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Brocade Sparks Latest Market Scare

Market leader Brocade leads chorus of warnings about short-term growth; analysts say SANs are healthy

In what has become almost a daily procession of gloomy forecasts, Brocade Communications Systems Inc. (Nasdaq: BRCD), the overwhelming leader of the market for storage-area networking (SAN) gear, was the latest technology company to reduce its guidance last night.

The company says economic conditions have stalled customer buying plans for the next quarter, making it tough to predict sales growth.

The announcement was made as part of Brocade's first-quarter earnings call after market close yesterday (see Brocade Enjoys $165M Q1). The company, which owns roughly 60 percent of the SAN market, posted net revenues of $165 million, more than 200 percent above revenues for the same time last year, and 25 percent over the previous quarter's figures. Diluted net income per share was $0.13, compared to $0.03 for the first quarter of 2000 and $0.11 for the last.

But earnings will stay flat next quarter, Brocade says, and growth will be roughly 19 percent for the last two quarters of 2001 -- resulting in growth of about 100 percent year over year.

The announcement caused a flurry of downgrades by financial analysts and sent Brocade's stock tumbling. Shares were trading at 41.13, down 3.56 (7.97%) by early afternoon today.

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