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January 24, 2001
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McData CEO: Doubling '01 Rev Growth View To 80% From 40%
Dow Jones Newswires
McData Corp.'s (MCDT) chief financial officer expects the company's first-quarter net income to be 11% to 13% of revenue. For 2001, the CFO expects net income to be 13% to 15% of revenue.
By Tom Locke
Of DOW JONES NEWSWIRES
DENVER -- McData Corp. (MCDT) is doubling its guidance for 2001 revenue growth to 80%, Chief Executive Jack McDonnell told conference call listeners Wednesday.
McDonnell told Dow Jones after the conference call that the new upward guidance is due in part to " a look at the market over the last few months; we think it's going to be strong."
McData is a Broomfield, Colo., maker of switches for storage area networks, which are used in storing computer data.
In addition, McDonnell said, the new guidance is due to a look at the company's partnerships and also the expectation of signing an agreement with a major original equipment manufacturer or reseller in the first quarter. A reseller would typically sell McData products under the McData name, while an OEM would typically sell the McData products under its own brand.
The revenue from that anticipated first-quarter deal is "going to be significant in the first quarter and certainly significant to our year," McDonnell told Dow Jones.
McDonnell said in the conference call, which followed the release of fourth-quarter results, that he expects to sign another major reseller or OEM later in 2001.
In the fourth quarter, McData's partnerships proved important as 73% of its fourth-quarter revenue came from sales through EMC Corp. (EMC) to EMC's end customers, and 13% of fourth-quarter revenue came from sales through International Business Machines Corp. (IBM) to its end customers.
The most important aspect of the quarter? "I just think the continuing momentum in the marketplace to director-class switches," McDonnell said. He added that McData now has switches in 10 of the top 15 U.S. banks, five of the top seven telecommunications companies, and 50 of the Fortune 100 companies.
Storage area networks, or SANs, link storage devices and computer servers. Switches like those of McData link those devices and manage information flow. McData has more than 90% of the high end of the market, where director-class switches, also known as "directors," provide internal back-up for components in the switch.
McDonnell said new products to be introduced in the first quarter will give McData "by far the best family of products in the industry."
"We will be introducing new mid-range products in the first quarter as well as new high-end products," he said.
Chief Financial Officer Janet Cooper, named to that post Jan. 8 to replace Dee Perry, who is retiring, said that she expects gross margin percentages to be in the "low 50s" for all of 2001. She expects gross margin percentages to be in the high 40s in the first half of the year, rising to 53% to 54% in the fourth quarter.
Cooper said she expects first-quarter revenue to be 75% to 80% higher than a year ago, and 8% higher than fourth-quarter revenue, which was $78.3 million.
Cooper also said she expects net income to be 11% to 13% of revenue in the first quarter and 13% to 15% of revenue for all of 2001.
She provided no forward guidance for earnings per share, and McDonnell said the company isn't providing that guidance.
McDonnell said in the conference call that McData is hearing from its customers that "spending for storage is not discretionary." The company continues to see high demand for its products and is optimistic about its entry into mid-range switches.
McData reported pro forma fourth-quarter earnings per diluted share, excluding non-cash charges, of 12 cents. That compares with 3 cents a share a year ago, and it beat the First Call/Thomson Financial consensus estimate of 11 cents.
McData fourth-quarter revenue of $78.3 million was more than double the $38.4 million reported a year ago.
At 4 p.m. EST Wednesday, McData shares closed down $7.75, or 11%, at $61.50. But following the quarterly report and conference call, the stock rebounded somewhat in after-hours trading to $64 as of 7:30 p.m., according to Nasdaq.com.
First Albany analyst Mark Kelleher noted that data storage stocks were down on the whole Wednesday.
-By Tom Locke, Dow Jones Newswires; 303-293-9294; tom.locke@dowjones.com |
