Brocade Communications Systems,Inc. (Nasdaq-BRCD) Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Brocade Communications Systems,Inc. (Nasdaq-BRCD)

BRCD 12.73

0.0%

Nov 20 4:00 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Lizzie Tudor who wrote (1402)	3/8/2003 12:12:45 AM
From: E_K_S	Read Replies (1) of 1583

HP's SAN business seems to be doing pretty good. Brocade should benefit as they are now considered a major OEM partner. HP Leads Market in Worldwide Disk Storage Systems Friday March 7, 10:43 am ET New Report Ranks HP No. 1 in Major Disk Categories Including OpenSANs, Gains Double-digit Growth in NAS Market (http://biz.yahoo.com/bw/030307/75175_1.html) * * * * * * * * I am expecting the worst for earnings this year and believe it will be next year before we really see sustained earnings growth. If the Rhapsody Networks merger goes well and they release a good vSAN software product (even a beta version) by Q3 or Q4 this year, we should begin to see accretive earnings by Q2 2004 from the acquisition. I have been accumulating shares at the lows and have hedged some of my shares by selling July $5 covered calls to generate income while I wait. The HPQ partnership is going to be key IMO especially as HP's large enterprise customers will be the first accounts to install and run the new Brocade/Rhapsody vSAN software. If this turns out to be successful and Brocade's stock price is still under $7.50/share, I would not be surprised to see HPQ offer up to $13/share for the company. HPQ has to be convinced that this next generation vSAN product is a big hit with their customers and works as promised. We really will not know until Q2 or Q3 of 2004. My $13.00/share buy out guess is based on what IBM paid for both Tivoli and Rational Software combined (around $2.843 Billion). This would be the equivalent share price after adjusting for the new Brocade shares issued and adjusting each transaction for the net cash they had in the bank at the time the transaction closed. By Q2 2004 Brocade's revenues and earnings should be pretty much equal to those of Tivoli and Rational Software combined (about $698 million combined total sales) at the time IBM made their purchase. IBM paid aprox 3.4x sales for Rational software ($2.1 Billion) and 15x sales for Tivoli (.743 Billion). Tivoli only generated $49 million in total revenues and was the huge new revenue stream IBM was buying. The Tivoli component is similar to the Rhapsody side of the Brocade transaction. Therefore, my upside 2004 target price for BRCD is around $13.00. I will be very satisfied if we get there. There may be some quite interesting (and profitable) option plays for the Jan 2004 (leaps)$7 1/2 and $10 calls. I will be watching to see if the open interest for these calls expands over the next several months. I suspect I am not the only investor that sees this as an opportunity for HPQ. EKS

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next