Feeds

Brocade results disappoint Wall Street

Prospect of 2010 recovery keeps faces smiley

Eight steps to building an HP BladeSystem

Despite quarterly sales growing 35 per cent in a year, Brocade disappointed Wall Street expectations and posted a loss due to legal and other exceptional items.

Revenues in its third fiscal 2009 quarter were $493.3m, a 3 per cent ($13m) decline on the previous quarter. The net loss of $21m was about a third of the previous quarter's $63.1m net loss and compares to a profit of $20.3m in the third quarter of Brocade's fiscal 2008. In that year-ago quarter Brocade's storage products represented 82 per cent of its revenues; they are 58 per cent now, with Foundry's networking gear the cause of the difference.

The storage revenues were down 2.6 per cent sequentially, 4.6 per cent year-on-year. IP (Foundry) product revenues contributed 24 per cent of total revenues, down from 25 percent the previous quarter. The actual IP product revenue number seems to have declined 6.5 per cent sequentially, from $126.6m down to $118.4m.

The losses came from half a million dollars worth of legal bills relating to stock option back-dating, and much of the rest came from items related to the Foundry acquisition. The lower-than-hoped-for sales revenues meant that there wasn't enough income to cover these costs and make a profit.

Days sales outstanding, a measure of the time it takes for Brocade to get revenue from customers, has risen from 43 days in last year's third quarter to 56 days now, up from the prior quarter's 49 days. Customers held on to their money longer, and this did not help the profit figure.

Chief financial officer Richard Deranleau said in the earnings transcript: "The net impact of this increase in accounts receivable was approximately $52 million, and led to a lower than typical cash from operations of $16.6 million in what is normally a seasonally weaker cash flow quarter."

So there's $52m lost from income through this and $13m through the sequential revenue decline. If both of these things had been effectively countered then Brocade would have had another $65m income and the net loss could well have been a profit of $40m or so.

Deranleau said cost synergies from the Foundry acquisition were proceeding ahead of plan. He said the company was positioned well for growth in a market consolidating storage and LAN networking onto Ethernet, which is the message Brocade is pushing out with its products.

The company is seeing a bottom to the recession, with Deranleau saying: "Our planning assumption is that the current IT spending environment will remain the same through the balance of calendar 2009, due to the uncertain macroeconomic environment. We expect IT spending in general and the storage and IP market specifically to improve during 2010 and to return to normal historical growth rates by the second half of 2010." That is a welcome thought.

More specifically he said: "We believe we will maintain market share in our core SAN market. We believe directors and embedded switches will grow faster than fixed port switches in the overall SAN market, and we expect to be a leading supplier of HBAs and CNAs." However, if Brocade is going to achieve this then either Qlogic or Emulex or both must lose market share.

Turning to Ethernet he expects IBM to ship more of Brocade's Foundry products. His outlook for the full financial 2009 year is "revenues... in the range from $1.9bn - $2.0bn."

Overall, Brocade is positioned nicely for the future but appeared not to execute its business this quarter as well as Wall Street hoped it would. ®

Mobile application security vulnerability report

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
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.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.