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Brocade's Business Booms

Business is booming for the 900-pound gorilla of the storage-area network (SAN) market, and its longtime reign doesn't look to be ending anytime soon. That is, unless a few tiny cracks around the edges start to widen.

Brocade Communications Systems Inc. (Nasdaq: BRCD), which owns approximately 80 to 90 percent of the market for Fibre Channel SAN switches, yesterday announced quarterly net revenues of $92.1 million, a 360 percent increase from the same quarter of 1999, and a 48 percent increase over last quarter. Brocade also announced net income of $20.1 million, a 1,146 percent increase over the $1.6 million reported for the same time last year, and 51 percent more than net income last quarter.

Wall Street loved the news: Brocade's stock price jumped more than 12 points and was up to 210 1/2 in the final hour of trading.

The action is helping to boost Brocade's value relative to its leading public competitors: With a total market capitalization of about $23 billion, Brocade is easily ahead of Gadzoox Networks Inc. (Nasdaq: ZOOX) and Vixel Corp. (Nasdaq: VIXL), with market caps of $230.7 million and $121.2 million respectively; McData Corp. (Nasdaq: MCDT), which went public last week, was trading at 91.25 late today with a market cap of about $9.474 billion; and Qlogic Corp. (Nasdaq: QLGC) was trading at 86.25, with a market cap of $6.7 billion.

Why does Brocade have so little competition? And can its love affair with Wall Street continue indefinitely?