– Emulex capped its long-term partnership with ServerEngines yesterday with the announcement that it will acquire the company for $78 million in cash and eight million shares of Emulex stock. Based on Emulex’s closing price of $10.11 last week, those eight million shares would translate into an additional $81 million, bringing the total to almost $160 million.

In addition, Emulex (NYSE: ELX) will issue four million shares of stock if ServerEngines meets certain business objectives by the end of 2011. Emulex also agreed to assume ServerEngines’ debt, which is currently $25 million. As such, the deal could eventually exceed $200 million.

Emulex entered into its partnership with ServerEngines in early 2008 to bolster its Ethernet portfolio. Emulex uses ServerEngines’ ASICs in its single-chip OneConnect Universal Converged Network Adapter (UCNA) cards, which support TCP/IP, iSCSI and Fibre Channel over Ethernet (FCoE).

Emulex has design wins for the UCNAs with vendors such as Dell, EMC, Hitachi Data Systems, HP, IBM and NetApp.

ServerEngines, a fabless semiconductor maker, has two primary product lines:

–The BladeEngine line of 10Gbps Ethernet ASICs, which are designed primarily for LAN on Motherboard (LOM) applications.

–The Pilot family of Server Management Controllers, which enable remote IP-based management. Pilot ASICs are used by server OEMs and ODMs such as Cisco, HP, NEC and Unisys.

In a prepared statement, Emulex president and CEO Jim McCluney stated: “We believe that the addition of LOMs and Pilot Server Management Controllers . . . will broaden our strategic position as a key infrastructure provider to server OEMs by providing a single and simplified interface for customers to engage on future development, support and communications as converged networks move out of the labs and into production environments over the next year. We also expect the acquisition will provide a more cost effective model in the 10Gbps Ethernet LOM and UCNA markets . . .”

ServerEngines was founded in 2004 by former Broadcom engineers that were previously with ServerWorks, which was acquired by Broadcom in 2001. About a year ago, Broadcom launched an unsuccessful hostile takeover of Emulex.

Emulex’s acquisition of ServerEngines is expected to be completed in July.

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