Brocade Boasts Big Quarter update from February 2007

Big OEM chalks up record revenues, though Cisco's gaining ground

February 27, 2007

2 Min Read
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Brocade emerged from its latest quarter with impressive earnings -- and Cisco nipping at its heels.

The company today posted earnings slightly above its January predictions. (See Brocade Reports Q1.) Revenues for the quarter ended January 27 were $224.2 million, up 7 percent sequentially and 32 percent year-on-year. GAAP net income was $33.3 million, or $0.12 per share basic and diluted, a increase of 67 percent sequentially and 245 percent year-on-year.

Despite acquiring chipmaker Silverback this quarter, Brocade wrapped its books with $631.7 million in cash and equivalents, 8 percent more than the company posted in the last quarter of 2006, and 24 percent more than it had in the first quarter of 2006. (See Brocade Grabs Silverback and Brocade Announces Earnings.)

Brocade's biggest OEM customers are still the same: EMC, HP, and IBM together accounted for 72 percent of total revenues, and each accounted for 10 percent or more of the overall share. This is about the same customer profile Brocade had last quarter and at the same time last year.

Brocade closed its first quarter 2007 just two days before finalizing its purchase of McData. (See Brocade Closes Out McData.) Figures from the combination will be included in next quarter's report.At least one analyst sees competition as the main shadow in this rosy picture. While "applauding the company's ongoing solid execution" and its acquisition of McData, Aaron Rakers of A.G. Edwards sees Cisco as a competitive challenge. What's more, he says, "slowing HP momentum could result in more of a headwind (vs. tailwind) for Brocade going forward," in a note today.

Indeed, Cisco reported substantial growth in storage last quarter. (See Cisco: Storage Stars in Earnings.)

CEO Michael Klayko, whose compensation topped $1 million last year, isn't daunted. "Overall, we had a phenomenal quarter which culminated with shareholder approval of the McDATA acquisition," he said in a prepared statement. "It's an exciting time for Brocade and an exciting time for the industry."

Mary Jander, Site Editor, Byte and Switch

  • Brocade Communications Systems Inc. (Nasdaq: BRCD)

  • Cisco Systems Inc. (Nasdaq: CSCO)

  • EMC Corp. (NYSE: EMC)

  • Hewlett-Packard Co. (NYSE: HPQ)

  • IBM Corp. (NYSE: IBM)

  • McData Corp.

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