Operating Segments and Revenue by Product Families, Geographic Area and Significant Customers

12 Months Ended

Jun. 29, 2014

Segment Reporting [Abstract]

Operating Segments and Revenue by Product Families, Geographic Area and Significant Customers

Operating Segments and Revenue by Product Families, Geographic Area and Significant Customers

Reporting Segment Information and Revenues by Product Families

Emulex has two reportable business segments, Connectivity and Visibility. The Connectivity segment includes the operating results of NCP and SCOP. The Visibility segment includes the operating results of NVP.

Customers in the NCP market use the Company’s industry standard Fibre Channel and Ethernet solutions to provide server I/O and target storage array connectivity to create networks for mission critical enterprise and cloud data centers. These products enable servers to reliably and efficiently connect to LANs, SANs, and NAS by offloading data communication processing tasks from the server as information is delivered and sent to the network. The Ethernet based NCP products include LOM application specific integrated circuits, OneConnect^® UCNAs, and custom form factor solutions for OEM blade servers that enable high performance, scalable networks and convergence. The Fibre Channel based NCP products include FC ASICs, LightPulse^® HBAs, and custom form factor solutions for OEM blade servers.

SCOP include InSpeed^®, SOC or backend connectivity, bridge, router products, iBMC, certain legacy products and other products and services. SCP are deployed inside storage arrays, tape libraries, and other storage appliances, and connect storage controllers to storage capacity, delivering improved performance, reliability, and connectivity.

NVP consists entirely of the recently acquired Endace^® family of network visibility and intelligent network recording products.

The Company’s net revenues by segment and product lines are:

	2014		2013		2012
	(In thousands)
Net revenues:
Connectivity Segment:
Network Connectivity Products	$	318,940	$	360,974	$	362,315
Storage Connectivity & Other Products	94,515		104,409		139,454
Total Connectivity Segment	413,455		465,383		501,769
Visibility Segment:
Network Visibility Products	33,878		13,184		—
Total net revenues	$	447,333	$	478,567	$	501,769

Other segment information is as follows:

	2014			2013			2012
	(In thousands)
Adjusted operating income (loss):
Connectivity Segment:	$	64,353		$	71,711		$	84,871
Visibility Segment:	(9,387		)	(2,217		)	—
Subtotal	$	54,966		$	69,494		$	84,871
Reconciling items:
Stock-based compensation	(15,257		)	(21,802		)	(22,169		)
Amortization of intangibles	(31,291		)	(27,735		)	(30,600		)
Patent litigation settlement, damages, and royalties	(7,426		)	(4,963		)	(37,310		)
Mitigation expenses related to the Broadcom patents	(9,458		)	(8,606		)	(3,584		)
Site closure and other restructuring costs	(9,152		)	(2,704		)	—
Other	(2,541		)	(4,393		)	(1,142		)
Reconciling items	(75,125		)	(70,203		)	(94,805		)
Operating loss	(20,159		)	(709		)	(9,934		)
Depreciation:
Connectivity Segment:	$	16,316		$	17,303		$	18,064
Visibility Segment:	2,720			897			—
	$	19,036		$	18,200		$	18,064
Amortization
Connectivity Segment:	$	25,832		$	26,137		$	30,600
Visibility Segment:	5,459			1,598			—
	$	31,291		$	27,735		$	30,600
Capital Expenditures
Connectivity Segment:	$	13,262		$	15,037		$	14,936
Visibility Segment:	2,723			685			—
	$	15,985		$	15,722		$	14,936

	2014		2013
	(In thousands)
Total Assets
Connectivity Segment:	$	568,709	$	549,443
Visibility Segment:	149,214		161,266
	$	717,923	$	710,709

Geographic Operations

The Company’s consolidated net revenues by geographic area based on bill-to location are:

	2014				2013				2012
	(In thousands)
Asia Pacific	$	264,771	59	%	$	284,064	60	%	$	286,572	57	%
United States	114,427		26	%	121,719		25	%	137,504		28	%
Europe, Middle East, and Africa	65,286		14	%	66,457		14	%	76,394		15	%
Rest of the world	2,849		1	%	6,327		1	%	1,299		—	%
Total net revenues	$	447,333	100	%	$	478,567	100	%	$	501,769	100	%

Individual international countries with more than 10% of consolidated net revenue based on bill-to location are:

	Net Revenues
	2014		2013		2012
Singapore	34	%	39	%	39	%
Taiwan	13	%	12	%	10

No other individual country in Asia Pacific, Europe, Middle East, Africa or the rest of the world accounted for more than 10% of net revenues during these periods.

The Company’s consolidated long-lived assets and net assets by geographic area are:

	Long-Lived Assets
	2014		2013
United States	$	49,138	$	53,014
International	10,770		9,401
	$	59,908	$	62,415

	Net Assets
	2014		2013
United States	$	218,021	$	330,422
International	236,625		257,203
	$	454,646	$	587,625

Significant Customers

The following table represents direct sales to customers accounting for greater than 10% of the Company’s consolidated net revenues or customer accounts receivable accounting for greater than 10% of the Company’s accounts receivable. Revenues and related accounts receivable from these customers are derived under Networking Segment contracts.

	Net Revenues						Accounts Receivable
	2014		2013		2012		2014		2013
Hewlett-Packard	16	%	19	%	22	%	12	%	17	%
Hon Hai Precision Industry Co., Ltd. (Foxconn Technology Group)(1)	13	%	12	%	—		11	%	13	%
IBM	29	%	32	%	32	%	32	%	36	%

(1) Hon Hai Precision Industry Co., Ltd. is a contract manufacturer that performed manufacturing for some of our OEM customers.

In addition to direct sales, some of the Company’s larger OEM customers purchase products indirectly through distributors, resellers, or other third parties. Customers with total direct and indirect revenues, including customer specific models purchased indirectly through distributors, resellers, and other third parties, of more than 10% in the current fiscal year were as follows:

	Net Revenues
	2014		2013		2012
EMC	10	%	11	%	—
Hewlett-Packard	22	%	23	%	24	%
IBM	33	%	35	%	37	%