Bouncing Brocade!

Stock surges nigh on 20 percent on word from CEO Reyes that it will meet its quarter

October 12, 2001

2 Min Read
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Shares in Brocade Communications Systems Inc. (Nasdaq: BRCD) surged almost 20 percent this morning (Thursday) on news that it will likely meet analysts expectations of $110 million in sales in its fourth quarter.

Following remarks by CEO Greg Reyes (The Tick) during an interview with Bloomberg, the stock climbed 17.5 percent to $22.4 a share (though some of the surge was attributable to the general uptick in tech stocks today).

At press time it had settled back somewhat to $21.86 -- still up 14.93 percent on the day. The article quotes Reyes saying that he is comfortable with the company’s position and would be surprised if it does not meet its quarter.

In August, Brocade said fourth-quarter earnings per share would be $0.05, a cent lower than analysts polled by First Call (see Brocade Hits Numbers). The company expects to report its fourth quarter on November 28.

Reyes has high hopes for the Asia-Pacific region, expecting revenues there to triple to 12 percent of the $500 million estimated for the full year. In anticipation of this, it has expanded its facilities in China with the opening of a Beijing office (see Brocade Moves on China).Several factors are said to be driving the demand for storage networks in China: increasing Internet usage; unique telecommunications requirements; and the competitive environment for data-intensive businesses such as telecommunications, finance, utilities, and manufacturing.

With the continued growth of data storage requirements, the storage market opportunity in China represents one of the highest-growth markets in Asia-Pacific, according to IDC. The research firm predicts that the total amount of data storage shipped will reach more than 60 petabytes by 2005 -- representing nearly 100 percent annual growth.

Despite Reyes’s buoyant words and optimism about new markets, Wall Street analysts remain anxious about when the market will recover and to what degree.

CIBC World Markets analyst Paul Mansky recently lowered his sales and earnings per share estimates for Brocade (and the rest of the sector) as he believes IT spending has been frozen since the September 11 attacks. Nevertheless, he maintains a Buy rating on the stock in anticipation of an upswing in the fourth quarter (see CIBC Revises SAN Stocks Down).

— Jo Maitland, Senior Editor, Byte and Switch

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