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Brocade Bloodied Again

Beleaguered Brocade Communications Systems Inc. (Nasdaq: BRCD) took another beating last quarter (see Brocade Lowers Guidance).

The Fibre Channel switch market leader Tuesday night announced it would miss its prior revenue forecast by around $20 million and will take a loss for the quarter.

Brocade announced preliminary revenues for its third fiscal quarter of 2005, the period ended July 30, of $121 million to $122 million, down from previous guidance of $140 million to $145 million. The company expects to lose 3 cents to 4 cents a share compared to its previous forecast of a 5 cent to 6 cent per share profit.

This is the second straight quarter Brocade has posted poor results. Its revenues in the first quarter of the year declined sequentially and year-over-year as it lost market share to rivals Cisco Systems Inc. (Nasdaq: CSCO) and McData Corp. (Nasdaq: MCDTA). (See Brocade Revenues Miss Guidance and Brocade Reports Earnings.)

And poor earnings is the least of Brocades problems. The company is also under investigation by the Securities and Exchange Commission (SEC) and the U.S. Department of Justice for the way it accounted for stock options from 2001 to 2004; it missed filing its April 10-Q and faces delisting by Nasdaq; and it is trying to get out of a previous deal to pay former CEO Greg Reyes. (See SEC Gets Formal With Brocade, Brocade Being Investigated, StockerYale Lowers Forecast, and Brocade Blasts 'Consultant' Reyes.)

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