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Brocade Under Pressure

Analysts say the company is overvalued. The 12000 continues to cause concern

Market reaction to last night's earnings report from Brocade Communications Systems Inc. (Nasdaq: BRCD) was mixed today, with many analysts voicing their disappointment at the delay of the Silkworm 12000 director switch (see Brocade Beats Estimates and Brocade's Slip-Sliding SilkWorm).

CIBC World Markets analyst Paul Mansky downgraded the stock from Buy to Hold. In a note to investors, Mansky states his belief that the quality of earnings for the quarter was dubious” and that management used aggressive accounting practices for the period.

Mansky expresses concern that Brocade is among the richest valued names in the storage universe, trading at 12 times calendar year 2002 sales estimates and 94 times EPS estimates.

Mansky says much of the good news has already been factored into the stock, which is currently up 123 percent from its 52-week low on October 1.

Robertson Stephens analyst Dane E. Lewis notes that the company is "nearly fully valued," prompting the analyst to keep his Market Perform rating.

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