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McData Picks Brocade's Pocket

Brocade could lose $32M (or more) in sales to McD in FC fabric switch market, says analyst

The continuing momentum of McData Corp. (Nasdaq: MCDTA) in the Fibre Channel fabric switch space could result in Brocade Communications Systems Inc. (Nasdaq: BRCD) losing an incremental $32 million in revenue -- or more -- over the next year, according to analyst firm Thomas Weisel Partners.

Thomas Weisel analyst Jason Ader today simultaneously upgraded McData to Outperform (from Peer Perform) and downgraded Brocade to Underperform (also from Peer Perform) based on evidence that McData's Sphereon 4500 fabric switch is rapidly gaining share in the fabric switch space, an area that has historically been Brocade's stronghold.

"McData's push into the midrange is succeeding beyond most expectations, driven by the strength of the single-ASIC, 24-port Sphereon 4500 switch," Ader wrote in a research note.

Since introducing the 4500 switch last October, McData has steadily eaten into Brocade's share in the sub-32-port SAN switch segment, in large part because of McData's lower per-port pricing. McData has also benefited from an expanded roster of OEM partners in recent months, signing deals with Storage Technology Corp. (StorageTek) (NYSE: STK) and Sun Microsystems Inc. (Nasdaq: SUNW) (see McData Lowers Boom on Brocade, StorageTek Resells McData Switch, and Sun to Resell McData Gear).

Thomas Weisel raised its fiscal year 2003 and 2004 revenue estimates for McData, while also lowering those for Brocade. The firm now puts McData's fiscal year 2003 at $445 million (up from $436 million) and its fiscal 2004 at $508 million (up from $480 million). It estimates Brocade's fiscal 2003 revenues at $524 million (down from $526 million) and fiscal 2004 revenues at $553 million (down from $581 million).

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