Brocade cuts sales target but beats Street in quarter
(UPDATE: adds analyst comment, details, updates stock price)
By Peter Henderson
SAN FRANCISCO, Feb 21 (Reuters) - Brocade Communications Systems Inc. (NasdaqNM:BRCD - news) beat Wall Street
forecasts in first-quarter results released on Wednesday but cut its annual sales forecast, saying computer storage customers were wary of the shaky economy.
Chief Executive Greg Reyes told Reuters that revenues for the fiscal year would be around $750 million, a drop from the $830 million that the company had forecast
three months ago.
``We are very concerned about the short-term effects of the U.S. economy and how that may be impacting our customers,'' he said in an interview after results were
announced. Sales the previous year had been $329.0 million.
Brocade, which makes switches and software to connect computer data networks, a fast-growing market despite the economic slowdown, said first-quarter
earnings were $32.5 million, or 13 cents per diluted share, compared with $7.3 million, or 3 cents per share a year ago.
Revenues for the quarter ended January 27 rose to $165.0 million from $42.7 million a year earlier.
Analysts polled by First Call/Thomson Financial research had on average forecast Brocade would earn 12 cents per share on revenues of $162.44 million.
Stakes are high for the storage sector since its products are seen as must-spend for companies struggling with growing piles of data.
``Irrespective of how the IT (information technology) segment is impacted overall, storage will fare better than other areas,'' Reyes told analysts in a conference call.
The stock dropped in after-hours trade, after a brief rise on the results and before the forecast was lowered, to $36-3/16 on Instinet from $44-11/16 at the Nasdaq
close.
``Even strong companies like Brocade are not immune to an economic downturn,'' commented Shaw Wu, a storage analyst at Banc of American Securities. ``My
biggest concern is visibility near-term, for the next three to nine months.''
Chief Financial Officer Mike Byrd said that revenues in the current, second fiscal quarter would be flat or rise very modestly on the first quarter, followed by
sequential gains of 19 percent in each of the third and fourth quarters.
That 19 percent growth would be the equivalent of 100 percent annually and would be sustainable," he told analysts the conference call.
Earnings per share for the year would be about 60 cents.
Byrd said that the new outlook was conservative and did not include expectations of revenues from Sun Microsystems.
Sun and Brocade announced product interoperability earlier this month, and Reyes said that could be important: ``It should be material in the second half of the
year.''
Brocade shares have taken a beating amid the recent downturn for technology stocks, falling by 42 percent since the start of the year.
But Brocade has outperformed storage industry heavyweight EMC Corp. (NYSE:EMC - news) by about 40 percent and the American Stock Exchange Computer
Hardware Index (^HWI - news) by nearly 70 percent since the end of 1999.
Brocade dominates the market for fiber channel switches for Storage Area Networks, which aim to improve corporate data management and cut the load on
traditional network servers by separating data storage from the main network. |
