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McData Wraps Rocky Year
Revenue up from previous quarter, but down 7 percent from last year
February 25, 2005
3 Min Read
McData Corp. (Nasdaq: MCDTA) had a better-than-expected fourth quarter, but the results failed to mask a rough year for the SAN switch vendor.
McData today reported revenue of $105.8 million and net income of $6.8 million, or earnings per share (EPS) of $0.06, for last quarter. According to Thomson First Call, analysts expected revenue of $104 million and $0.05 EPS, both numbers in the middle of guidance McData gave last November (see McData Merely Mediocre).
While McDatas income rose 7 percent sequentially, it also fell 7 percent from the fourth quarter of the previous year. Net income rose substantially, though, up 48 percent from $4.6 million the previous quarter and 58 percent from $4.3 million last year.
For the full year, McData’s revenue of $399.8 million dropped 5 percent from $418.9 million in the previous year. Net income of $14.5 million and $0.13 EPS for the year also fell, from $24.5 million and $0.20 the previous year.
McData lost ground to both of its major rivals from the same period a year ago. Switch market leader Brocade Communications Systems Inc. (Nasdaq: BRCD) reported an 11 percent year-over-year increase for last quarter to $161.6 million (see Brocade Boasts Strong Quarter). Cisco Systems Inc. (Nasdaq: CSCO), which seems to be cutting into McData’s stronghold in the director market, reported its storage revenue jumped 70 percent year-over-year to $56 million (see Cisco Storage Spikes).McData’s results look worse when only product revenue is considered. Overall product revenue of $74.4 million was up 2 percent sequentially and down 21 percent from last year. McData director revenue was flat sequentially and down year-over-year. CEO John Kelley told analysts on a conference call that he believes McData lost a bit of market share in directors last quarter but gained share in switches.
Other issues Kelley addressed on today’s call include:
The Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) acquisition: Kelley said McData received Securities and Exchange Commission (SEC) approval of the $235 million acquisition it announced last month (see McData Bags CNT for $235M). He said McData would benefit from CNT’s services and SAN extension products, while there is “little or no product overlap” between the companies.
Product rollout: Hitachi Ltd. (NYSE: HIT; Paris: PHA) last month announced qualification of McData’s Intrepid 10000 (i10K) backbone director, and Kelley says HDS sold two of the units last quarter (see Anybody Want a High-Speed Director? and McData's Ready for Rollout). He expects qualification from two OEMs this quarter, most likely its two biggest customers, EMC Corp. (NYSE: EMC) and IBM Corp. (NYSE: IBM).
Kelley said McData also sold its first Eclipse 2640 SAN Router through a reseller, and he expects OEM qualifications this quarter. He also hopes to have 4-Gbit/s switches, with 16- and 32-ports each, available in the first half of the year.
For guidance, McData forecast revenue of $98 million to $103 million and EPS of $0.01 to $0.03 this quarter. Its revenue was $97.2 million with a $0.01 EPS in the same quarter last year.
— Dave Raffo, Senior Editor, Byte and Switch0
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