Interview with Greg Reyes
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GREG REYES - BROCADE Communications Systems
CEO Interview - published 02/08/2000
DOCUMENT # JAJ215
GREG REYES is President and CEO of BROCADE Communications Systems, Inc.
He has extensive management experience ranging from servers and workstations
to data communication, hardware, software and silicon. Mr. Reyes joined Brocade
from Wireless Access, Inc., a pioneer in wireless data messaging platforms and
integrated circuits, where as President and CEO, he led the company from a virtual
start-up through its subsequent rapid growth and acquisition. Prior to Wireless
Access, Inc., Mr. Reyes was a Divisional Vice President for Norand Data Systems,
a developer of wireless data networks and hand held terminals. At Norand, he was
a member of the management team that took the company public. Previously,
Mr. Reyes was Vice President of Sales and Support for Banyan Systems, a data
communications software company, and Convergent Technologies, an OEM
supplier of workstations and Unix servers.
SECTOR: DATA STORAGE
TWST: Could you begin by giving us a brief overview of Brocade Communications?
Mr. Reyes: BROCADE is focused on delivering a networking
model to storage, which helps address a bandwidth bottleneck between
servers and externally attached storage.The mega-trends that are driving
this opportunity are a function of the fact that billions of dollars have been
spent building LAN and WAN infrastructure; however, the mechanisms for
interconnecting servers and storage have not kept pace with the evolution
of data communications technology.
BROCADE has a family of fibre channel switches that allow you to interconnect
servers and storage in a state of the art, high-speed manner to scale storage
independently of servers. Through a networked environment for storage, our
customers gain robust functionality and responsiveness to meet the demands
of the e-commerce explosion, such as high data availability, data replication,
and optimized data movement.
TWST: What are the greatest opportunities for BROCADE over the
next several years? Is there a scenario that could lead the company to
really beat expectations in the future?
Mr. Reyes: We have been a public company for two quarters.
In each of those past two quarters we have exceeded analysts' estimates.
Some of the driving forces that have allowed us to do this have been that
we have a majority of the OEM market for fibre channel switches -- we are
OEM partners with most of the industry's leading server and storage OEMs.
These companies have begun the aggressive wholesale deployment of
this new networking model for storage, which is referred to as the storage
area network.We have also seen our initiatives with high end system integrators
result in significant achievements -- these high end system integrators are
going into large corporate accounts, upgrading existing servers and storage
to enable them to migrate into a storage area networking environment. We
found with the system integrators they provide a unique capability to upgrade
the installed base of millions upon millions of servers, if not hundreds and
hundreds of thousands of external storage and tape sub-systems. Combined
with our OEM channel, which tends to sell new systems to existing or new
customers, we have a significant market advantage.The trend that I believe
will accelerate the market's development (and I believe that BROCADE will
be a beneficiary of that) is that once this new storage infrastructure is deployed
it enables customers to deploy new classes of applications that really hit at the
sweet spot of the challenges facing today's data center -- to enable cost-effective
off-the-LAN backup, server and storage consolidation, high availability and
clustering. These applications are, in fact, enabled by companies like VERITAS,
which is a BROCADE partner.In the third phase of the market's evolution, we will
see an opportunity to interconnect these islands of data using metropolitan area
technology and wide area technology. I believe that the evolution of the storage
area networking market will, in many ways, parallel the evolution of the data
communications market. We are in the first year of a decade-long cycle that
has a lot of growth and profit potential for BROCADE.
TWST: What keeps you awake at night about BROCADE, if anything?
Mr. Reyes: When you are the CEO your job is to worry about
everything. The challenges facing the company today are very different
from the challenges facing the company a year ago. The way I like to
phrase it, "The company is faced with a very elegant set of challenges.
" We have been able to garner well in excess of 80 percent market share
in the fibre channel switch market. We have a dominant position in the
system integration channel. We have the broadest family of products, the
most robust set of product features, and our revenue and profits far exceed
our next closest competitor. So, those are all great attributes of the company.
At this point, what keeps me awake at night is execution, execution, execution!
We are aggressively scaling the company. We are aggressively ramping
production. We are aggressively expanding our product road map. We are
expanding into Europe. So, making sure that we are doing the right things in
terms of scaling the organization is one of my biggest concerns.BROCADE
has a very experienced management team. We are very objective oriented
and have a proven track record -- we know how to focus and execute.
TWST: You touched on this, but can you tell us more about BROCADE's
competitive advantages? What else sets the company apart?
Mr. Reyes: From a competitive standpoint, there are a handful of
smaller start up companies that we see in the market. We have yet to lose
one single piece of business to any of them. I think the reason for that is
that the founding technical team at BROCADE had a far-reaching vision
that having a flexible and scalable networking model for storage, supported
by high speed any-to-any networking connectivity, would be a requirement
for every business.We were the first company to market with an enterprise
class switching infrastructure for storage. The competitors are playing
"catch up." I think the proof is in their collective results. BROCADE continues
to beat estimates and pull away in virtually every point of measure; our
competitors results just don't stack up.
TWST: Any opportunities for improvement within BROCADE?
Any weaknesses to be addressed?
Mr. Reyes: There are always opportunities to improve.
I would say that we are hitting on all cylinders right now in virtually
every functional area of the company. But, that being said, we have
an aggressive set of objectives for each functional department. We strive
for ongoing continuous improvement across virtually every metric that
you would measure a company, ranging from revenue, profitability,
product costs, product schedules, recruiting, market share, quality, etc.
What are your specific goals for BROCADE looking forward several
years, if that is possible?
Mr. Reyes: Our goal is to maximize our return for our shareholders
and to deliver on our commitments to our customers. We will do that by
making sure that we are really tuned into the phases of the market's evolution.
There are key enabling things that need to fall into place to drive the market
in its next phase of development. To the extent that we are successful
and executing to our plan, I think we will see BROCADE blossom in lock
step with the market.
TWST: How do you feel about your current stock price?
Mr. Reyes: I do not set the stock price. I am proud of the shareholder
returns that we have been able to deliver. I am proud of our execution. I think
on a relative basis compared to companies in the "networking class of 1999,"
the company is very competitively priced. I think, over time, there will be a
clear bifurcation in the market where people who are BROCADE shareholders
will be glad that they are.
TWST: Speaking of that, can you give us two or three reasons why a long-term
investor should be interested in BROCADE and buy stock in the company?
Mr. Reyes: We have a superior management team in place that has
proven that they have the ability to execute. We have delivered back-to-back
quarters of revenue and earnings acceleration. Those factors, combined with
the fact that the storage area networking category looks like it could be the
next major networking opportunity, make this an exciting market and BROCADE
a very exciting company.
TWST: Thank you.
GREGORY L. REYES
President and CEO
BROCADE Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose, CA 95131
(408)-487-8000
(408)-487-8101 FAX |
