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Brocade raises expectations for Q4

Climbing Mount Profitability

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Execs at storage switch maker Brocade took a break from dealing with the company's high-profile stock option woes by reporting some decent Q3 results.

Revenues reached a record $188.9m, up 55 per cent on the same period a year ago. Brocade had previously told Wall Street it expected to beat its previous revenue expectation of between $174m and $183m.

GAAP profit was $24.5m, or $0.09 per share. The firm made a loss of $7.2m in Q3 2005.

CEO Michael Klayko said: "Our results this quarter were outstanding and represent the third consecutive quarter of record revenues and the fourth consecutive quarter of increased profitability."

High end enterprise director switches were in particularly strong demand, enjoying a 72 per cent sales spike.

The business highlight for the quarter was the $713m acquisition of McData, though that won't appear in the accounts until the deal is sealed Q1 2007.

Klayko said: "McDATA's strong presence in the mainframe connectivity, professional services and long distance solutions will substantially augment and diversify our current business."

He defended the company against claims it had paid over the odds for its rival in a desperate bid to fend off Cisco's challenge, saying: "We believe that this acquisition will provide a wide range of compelling benefits for our customers, partners and shareholders, and that the value of bringing the two companies together is significantly greater than the roughly one times annual revenue that we paid for McDATA."

The company's finance chief told investors the outlook will continue to grow brighter. Richard Deranleau said revenues for Q4 should be between $200m and $205m, beating analyst estimates, which have been around $191m.

In post-Wall Street trading yesterday evening, Brocade's stock rose five and a half per cent to $5.71. ®

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