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Blunt Blades Bloody Brocade

Brocade Communications Systems Inc. (Nasdaq: BRCD) isnt getting the boost from blades that it had hoped for.

Brocade executives fingered poor sales of embedded switches for blade servers and a slow ramp to 4-Gbit/s switches as reasons revenues fell below expectations last quarter (see Brocade Reports Earnings ).

The industry’s eventual transition from 2-Gbit/s equipment should take care of Brocade’s 4-Gbit/s sales, but its sequential drop in blade switch revenue could be a sign of trouble for Brocade in that emerging market.

Brocade CEO Mike Klayko blames the drop in blade server revenue on complicated sales processes at new blade server OEM partners, Dell Inc. (Nasdaq: DELL) and Hewlett-Packard Co. (NYSE: HPQ), rather than losses to the competition. But industry analysts suspect the combined blade switch offerings of QLogic Corp. (Nasdaq: QLGC) and McData Corp. (Nasdaq: MCDTA) hurt Brocade (see McData Hops on QLogic Blades and QLogic Breaks 20,000).

These companies show signs the blade server business is booming (see IDC: Blades Blast Off). QLogic, which sells blade switches with McData management software, reported a 45 percent sequential increase in blade server unit sales for its previous quarter. HP reported 53 percent year-over-year gain in blade server revenue last quarter (see HP CEO Calls for Better Storage).

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