DOW JONES NEWSWIRES
Broadcom Corp. (BRCM) said a federal court granted a permanent injunction to halt U.S. sales of some of Emulex Corp.'s (ELX) products that earlier were found to infringe on two of Broadcom's patents.
Emulex, a networking and storage company, said it is continuing to implement design changes for products affected by the decision and will set aside an additional $600,000 for impacts related to the case for its fiscal third quarter. The latest charges are in addition to those recorded for its fiscal first quarter.
Broadcom--a provider of chips for set-top boxes, networking and smartphones--said Emulex products affected by the decision include the BladeEngine2 and BladeEngine3 Ethernet controllers and Lancer chips used in some adapter products. The ban also covers some fibre channel switch products. Emulex said U.S. revenue related to the products represented about 5% of its fiscal second-quarter earnings.
The injunction also includes a so-called sunset period in which Emulex can continue some sales of products that had firm orders before the period begins. During the 18-month sunset period, Broadcom will receive a royalty of 9% on sales of any products covered in the injunction.
Broadcom in January reported better-than-expected fourth-quarter revenue and provided strong sales guidance for the current period, likely benefiting from its exposure to Apple Inc. (AAPL) and helping to alleviate some fears about mobile-market weakness.
Emulex in January reported that it swung to a fiscal second-quarter profit following a year-earlier write-down, while sales of its data-storage products surged.
Broadcom shares were up 1.6% at $38.43 in premarket trading. Through Friday's close, the stock is up by 29% this year.
Emulex shares closed Friday at $10.28 and were inactive premarket. The stock is up about 50% this year.
--By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com