BRCD ( $30-$32-$30) PE 89--> Q3 profit, sales meet estimate, projects flat revs
(Adds details, adds byline, previous SAN JOSE)
By Peter Henderson
SAN FRANCISCO, Aug 15 (Reuters) - Computer storage network
company Brocade Communications Systems Inc. <BRCD.O> reported
on Wednesday that third-quarter profit dropped 40 percent as
the economy sapped market strength, but Brocade met Wall Street
expectations with results and its outlook.
Brocade's net earnings fell to $12.05 million, or 5 cents
per diluted share, in the fiscal third quarter ended July 28
from $20.08 million, or 8 cents per share, in the quarter a
year ago.
Sales at Brocade, which makes switches that tie together
storage networks, rose to $116.3 million from $92.1 million a
year ago.
Analysts polled by Thomson Financial/First Call expected
EPS of 3 cents to 6 cents, with a consensus forecast of 5
cents, on sales of $116 million.
The gross profit margin of sales minus the cost of sales as
a percentage of revenues, was 60 percent, up from 58.6 percent
a year ago and in line with the fiscal second quarter and the
company's third-quarter projections.
Earnings were steady from the previous quarter and sales
ticked up by $1 million. "Up sequentially slightly is
impressive in this environment," Doug MacKay, a portfolio
manager at Oak Associates, commented by e-mail.
Brocade shares swung after hours, dropping to about $30.07
after rising to $31.91 from a close of $30.34 on Nasdaq. They
had lost $1.82 before the earnings news.
Brocade's switches tie together storage networks, which
many companies are turning to in order to manage data that is
burgeoning as the firms move business on line.
Brocade shares have plummeted 67 percent this year as hope
has faded for a technology expansion. However, the stock has
outperformed storage heavyweight EMC Corp. <EMC.N> by about 37
percent this year.
WAITING ON THE ECONOMY
"Our ability to do what we said we were doing to do is a
critical part of our being a quality company,", Chairman and
Chief Executive Greg Reyes said in an interview after
announcing the results.
He said some technology customers might use up left over
dollars by the end of the year but that there was not likely to
be a spending blitz. He declined to call the economy: "I am a
trained business man. I am not a trained economist."
Chief Financial Officer Tony Canova forecast sales of $120
million in the fourth quarter and earnings of 5 cents per
share, broadly in line with Wall Street expectations.
"People were concerned with what might happen to guidance.
There have been a lot of companies in storage that have had to
bring numbers down, some by quite a lot. Brocade bucked that
trend," said Wit SoundView analyst Glen Ingalls.
Canova said that a new product cycle, including the
SilkWorm 12000 switch with which Brocade expects to tap higher
end markets, would would show a revenue impact in the second
half of the fiscal year, when revenue could accelerate.
First quarter sales would rise in the high single digits
and first half growth would be modest, he said.
Bill Shope, an analyst at ABN AMRO, said Brocade's SilkWorm
12000 appeared to be ramping up well, although "The real
competitive environment doesn't start to show until the economy
shapes up," he said.
Canova said he was optimistic about the market opportunity.
"We are mindful of the broader macroeconomic conditions which
may continue to affect our revenue growth," he added.
((Peter Henderson, San Francisco Bureau 415 677-2578
peter.henderson@reuters.com))
REUTERS
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