Feeds

Brocade tightlipped about management cull

Unravelled

  • alert
  • submit to reddit

The essential guide to IT transformation

ComputerWire: IT Industry Intelligence

While analysts disagree on the cause of Brocade's shock warning of a coming sharp fall in revenue, the SAN switch making giant has indicated strongly that casualty list from the 12% layoffs it announced last week includes more than three vice presidents, as well as its COO and president.

During its earning call on Thursday, the SAN switch maker said the layoffs were necessary only because the growth that the company anticipated early this year had not happened, and it said that president and COO Mike Byrd was leaving the company "to spend more time with his family." Byrd will leave Brocade at the end of January, and continue to advise the company for another three months after that.

Alongside Byrd, the company is losing its CTO and VP of engineering Morris Taradalsky, its marketing vice president Jeff Brooks, and its general manager and vice president of global services Rich Geruson. The senior executive bloodletting does not stop there, apparently. A spokeswoman for the company declined to answer when asked whether any other Brocade vice presidents have been axed - a sure sign that they have.

On Thursday Brocade announced in an earnings call that revenue during its current fiscal quarter will fall by up to 22% sequentially, a strong contrast with revenue guidance across the rest of the storage networking industry which is generally indicating flat or single digit sequential revenue growth. As a result, Brocade's share price fell 26% during trading on Monday.

Brocade said that its revenue will return to growth in its second fiscal quarter. Analysts disagreed on the reasons for the temporary slump. Sabrina Ricci, analyst at Deutsche Bank, said it was clearly the result of channel stuffing - Brocade selling the channel more hardware than the channel is itself able to sell on to end-customers. How else could Brocade predict that its revenue growth would return after a quarter, she asked. "Demand is a not a one quarter phenomenon," she said.

For the Evaluator Group, Randy Kerns said he certainly does not believe that Brocade has been stuffing its channel. According to Kerns, Brocade is likely to have been forced to lower the price of its hardware because of the launch of new mid-range hardware by its rival McData Corp. When it launched its 8-port to 24-port Sphereon 4500 SAN switch in October, McData claimed it carried a per-port list price which was 50% lower than that of equivalent Brocade hardware.

The channel-stuffing theory was also rejected by Tom Lahive at the Enterprise Storage Group, based on what he said was ESG's contacts with OEMs, customers, and resellers. Brocade is being overly-conservative - or pessimistic - about its sequential revenue downturn. "I'd be surprised if turns out to be in double digits," he said. Lahive was however unable to explain why Brocade should suffer a downturn when the rest of its sector is enjoying growth, despite saying that Brocade's bias towards mid-range products should enable it to endure market downturns better than suppliers such as McData, which is more focused on high-end sales. The ESG also believes that other than the loss of Brocade's COO, the cull of executives at the company was to make room for "the new team in Rhapsody, which has a strong industry reputation." Lahive added that possibly Brocade is anticipating that the hand over of reins will lead to a little "internal confusion" during its current quarter, and this is the reason for its predicted downturn.

© ComputerWire

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Facebook, Google and Instagram 'worse than drugs' says Miley Cyrus
Italian boffins agree with popette's theory that haters are the real wrecking balls
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.