. Discontinued
operations used $74 of cash in 1996 compared to using $450 of cash a year ago.

In addition to its cash balances, the Company has a line of credit of up to
$7,000 with Silicon Valley Bank. There were no borrowings under the line of
credit during 1996. Under the terms of the line of credit, the Company is
required to grant Silicon Valley Bank a security interest in its accounts
receivable, inventories, equipment and other property upon any borrowing. The
line of credit with Silicon Valley Bank requires the Company to satisfy certain
financial and other covenants and conditions, including prescribed levels of
tangible net worth, profitability and liquidity. In the event the Company fails
to comply with any financial or other covenant in its loan agreement with
Silicon Valley Bank, the line of credit could become unavailable to the Company.
In addition, after borrowings have been made under the line of credit, a failure
to satisfy such covenants would constitute an event of default, giving rise to
the various remedies available to a secured lender. There can be no assurance
that the Company will continue to satisfy the financial and other covenants and
conditions of the line of credit or that the line of credit will continue to be
available to meet the Company's liquidity requirements. The Company anticipates
that borrowings under the line of credit will be required during the next twelve
months.

The Company's line of credit with Silicon Valley Bank, which is renewed
periodically in the normal course of business, expires in September 1997. The
Company recently completed negotiations with Silicon Valley Bank to extend and
expand the existing line of credit to $7,000. A failure to renew this line of
credit would adversely affect the Company's ability to meet its financial
obligations and liquidity requirements.

The Company believes that its existing cash balances, facilities and
equipment leases, anticipated cash flows from operating activities and
borrowings under its line of credit will be sufficient to support its working
capital needs and capital expenditure requirements for the next twelve months.
However, the Company has recently experienced reductions in revenue levels and
significant losses from operations. The Company's ability to meet its future
liquidity requirements is dependent upon its ability to operate profitably or,
in the absence thereof, to draw on its line of credit and to arrange additional
financing. If the Company were to continue to experience

15
<PAGE> 17
losses at the rate experienced in 1996, additional debt or equity financing
would be required within three to nine months. There can be no assurances that
revenues will return to the levels experienced in the prior year or that the
Company would be profitable at such revenue levels. Furthermore, there can be no
assurances that future requirements to fund operations will not require the
Company to draw on its line of credit and seek additional financing, or that
such line of credit or additional financing will be available on terms favorable
to the Company and its stockholders, or at all.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item is included herein as part of Item
14(a) of Part IV of this annual report.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

There is incorporated herein by reference the information required by this
Item in the Company's definitive proxy statement for the 1996 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the year ended June 30, 1996 and the
information from the section entitled "Executive Officers of the Registrant" in
Part I of this report.

Item 11. EXECUTIVE COMPENSATION.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

16
<PAGE> 18
PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Documents Filed with Report

1. Consolidated Financial Statements

The consolidated financial statements listed on the
accompanying Index to Consolidated Financial Statements and
Schedule are filed as part of this report.

2. Financial Statement Schedule

The financial statement schedule listed on the accompanying
Index to Consolidated Financial Statements and Schedule is
filed as part of this report.

3. Exhibits

The exhibits listed on the accompanying Index to Exhibits at
page 39 are filed as part of this report.

(b) Reports on Form 8-K

The Registrant has not filed any reports on Form 8-K during
the last quarter of the year for which this report is filed.

17
<PAGE> 19

EMULEX CORPORATION AND SUBSIDIARIES
Annual Report -- Form 10-K
Items 8, 14(a)(1) and 14(a)(2)
Index to Consolidated Financial Statements and
Schedule June 30, 1996, July 2, 1995 and
July 3, 1994
(With Independent Auditors' Report Thereon)

<TABLE>
<CAPTION>
Consolidated Financial Statements Page Number
- --------------------------------- -----------

<S> <C>
Independent Auditors' Report.......................................................... 19

Consolidated Balance Sheets-- June 30, 1996 and July 2, 1995 ......................... 20

Consolidated Statements of Operations--Years ended June 30, 1996,
July 2, 1995 and July 3, 1994 ...................................................... 21

Consolidated Statements of Stockholders' Equity--Years ended
June 30, 1996, July 2, 1995 and July 3, 1994........................................ 22

Consolidated Statements of Cash Flows--Years ended
June 30, 1996, July 2, 1995 and July 3, 1994 ....................................... 23

Notes to Consolidated Financial Statements............................................ 24

Schedule

Schedule II - Valuation and Qualifying Accounts and Reserves......................... 37
</TABLE>

All other schedules are omitted because the required information is not
applicable or the information is presented in the consolidated financial
statements or notes thereto.

18
<PAGE> 20

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Emulex Corporation:

We have audited the consolidated financial statements of Emulex Corporation and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we have also audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Emulex Corporation
and subsidiaries as of June 30, 1996 and July 2, 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

KPMG Peat Marwick LLP

Orange County, California
August 9, 1996

19
<PAGE> 21

EMULEX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and July 2, 1995
(in thousands, except share data)

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Assets (note 5)

Current assets:
Cash and cash equivalents ........................................... $ 1,635 $10,308
Accounts and notes receivable, less allowance for
doubtful accounts of $482 in 1996 and $492 in 1995 ............... 12,993 12,896
Inventories, net (note 3) .......................................... 14,671 14,261
Prepaid expenses .................................................... 1,892 1,199
Income tax receivable (note 4) ...................................... 388 350
------- -------
Total current assets ............................................ 31,579 39,014

Property, plant and equipment, net (notes 3 and 10) ...................... 7,533 8,451
Other assets ............................................................. 188 85
------- -------

$39,300 $47,550
======= =======

Liabilities and Stockholders' Equity

Current liabilities:
Current installments of capitalized lease obligations (note 10) ..... $ 261 $ 243
Accounts payable .................................................... 8,699 8,371
Accrued liabilities (note 3) ........................................ 5,846 5,356
Deferred income taxes (note 4) ...................................... 688 --
------- -------
Total current liabilities ....................................... 15,494 13,970

Capitalized lease obligations, excluding
current installments (note 10) ...................................... 204 253
Deferred income taxes (note 4) .......................................... 1,572 2,649
------- -------

17,270 16,872
------- -------

Commitments and contingencies (note 10)

Stockholders' equity (notes 2 and 6):
Preferred stock, $.01 par value; 1,000,000 shares authorized (150,000
shares designated as Series A Junior
Participating Preferred Stock); none issued and
outstanding ..................................................... -- --
Common stock, $.20 par value; 20,000,000 shares
authorized; 5,993,403 and 5,860,923 issued and
outstanding in 1996 and 1995, respectively ...................... 1,199 1,172
Additional paid-in capital .......................................... 6,627 6,014
Retained earnings ................................................... 14,204 23,492
------- -------

Total stockholders' equity ............................................... 22,030 30,678
------- -------

$39,300 $47,550
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

20
<PAGE> 22

EMULEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended June 30, 1996, July 2, 1995 and July 3, 1994
(in thousands, except per share data)

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(52 weeks) (52 weeks) (53 weeks)

<S> <C> <C> <C>
Net revenues (note 9) ........................... $ 51,338 $ 75,475 $ 61,558
Cost of sales ................................... 34,538 44,412 38,248
-------- -------- --------
Gross profit ................................. 16,800 31,063 23,310

Operating expenses:
Engineering and development .................. 11,387 10,674 8,498
Selling and marketing ........................ 11,381 12,170 13,361
General and administrative ................... 4,940 5,435 5,393
Amortization of goodwill ..................... -- 337 467
Impairment of goodwill ....................... -- 785 1,001
Consolidation charges ........................ -- -- 2,413
-------- -------- --------
Total operating expenses ................. 27,708 29,401 31,133
-------- -------- --------

Operating income (loss) .................. (10,908) 1,662 (7,823)
Nonoperating income (note 7) .................... 483 1,120 123
-------- -------- --------

Income (loss) from continuing operations
before income taxes .................... (10,425) 2,782 (7,700)

Income tax benefit (note 4) ..................... (1,137) (1,156) (23)
-------- -------- --------

Income (loss) from continuing operations ........ (9,288) 3,938 (7,677)

Discontinued operations (note 2):
Loss from discontinued operations,
net of income tax ........................ -- -- (4,558)

Loss on disposal of discontinued
operations, net of income tax ............ -- -- (2,994)
-------- -------- --------

Net income (loss) ............................ $ (9,288) $ 3,938 $(15,229)
======== ======== ========

Income (loss) from continuing operations per
common and common equivalent share ........... $ (1.56) $ 0.64 $ (1.39)

Loss from discontinued operations and disposal
of discontinued operations, net of income tax,
per common and common equivalent share ....... -- -- (1.36)
-------- -------- --------

Net income (loss) per common and
common equivalent share ...................... $ (1.56) $ 0.64 $ (2.75)
======== ======== ========
Weighted average number of common
and common equivalent shares ................. 5,936 6,172 5,537
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

21
<PAGE> 23

EMULEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1996, July 2, 1995 and July 3, 1994
(in thousands, except share data)

<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at June 27, 1993 ...................... 5,498,847 $ 1,100 $ 4,198 $ 48,184 $ 53,482

Exercise of stock options (note 6) ......... 79,643 16 691 -- 707
Repurchase and cancellation
of common stock ......................... (29) -- -- -- --
Distribution of QLogic Corporation
common stock (note 2) ................... -- -- -- (13,401) (13,401)
Net loss ................................... -- -- -- (15,229) (15,229)
---------- ---------- ---------- ---------- ----------

Balance at July 3, 1994 ....................... 5,578,461 1,116 4,889 19,554 25,559

Exercise of stock options (note 6).......... 282,462 56 1,125 -- 1,181
Net income ................................. -- -- -- 3,938 3,938
---------- ---------- ---------- ---------- ----------

Balance at July 2, 1995 ....................... 5,860,923 1,172 6,014 23,492 30,678

Exercise of stock options (note 6) ......... 132,480 27 613 -- 640
Net loss ................................... -- -- -- (9,288) (9,288)
---------- ---------- ---------- ---------- ----------

Balance at June 30, 1996 ....................... 5,993,403 $ 1,199 $ 6,627 $ 14,204 $ 22,030
========== ========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

22
<PAGE> 24

EMULEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended June 30, 1996, July 2, 1995 and July 3, 1994
(in thousands)

Cash flows from operating activities:
Income (loss) from continuing operations $ (9,288) $ 3,938 $ (7,677)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating activities:
Depreciation, amortization and goodwill impairment 2,412 4,619 5,191
Loss (gain) on disposal of property, plant and equipment (125) 109 1,515
Provision for doubtful accounts 125 64 317
Changes in assets and liabilities:
Accounts receivable (222) (3,204) 835
Inventories (410) (5,323) 3,213
Income tax receivable (38) (113) 501
Accounts payable 328 5,356 (1,733)
Accrued liabilities 564 (151) (164)
Deferred income taxes (389) 584 (14)
Deferred income -- (1) (9)
Prepaid expenses (693) (750) 167
Other assets (103) 283 35
-------- -------- --------
Net cash provided by (used in) operating activities (7,839) 5,411 2,177
-------- -------- --------

Cash flows from investing activities:
Net proceeds from sale of property, plant and equipment 1,032 8 13
Additions to property, plant and equipment (2,189) (2,353) (1,709)
Additions to intangibles -- -- (1,286)
-------- -------- --------
Net cash used in investing activities (1,157) (2,345) (2,982)
-------- -------- --------

Cash flows from financing activities:
Principal payments under capital leases (243) (261) (579)
Payments on short-term notes payable to bank, net -- -- (1,610)
Proceeds from issuance of common stock 640 1,181 707
-------- -------- --------
Net cash provided by (used in) financing activities 397 920 (1,482)
-------- -------- --------

Net cash provided by (used in) continuing operations (8,599) 3,986 (2,287)

Net cash used in discontinued operations (74) (450) (9,304)
-------- -------- --------

Net increase (decrease) in cash and cash equivalents (8,673) 3,536 (11,591)

Cash and cash equivalents at beginning of year 10,308 6,772 18,363
-------- -------- --------
Cash and cash equivalents at end of year $ 1,635 $ 10,308 $ 6,772
======== ======== ========

Supplemental disclosures:
Cash paid during the year (related to continuing and discontinued operations)
for:
Interest $ 33 $ 28 $ 325
Income taxes 141 8 934
</TABLE>

Capital lease obligations of $212 were incurred in 1996, when the Company
entered into a lease for new equipment.

See accompanying notes to consolidated financial statements.

23
<PAGE> 25

EMULEX CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 1996, July 2, 1995 and July 3, 1994
(in thousands, except share data)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Emulex
Corporation, a Delaware corporation, and its wholly-owned subsidiaries
(collectively, the "Company" or "Emulex"). All significant intercompany
balances and transactions have been eliminated in consolidation.

Fiscal Year

The Company's fiscal year ends on the Sunday nearest June 30. Fiscal
year 1994 comprised 53 weeks. Fiscal years 1996 and 1995 each comprised
52 weeks.

Reverse Stock Split

On February 24, 1994, the Board of Directors of the Company declared a
one-for-two reverse split of the Company's common stock to stockholders
of record on February 25, 1994. Par value of the common stock increased
from $0.10 to $0.20 per share. Accordingly, all references to share and
per share data have been retroactively restated to reflect this
one-for-two reverse stock split.

Consolidation Charges

The Company incurred consolidation charges of $2,413 during 1994,
primarily as a result of restructuring activities initiated in the
second quarter of that year. These charges included a provision of
approximately $625 for closing the Company's Italian operations, $550
to write off fixed assets no longer used, $600 to consolidate
facilities and manufacturing operations and $630 for employee
termination costs. The estimated number of employees to be terminated
in association with the $630 termination cost provision was 60, of
which approximately 50 percent were in manufacturing with the remaining
50 percent spread out among engineering, sales, marketing and general
and administrative services. The actual number of employees terminated
through the end of 1994 under the original plan was 49, and the amount
of termination benefits paid and charged for the same period was
approximately $316. Although the majority of restructuring activities
were completed by the end of 1994, the Company continued to phase in
certain elements of the restructuring plan during 1995. Specifically,
of the $729 of charges incurred against the consolidation reserve in
1995, approximately $373 was for termination benefits and related
costs, $192 for excess capacity and $164 for other costs. The actual
number of employees terminated in 1995 under the original plan was 10.
The consolidation plan was substantially complete as of July 2, 1995,
and the accrual approximated the actual costs incurred.

Foreign Currency Translation

The Company has designated the U.S. dollar as its functional currency.
Accordingly, monetary assets and liabilities denominated in foreign
currencies are remeasured into the U.S. dollar at the exchange rates in
effect at the balance sheet date. Non-monetary assets and liabilities
denominated in foreign currencies are remeasured into the U.S. dollar
at the appropriate historical exchange rates. Income and expense
amounts denominated in foreign currencies are remeasured into the U.S.
dollar at the average exchange rates during the period, except for
expense items related to non-monetary accounts, which are remeasured at
the appropriate historical exchange rates. Net foreign exchange gains
and losses are included in other nonoperating income (expense) in the
period incurred (see note 7).

24
<PAGE> 26

EMULEX CORPORATION
Notes to Consolidated Financial Statements

Cash Equivalents

At June 30, 1996, $367 of money market fund investments are included in
cash and cash equivalents. All highly liquid debt instruments with
original maturities of three months or less are considered to be cash
equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
net realizable value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, and depreciation and
amortization are provided on the straight-line method over estimated
useful lives of two to thirty years.

Intangible Assets

Intangible assets are stated at the lower of cost or net realizable
value, less accumulated amortization. Amortization is provided on a
straight-line basis over the estimated useful lives of the assets and
totaled $0, $2,588 and $1,662 for the years ended June 30, 1996, July
2, 1995 and July 3, 1994, respectively. Intangible assets consist of
goodwill (discussed below), capitalized software development costs
(discussed below) and license fees.

Goodwill

Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized over the periods expected to be
benefited. In 1995, the Company adopted Statement of Financial
Accounting Standards No. ("Statement") 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of". Under the provisions of Statement 121, the recoverability
of goodwill is assessed by determining whether the amortization of
goodwill over its remaining life can be recovered through projected
undiscounted future cash flows. The amount of goodwill impairment, if
any, is measured based on projected discounted future cash flows. Prior
to the adoption of Statement 121, the Company had used a similar
approach for assessing the recoverability of goodwill based on net
income.

In October 1991, the Company recorded goodwill related to the
acquisition of InterConnections, Inc. in the amount of $3,599 assuming
a useful life of six years. During the quarter ended December 26, 1993,
the Company completed a forecast of its operations, including its
InterConnections, Inc. subsidiary. The forecast indicated that the
expected future financial results no longer supported full
recoverability of the unamortized goodwill and that a partial
impairment of the asset had resulted. The amount of the impairment was
determined to be $1,001, and was recognized as a charge to partially
write down the remaining unamortized goodwill balance in the quarter
ended December 26, 1993. Remaining unamortized goodwill related to the
acquisition of InterConnections at July 3, 1994 was $1,122.

In the fourth quarter of 1995, as the result of weak sales and changes
in the marketplace, the Company decided to discontinue the product line
that was the basis for the remaining goodwill at InterConnections, Inc.
With no future product revenues, a review of the expected future cash
flows from the product line, undiscounted and without interest charges,
indicated that the remaining unamortized goodwill was fully impaired. A
charge of $785 to operating expenses was recorded in the fourth quarter
of 1995 to write off the remaining unamortized goodwill from the
InterConnections, Inc. acquisition.

25
<PAGE> 27
EMULEX CORPORATION
Notes to Consolidated Financial Statements

Capitalized Software Development Costs

Capitalized software development costs consist of costs to purchase
software and to develop software internally. Capitalization of
internally developed software begins upon the establishment of
technological feasibility. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized
software development costs require judgment by management with respect
to certain external factors, including but not limited to, anticipated
future gross revenue, estimated economic life and changes in software
and hardware technologies. The amount of software development costs
capitalized in 1994 was $1,269. No software development costs were
capitalized in 1996 or 1995.

Further, Statement 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed," requires that at each
balance sheet date the unamortized costs of a computer software product
be compared to the net realizable value of that product. The amount by
which the unamortized costs exceed the net realizable value of a
product is to be written off. The Company's capitalized software
development costs were primarily associated with the InterConnections,
Inc. product line discussed above in Goodwill. As a result of the
Company's decision to discontinue this product line, there will be no
future product revenue stream to support the capitalized software
development costs. Accordingly, in the fourth quarter of 1995, the
Company recorded a charge of $685 to cost of sales to write off all
remaining capitalized software development costs.

Software Revenue Recognition

The Company recognizes revenue from licenses of networking software
upon delivery and acceptance of the product. Revenue from sales of
post-contract customer support ("PCS") agreements is recognized at the
time of sale, with a reserve maintained equivalent to the cost of
providing the related services, as the estimated cost of providing PCS
during the initial period of the PCS arrangement is insignificant.

Distributor Revenue Recognition

The Company has agreements with certain of its distributors and Master
VAR's to provide price protection and stock rotation privileges with
respect to inventories which the distributors may have on hand when the
Company's published list prices are reduced and/or when items are slow
moving. These agreements may be terminated upon written notice by
either party. Pursuant to the Company's contractual obligations under
these agreements, or in the event of termination, the Company may be
obligated to issue credits to provide price protection and/or to
repurchase a certain portion of a distributor's or Master VAR's
inventory. The Company recognizes revenue at the time of shipment and
records a reserve for price protection and inventory repurchase.

Net Income (Loss) per Share

Net income (loss) per common and common equivalent share was computed
based on the weighted average number of common and common equivalent
shares outstanding during the years presented. Primary and fully
diluted net income (loss) per share are approximately the same. The
Company has granted certain stock options (see note 6) which have been
treated as common share equivalents, except in those periods where such
inclusion would be antidilutive.

Fair Value of Financial Instruments

In December 1991, the Financial Accounting Standards Board issued
Statement 107, "Disclosures about Fair Value of Financial Instruments."
Statement 107 requires all entities to disclose the fair value of
financial instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to
estimate fair value. Statement 107 defines fair value of a financial
instrument as the amount

26
<PAGE> 28
EMULEX CORPORATION
Notes to Consolidated Financial Statements

at which the instrument could be exchanged in a current transaction
between willing parties. As of June 30, 1996, the fair value of all
financial instruments approximated carrying value.

Accounting for Stock Options

In October 1995, the Financial Accounting Standards Board issued
Statement 123, "Accounting for Stock-Based Compensation" which
encourages, but does not require, a fair value based method of
accounting for employee stock options. Statement 123 will be effective
for fiscal years beginning after December 15, 1995. While the Company
is still evaluating Statement 123, it currently expects to elect to
continue to measure compensation cost under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Management does not believe
that the adoption of this new standard will have a material effect on
the Company's consolidated financial statements.

Use of Estimates

Management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.

Income Taxes

The Company accounts for income taxes pursuant to Statement 109,
"Accounting for Income Taxes." Statement 109 uses the asset and
liability method of accounting for income taxes, which recognizes
deferred tax assets and liabilities for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.

Reclassifications

Certain reclassifications have been made to the 1995 and 1994
consolidated financial statements to conform to the 1996 presentation.

NOTE 2 DISCONTINUED OPERATIONS

In April 1992, the Company announced it was evaluating a plan to
establish QLogic Corporation ("QLogic"), formerly the micro devices
division, as a separate, publicly-traded company. The decision to spin
off QLogic, then a wholly-owned subsidiary of the Company, was based on
the Company's belief that QLogic had certain characteristics that were
significantly different from the remaining business operations of the
Company, and that QLogic would be better able to focus on those
characteristics as a separate company, including having independent
access to equity markets as a source of funding for future growth and
potential acquisitions.

At a special meeting of stockholders of the Company held on February
24, 1994, the stockholders voted on a single, unified proposal which in
part provided for the distribution (the "Distribution") to
stockholders, on a share-for-share basis, of all outstanding shares of
common stock of QLogic. On February 28, 1994, subsequent to
stockholders approving the aforementioned proposal, the Company
declared a special distribution to the Company's stockholders of all
the shares of QLogic effective on the record date, February 25, 1994.
In addition, on February 25, 1994, the Securities and Exchange
Commission declared the Registration Statement on Form 10 of QLogic
effective, and trading commenced under the symbol QLGC on the Nasdaq
National Market.

27
<PAGE> 29
EMULEX CORPORATION
Notes to Consolidated Financial Statements

The results of operations for the year ended July 3, 1994 have been
restated to present QLogic as a discontinued operation. As of July 2,
1995 there were no remaining assets or liabilities of the discontinued
QLogic operation. The loss from discontinued operations as a result of
the spin-off of QLogic for 1994 was $4,558, after tax. The Company
recorded a loss on disposal of discontinued operations of $2,994, after
tax. The loss on disposal consisted primarily of legal, accounting and
investment banking fees.

NOTE 3 BALANCE SHEET DETAIL

Components of inventories are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------

<S> <C> <C>
Raw materials .......................................... $ 8,074 $ 9,223
Work-in-process ........................................ 1,844 2,036
Finished goods ......................................... 4,753 3,002
-------- --------

$ 14,671 $ 14,261
======== ========

Components of property, plant and equipment are as follows:
<CAPTION>
1996 1995
-------- --------

<S> <C> <C>
Land ................................................... $ 531 $ 694
Buildings .............................................. 2,114 2,924
Production and test equipment .......................... 13,375 12,551
Furniture and fixtures ................................. 3,861 4,641
Leasehold improvements ................................. 401 379
Other equipment ........................................ 492 329
-------- --------

20,774 21,518

Less accumulated depreciation and amortization ......... (13,241) (13,067)
-------- --------

$ 7,533 $ 8,451
======== ========

Components of accrued liabilities are as follows:
<CAPTION>
1996 1995
-------- --------

<S> <C> <C>
Payroll and related costs .............................. $ 1,896 $ 2,104
Warranty and related reserves .......................... 883 663
Royalties .............................................. 824 352
Other .................................................. 2,243 2,237
-------- --------

$ 5,846 $ 5,356
======== ========
</TABLE>

28
<PAGE> 30
EMULEX CORPORATION
Notes to Consolidated Financial Statements

NOTE 4 INCOME TAXES

The components of income tax benefit from continuing operations include
the following:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
Federal:
<S> <C> <C> <C>
Current ............. $ (753) $(1,174) $ --
Deferred ............ (387) 105 445
State:
Current ............. -- -- --
Deferred ............ -- (105) (445)
Foreign and Puerto Rico:
Current ............. 3 18 (23)
Deferred ............ -- -- --
------- ------- -------

$(1,137) $(1,156) $ (23)
======= ======= =======
</TABLE>

Income (loss) from continuing operations before income taxes consisted
of the following:

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------

<S> <C> <C> <C>
* Domestic . $(10,010) $ 2,388 $ (7,319)
Foreign .. (415) 394 (381)
-------- -------- --------

Total $(10,425) $ 2,782 $ (7,700)
======== ======== ========
</TABLE>

* Domestic income includes the Company's Puerto Rico and Virgin Islands
operations.

The significant components of deferred income tax expense (benefit) attributable
to income from continuing operations for the year ended June 30, 1996 are as
follows:

<TABLE>
<S> <C>
Deferred tax expense (exclusive of the effects of
other components listed below) ................ $(2,941)

Increase in beginning-of-the-year balance of the
valuation allowance for deferred tax assets ... 2,554
-------
$ (387)
=======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented
below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Reserves not currently deductible ................................. $ 825 $ 668
Provisions for discontinued operations ............................ 116 683
Net operating loss carryforwards .................................. 13,357 10,078
Business credit carryforwards ..................................... 2,618 2,368
Alternative minimum tax credit carryforwards ...................... 1,865 1,865
-------- --------

Total gross deferred tax assets ................................ 18,781 15,662
Less valuation allowance ....................................... (16,644) (13,226)
-------- --------
Net deferred tax assets ........................................ 2,137 2,436
-------- --------
</TABLE>

Deferred tax liabilities:

29
<PAGE> 31
EMULEX CORPORATION
Notes to Consolidated Financial Statements

<TABLE>
<S> <C> <C>
Capitalization of inventory costs ..... 258 260
Various state taxes ................... 524 290
Accelerated depreciation .............. 117 141
Taxes provided on Emulex Caribe, Inc.
undistributed income ................ 1,286 1,849
Other ................................. 2,212 2,545
------ ------
Total gross deferred tax liabilities 4,397 5,085
------ ------

Net deferred tax liabilities ....... $2,260 $2,649
====== ======
</TABLE>

Based on the Company's historical pre-tax results of operations, management
believes it is more likely than not that the Company will realize the benefit of
the existing deferred tax assets, which are not offset by a valuation allowance,
as of June 30, 1996. Management believes the existing net deductible temporary
differences will reverse during periods in which the Company generates net
taxable income; however, there can be no assurance that the Company will
generate any earnings or any specific level of continuing earnings in future
years. Certain tax planning or other strategies could be implemented, if
necessary, to supplement earnings from operations to fully realize recorded tax
benefits.

Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of June 30, 1996 will be allocated as follows:

<TABLE>
<S> <C>
Income tax benefit that would be reported in the
consolidated statements of operations ........ $14,870

Additional paid-in capital ..................... 1,774
-------
$16,644
=======
</TABLE>

Income tax expense realized from discontinued operations was $200 for 1994.

The effective income tax benefit on pretax income (loss) from continuing
operations differs from expected federal income tax for the following reasons:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------

<S> <C> <C> <C>
Expected income tax at 34 percent ............ $(3,545) $ 946 $(2,618)
State income tax, net of federal tax benefit . (285) 135 (332)
Net increase in tax as a result of Emulex
Caribe, Inc. and foreign income taxed at
a rate different from U.S. statutory rate . 1,216 (972) (336)
Puerto Rican tollgate taxes provided for
current year income ....................... -- 168 --
Amortization and impairment of goodwill ...... -- 449 587
Change in beginning-of-the-year balance of the
valuation allowance for deferred tax assets
allocated to income tax expense ........... 2,554 (439) 2,285
Refund received from Internal Revenue Service -- (1,581) --
Recovery received from QLogic pursuant to tax
sharing agreement ......................... (750) -- --
Other, net ................................... (327) 138 391
------- ------- -------

$(1,137) $(1,156) $ (23)
======= ======= =======
</TABLE>

During the year ended June 30, 1996, the Company received a $750 federal income
tax benefit related to a recovery under a tax sharing agreement with QLogic
Corp. (a former subsidiary of the Company).

30
<PAGE> 32
EMULEX CORPORATION
Notes to Consolidated Financial Statements

During the year ended July 2, 1995, the Company received a federal
income tax refund of $1,581 pertaining to prior years.

At June 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $38,026 which are available to offset
future federal taxable income through 2011 and $10,065 for state
purposes available through 2001. The Company also has business credit
carryforwards for federal purposes of approximately $2,003 which are
available to reduce federal income taxes through 2010. In addition, the
Company has alternative minimum tax credit carryforwards of
approximately $1,865 which are available to reduce future federal
regular income taxes over an indefinite period. Additionally, the
Company has approximately $609 of research and experimentation credit
carryforwards for state purposes available through 2011.

The Company is currently undergoing an examination by the California
Franchise Tax Board for the Company's California income tax returns for
years 1991, 1990 and 1989. In the opinion of management, this
examination will not have a material adverse effect on the Company's
consolidated financial position or results of operations.

NOTE 5 LINE OF CREDIT

The Company had a $5,000 bank line of credit with Silicon Valley Bank
("SVB") that was to have expired in September 1996. In August 1996, the
Company expanded this line of credit to $7,000, and extended it one
year to expire in September 1997. The agreement allows the Company to
borrow at the bank's prime rate (8.25 percent at June 30, 1996) plus
one half percent for borrowings less than $2,000 and prime plus two
percent if borrowings exceed $2,000. There were no borrowings
outstanding under this line at June 30, 1996 and July 2, 1995. The bank
line of credit is secured by substantially all assets and requires the
Company to satisfy certain financial and other covenants and
conditions, including prescribed levels of tangible net worth,
profitability and liquidity, and prohibits, among other things, the
payment of cash dividends. At June 30, 1996, the Company was in
compliance with all such covenants.

NOTE 6 STOCK OPTIONS AND PURCHASE RIGHTS

Under the Company's Employee Stock Option Plan (the "Plan"), the
exercise price of options granted will not be less than the fair market
value at the date of grant. The total number of shares of common stock
available for grant under the Plan is 2,380,000. Unless otherwise
provided by the Board of Directors or a committee of the Board
administering the Plan, each option granted under the Plan becomes
exercisable at the rate of 25 percent one year after the date of grant
with an additional 6.25 percent becoming exercisable each three-month
interval thereafter.

Under the Company's Non-Employee Director Stock Option Plan (the
"Director Plan"), a maximum of 125,000 shares of common stock of the
Company can be issued. The Director Plan provides that an option to
purchase 12,500 shares of common stock of the Company will be granted
to each non-employee director of the Company upon the first date that
such director becomes eligible to participate. Options granted under
the Director Plan are non-qualified stock options. The exercise price
per option granted will not be less than the fair market value at the
date of grant. No option granted under the Director Plan shall be
exercisable after the expiration of the earlier of (i) ten years
following the date the option is granted or (ii) one year following the
date the optionee ceases to be a director of the Company. Unless
terminated sooner by the Board, the Director Plan will expire on
December 31, 1996. No shares were granted during 1996 or 1995. In 1994,
25,000 shares were granted at an average exercise price of $5.125.

In connection with the distribution in February 1994 of shares of
common stock of QLogic Corporation to the Company's stockholders (the
"Distribution") and a one-for-two reverse stock split, certain
adjustments were made to options outstanding under the Plan and the
Director Plan on the date of the distribution (the "Distribution
Date"). Each option which was outstanding under the Plan on the
Distribution Date (a "Converted Option"), other than options held by
the Company's President and Chief Executive Officer, was converted into
two separately exercisable options: one to purchase the

31
<PAGE> 33
EMULEX CORPORATION
Notes to Consolidated Financial Statements

same number of shares of Emulex common stock which the Converted Option
covered as of the Distribution Date, after adjustment for the reverse
stock split (a "New Emulex Option"); and one to purchase that same
number of shares of QLogic common stock (a "New QLogic Option"). The
purchase price per share of Emulex common stock subject to the New
Emulex Option was an amount which bears the same ratio to the exercise
price per share under the Converted Option (after adjustment for the
reverse stock split) that the fair market value of Emulex common stock
after the Distribution bears to the sum of the fair market value per
share of Emulex common stock after the Distribution plus the fair
market value per share of QLogic common stock after the Distribution.
The President and Chief Executive Officer of the Company held an option
to purchase 250,000 shares of Emulex common stock at a price of $6.50
per share under the Plan. On the Distribution Date, his option was
converted into two separately exercisable options: one to purchase the
same number of shares of Emulex common stock which the Converted Option
covered as of the Distribution Date, after adjustment for the reverse
stock split, and a second option to purchase 25,000 shares of QLogic
common stock after giving effect to the reverse stock split. The
purchase price per share of Emulex common stock and QLogic common stock
subject to the Emulex option and the QLogic option was the fair market
value per share of Emulex common stock and QLogic common stock,
respectively, after the Distribution.

In connection with the Distribution, each option which was outstanding
under the Director Plan on the Distribution Date was converted into a
New Emulex Option and a New QLogic Option in substantially the same
manner that Converted Options held by employees under the Plan were
converted, as described above. Service as a director of either Emulex
or QLogic after the distribution is treated the same as service as a
director of the other for purposes of determining termination and
vesting of exercisability of both new options.

Following is a summary of stock option transactions for 1996, 1995 and
1994:
<TABLE>
<CAPTION>
Number Price
of Shares per Share Amount
--------- --------- ------

<S> <C> <C> <C>
Options outstanding at June 27, 1993 702,095 $ 1.72 - 18.00 $ 9,059

Granted .......................... 328,074 3.78 - 13.00 2,958
Exercised ........................ (79,643) 3.69 - 12.25 (707)
Canceled ......................... (106,006) 3.61 - 18.00 (1,146)
Distribution of QLogic
common stock (see note 2) ...... -- 0.57 - 17.50 (6,384)
-------- -------------- -------

Options outstanding at July 3, 1994 844,520 0.57 - 6.88 3,780

Granted .......................... 233,500 6.50 - 23.75 3,198
Exercised ........................ (282,462) 0.57 - 6.88 (1,181)
Canceled ......................... (61,614) 3.78 - 13.00 (322)
-------- -------------- -------

Options outstanding at July 2, 1995 733,944 1.83 - 23.75 5,475

Granted .......................... 284,800 10.13 - 28.38 5,275
Exercised ........................ (132,480) 1.83 - 15.06 (640)
Canceled ......................... (85,066) 3.78 - 23.75 (889)
-------- -------------- -------

Options outstanding at June 30, 1996 801,198 $ 3.20 - 28.38 $ 9,221
======== ============== =======
</TABLE>

The exercisable options outstanding were 262,564 at June 30, 1996.

32
<PAGE> 34
EMULEX CORPORATION
Notes to Consolidated Financial Statements

The Company has a Shareholder Rights Plan that provides for Preferred
Stock Purchase Rights ("Rights") that attach to and transfer with each
share of common stock. When the Rights become exercisable, each Right
entitles the holder to purchase from the Company one unit consisting of
1/100 of a share of Series A Junior Participating Preferred Stock for $50
per unit, subject to adjustment. The Rights become exercisable if (i) a
person or group ("Acquiring Person") has acquired, or obtained the right
to acquire, 20 percent or more of the outstanding shares of common stock,
(ii) a person becomes the beneficial owner of 30 percent or more of the
outstanding shares of common stock, (iii) an Acquiring Person engages in
one or more "self-dealing" transactions with the Company or (iv) an event
occurs which results in an Acquiring Person's ownership interest being
increased by more than 1 percent. Upon exercise and payment of the
purchase price for the Rights, the Rights holder (other than an Acquiring
Person) will have the right to receive Company common stock (or, in
certain circumstances, cash, property or other securities of the Company)
equal to two times the purchase price. The Company is entitled to redeem
the Rights at any time prior to the expiration of the Rights in January
1999, or 10 days following the time that a person has acquired beneficial
ownership of 20 percent or more of the shares of common stock then
outstanding. The Company is entitled to redeem the Rights in whole, but
not in part, at a price of $0.01 per Right, subject to adjustment.

NOTE 7 NONOPERATING INCOME

Nonoperating income, net, from continuing operations is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------

<S> <C> <C> <C>
Interest income ........ $ 248 $ 1,055 $ 252
Interest expense ....... (43) (18) (110)
Foreign exchange ....... (34) 51 (79)
Gain on sale of building 312 -- --
Other .................. -- 32 60
------- ------- -------

$ 483 $ 1,120 $ 123
======= ======= =======
</TABLE>

NOTE 8 EMPLOYEE RETIREMENT SAVINGS PLAN

The Company has a pretax savings and profit sharing plan under Section
401(k) of the Internal Revenue Code for substantially all domestic
employees. Under the plan, eligible employees are able to contribute up
to 12 percent of their compensation not to exceed the maximum IRS
deferral amount. Company discretionary contributions match up to 3
percent of a participant's compensation. The Company's contributions
under this plan were $287, $272, and $291 in 1996, 1995 and 1994,
respectively.

The Company has a similar plan for all employees in the Company's
Puerto Rico facility under Section 165(e) of the Internal Revenue Code.
Under the plan, eligible employees are able to contribute up to 10
percent of their compensation not to exceed the maximum IRS deferral
amount. Company discretionary contributions match up to 3 percent of a
participant's compensation. The Company's contributions under this plan
were $88, $88 and $75 for 1996, 1995 and 1994, respectively.

NOTE 9 EXPORT REVENUES AND SIGNIFICANT CUSTOMERS

The Company designs, manufactures and markets three major distinct
product families: network access servers, printer servers and
high-speed Fibre Channel products. The Company markets these products
through distributors, resellers and to large OEMs, such as IBM
Corporation and Xerox. The Company's export revenues were approximately
$20,700, $35,200 and $25,846 representing 40, 47 and 42 percent of
consolidated net revenues for 1996, 1995 and 1994, respectively. The
majority of export shipments are to the European marketplace.

33
<PAGE> 35
EMULEX CORPORATION
Notes to Consolidated Financial Statements

In 1996, IBM Corporation represented 15 percent of revenues. In 1995,
Reuters and Xerox represented 16 and 13 percent of revenues,
respectively. No customer represented more than 10 percent of revenues
in 1994. The Company derived approximately 39, 53 and 49 percent of its
revenues from sales to OEMs in 1996, 1995 and 1994, respectively.
Emulex's operating results could be adversely affected if sales to one
or more such customers significantly decline, or if any one of these
customers develop alternative sources for the Company's products.

NOTE 10 COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain facilities and equipment under long-term
noncancelable operating lease agreements which expire at various dates
through 2000. Rent expense for the Company under operating leases,
including month-to-month rentals, totaled $1,178, $1,189 and $1,152 in
1996, 1995 and 1994, respectively.

Future minimum noncancelable lease commitments are as follows:

<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
----------- ---------
<S> <C> <C>
Fiscal year:
1997 ...................................... $ 283 $1,149
1998 ...................................... 140 723
1999 ...................................... 84 558
2000 ...................................... 7 140
------ ------

Total minimum lease payments .............. 514 $2,570
======
Less amounts representing interest ........ 49
------
Present value of future minimum capitalized
lease obligations ...................... 465
Less current installments under capitalized
lease obligations ...................... 261
------

Capitalized lease obligations, excluding
current installments ................... $ 204
======
</TABLE>

In January 1994, in anticipation of the Distribution, the Company
agreed to assign its lease on a 70,000 square foot facility to QLogic.
In consideration to the lessor, the Company has agreed to guaranty
satisfaction of all obligations and responsibilities of QLogic to the
lessor under the terms and conditions of the lease should QLogic
default on said terms and conditions during the term of the lease,
which terminates on October 31, 1999. In the event of a default by
QLogic, the Company reserves the right to seek reimbursement from
QLogic for any and all expenses the Company incurs due to the default.

Litigation

The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.

34
<PAGE> 36
EMULEX CORPORATION
Notes to Consolidated Financial Statements

NOTE 11 QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for continuing operations for
1996 and 1995 are as follows:

<TABLE>
<CAPTION>
Net Net Net
Revenues Gross Profit Income (loss) Income (loss)*
-------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
1996:
Fourth quarter.... $15,516 $ 5,225 $ (554) $ (0.09)
Third quarter..... 12,702 4,257 (2,337) (0.39)
Second quarter.... 12,672 4,024 (2,916) (0.49)
First quarter..... 10,448 3,294 (3,481) (0.59)
------- ------- -------

Total ............ $51,338 $16,800 $(9,288)
======= ======= =======

1995:
Fourth quarter.... $19,583 $ 7,687 $ 1,099 $ 0.17
Third quarter..... 19,104 8,087 874 0.14
Second quarter.... 18,277 7,759 1,296 0.21
First quarter..... 18,511 7,530 669 0.11
------- ------- -------

Total ............ $75,475 $31,063 $ 3,938
======= ======= =======
</TABLE>

* Per common and common equivalent share

.
35
<PAGE> 37
CONSOLIDATED FINANCIAL STATEMENT

SCHEDULE OF EMULEX CORPORATION AND SUBSIDIARIES

<PAGE> 38
SCHEDULE II

EMULEX CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

YEARS ENDED JUNE 30, 1996, JULY 2, 1995, AND JULY 3, 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT BALANCE CHARGED TO AMOUNTS
BEGINNING OF AT END OF COST AND WRITTEN
CLASSIFICATION PERIOD PERIOD EXPENSES OFF OTHER(1)
- -------------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996:
Allowance for doubtful accounts.... $ 492 $ 125 $ 135 $ -- $ 482
Inventory valuation reserves....... $1,740 $ 840 $ 871 $ -- $1,709

Year ended July 2, 1995:
Allowance for doubtful accounts.... $ 538 $ 64 $ 110 $ -- $ 492
Inventory valuation reserves....... $2,147 $ 276 $ 683 $ -- $1,740

Year ended July 3, 1994:
Allowance for doubtful accounts.... $ 462 $ 317 $ 216 $ (25) $ 538
Inventory valuation reserves....... $2,714 $3,849 $3,070 $(1,346) $2,147

</TABLE>

- ---------------
(1) Represents distribution to QLogic Corporation.

37
<PAGE> 39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

EMULEX CORPORATION

Date: August 23, 1996 By: /s/ Paul F. Folino
------------------
Paul F. Folino,
President, Chief Executive Officer
and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on August 21, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Principal Executive Officer:

/s/ Paul F. Folino President, Chief Executive Officer
-----------------------------------------------
(Paul F. Folino) and Director

Principal Financial and Accounting Officer:

/s/ Walter J. McBride Sr. Vice President, Chief Financial
-----------------------------------------------
(Walter J. McBride) Officer, Secretary and Treasurer

/s/ Fred B. Cox Director and Chairman of the Board
-----------------------------------------------
(Fred B. Cox)

/s/ Robert H. Goon Director
-----------------------------------------------
(Robert H. Goon)

/s/ Gary E. Liebl Director
-----------------------------------------------
(Gary E. Liebl)

/s/ Don M. Lyle Director
-----------------------------------------------
(Don M. Lyle)

/s/ Michael P. Downey Director
-----------------------------------------------
(Michael P. Downey)
</TABLE>

38
<PAGE> 40

<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED COPY
- ----------- ------------------------------------------------------------------------ -------------
<S> <C> <C>
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1
to Registration Statement on Form S-4 [File No. 33-9995] filed November
6, 1986, as amended by post-effective amendment filed on June 15,
1989).

3.2 By-laws (incorporated by reference to Exhibit 4.2 to Registration
Statement on Form S-8 [File No. 33-40959] filed June 3, 1991).

3.3 Certificate of Designations of Series A Junior Participating Preferred
Stock (incorporated by reference to Exhibit 4 to the Registrant's
Current Report on Form 8-K filed February 2, 1989).

4.1 Rights Agreement dated as January 19, 1989 between Emulex Corporation
and First Interstate Bank, Ltd. (incorporated by reference to Exhibit 4
to the Registrant's Current Report on Form 8-K filed February 2, 1989).

10.1 Emulex Corporation Non-Employee Director Stock Option Plan
(incorporated by reference to Annex E and F to the Registrant's Proxy
Statement dated January 24, 1994 for the Special Meeting of
Stockholders Held on February 24, 1994).

10.2 Standard Industrial Lease--Net dated April 6, 1982 between C.J.
Segerstrom & Sons and the Registrant and amendments thereto
(incorporated by reference to Exhibit 10.15 to Registration Statement
on Form S-1 [File No. 2-79466] filed on September 23, 1982, Exhibit
10.8 to the Registrant's 1983 Annual Report on Form 10-K, and Exhibit
10.6 to the Registrant's 1986 Annual Report on Form 10-K).

10.3 Amendment #9 to Standard Industrial Lease--Net dated April 6, 1982
between C.J. Segerstrom & Sons and the Registrant (incorporated by
reference to Exhibit 10.9 to the Registrant's 1990 Annual Report on
Form 10-K).
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED COPY
- ----------- ------------------------------------------------------------------------ -------------
<S> <C> <C>
10.4 Second Amendment of Amendment #9 to Standard Industrial Lease--Net
dated March 29, 1990 between C.J. Segerstrom & Sons and the Registrant
(incorporated by reference to Exhibit 10.10 to the Registrant's 1990
Annual Report on Form 10-K).

10.5 1993 Amendment to Standard Industrial Lease - Net dated April 29, 1993
between C.J. Segerstrom & Sons and the Registrant (incorporated by
reference to Exhibit 10.9 to the Registrant's 1993 Annual Report of
Form 10-K).

10.6 Distribution Agreement dated as of January 24, 1994 among Emulex
Corporation, a Delaware corporation, Emulex Corporation, a California
corporation, and QLogic Corporation (incorporated by reference to
Exhibit 10.10 to the Registrant's 1994 Annual Report of Form 10-K).

10.7 Form of Tax Sharing Agreement among Emulex Corporation, a Delaware
corporation, Emulex Corporation, a California corporation, and QLogic
Corporation (incorporated by reference to Exhibit 10.11 to the
Registrant's 1994 Annual Report of Form 10-K).

10.8 Administrative Services Agreement, dated as of February 21, 1993, among
Emulex Corporation, a California corporation, Emulex Corporation, a
Delaware corporation, and QLogic Corporation (incorporated by reference
to Exhibit 10.12 to the Registrant's 1994 Annual Report of Form 10-K).

10.9 Employee Benefits Allocation Agreement, dated as of January 24, 1994,
among Emulex Corporation, a Delaware corporation, Emulex Corporation, a
California corporation, and QLogic Corporation (incorporated by
reference to Exhibit 10.13 to the Registrant's 1994 Annual Report of
Form 10-K).
</TABLE>

40
<PAGE> 42
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED COPY
- ----------- ------------------------------------------------------------------------ -------------
<S> <C> <C>
10.10 Form of Assignment, Assumption and Consent Re: Lease among Emulex
Corporation, a California corporation, QLogic Corporation and C.J.
Segerstrom & Sons, a general partnership (incorporated by reference to
Exhibit 10.14 to the Registrant's 1994 Annual Report of Form 10-K).

10.11 Intellectual Property Assignment and Licensing Agreement, dated as of
January 24, 1994, between Emulex Corporation, a California corporation,
and QLogic Corporation (incorporated by reference to Exhibit 10.15 to
the Registrant's 1994 Annual Report of Form 10-K).

10.12 Form of Supplement to Tax Sharing Agreement among Emulex Corporation, a
Delaware corporation, Emulex Corporation, a California corporation, and
QLogic Corporation. (incorporated by reference to Exhibit 10.12 to the
Registrant's 1995 Annual Report of Form 10-K).

10.13 Emulex Corporation Employee Stock Option Plan as amended November 17,
1994 (incorporated by reference to Exhibit 10.13 to the Registrant's
1995 Annual Report of Form 10-K).

10.14 Amendment to Loan Agreement dated April 18, 1996 between Silicon Valley
Bank and Emulex Corporation, InterConnections, Inc., Emulex Europe
Limited. (incorporated by reference to Exhibit 10.1 to the Registrant's
Form 10-Q for the quarter ended March 31, 1996).

10.15 Amendment to Security Agreement dated April 18, 1996 between Silicon
Valley Bank and Emulex Corporation, Emulex Caribe, Inc., Computer Array
Development, Inc., Highspeed Communications, Inc., Digital House, Ltd.,
Emulex Foreign Sales Corporation. (incorporated by reference to Exhibit
10.2 to the Registrant's Form 10-Q for the quarter ended March 31,
1996).
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED COPY
- ----------- ------------------------------------------------------------------------ -------------
<S> <C> <C>
10.16 Schedule to Loan and Security Agreement dated April 18, 1996 between
Silicon Valley Bank and Emulex Corporation, InterConnections, Inc.,
Emulex Europe Limited. (incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q for the quarter ended March 31, 1996).

21 List of the Registrant's subsidiaries.

23 Independent Auditors' Consent.

27.1 Financial Data Schedule
</TABLE>

<PAGE> 1

SUBSIDIARIES OF THE REGISTRANT

Following is a list of the subsidiaries of the Registrant:

Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ -------------

Digital House, Ltd. California

Emulex Caribe, Inc. Delaware

Emulex Corporation California

Emulex Europe Limited United Kingdom

Emulex Foreign Sales Corporation U.S. Virgin Islands

Emulex Italia S.r.l. Italy

InterConnections, Inc. Washington

EXHIBIT 21

<PAGE> 1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Emulex Corporation:

We consent to incorporation by reference in the registration statements (Nos.
2-89162, 33-40959 and 33-44484) on Form S-8 of Emulex Corporation of our report
dated August 9, 1996, relating to the consolidated balance sheets of Emulex
Corporation and subsidiaries as of June 30, 1996 and July 2, 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1996, and
the related schedule, which report appears in the June 30, 1996 annual report on
Form 10-K of Emulex Corporation.

KPMG Peat Marwick LLP

Orange County, California
August 23, 1996

EXHIBIT 23

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EMULEX
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET, STATEMENT OF OPERATIONS
AND STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 1996 AND QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,635
<SECURITIES> 0
<RECEIVABLES> 13,475
<ALLOWANCES> 482
<INVENTORY> 14,671
<CURRENT-ASSETS> 31,579
<PP&E> 20,774
<DEPRECIATION> 13,241
<TOTAL-ASSETS> 39,300
<CURRENT-LIABILITIES> 15,494
<BONDS> 204
0
0
<COMMON> 1,199
<OTHER-SE> 20,831
<TOTAL-LIABILITY-AND-EQUITY> 39,300
<SALES> 51,338
<TOTAL-REVENUES> 51,338
<CGS> 34,538
<TOTAL-COSTS> 34,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> (10,425)
<INCOME-TAX> (1,137)
<INCOME-CONTINUING> (9,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,288)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.56)

</TABLE>