McData Corp. (Nasdaq: MCDTA) raised its guidance for the fourth quarter of 2002 by $20 million this morning, crediting unexpectedly strong sales of its new midrange and high-end Fibre Channel switches.
McData says it now expects revenues to be between $104 million and $106 million for the quarter ending December 31, 2002, compared with its previous guidance of $84 million to $86 million. It also expects fourth-quarter pro forma earnings to be 6 to 8 cents per share, excluding non-cash deferred compensation and amortization charges, compared with its previous guidance that it would break even. McData also said it expects to be profitable -- on a pro forma basis -- for the full year 2002 (see McData Ups Q4 Guidance).
"McData's preliminary fourth-quarter performance reflected a very strong ramp-up in orders for our recently introduced new products and strong demand across all channels," said John Kelley, CEO and president of McData, in a prepared statement. "Revenue for both the Intrepid 6000 series 140-port director and the Sphereon 4500 fabric switch was more than double our expectations for the fourth quarter." (See McData Lowers Boom on Brocade and McData Hits 140 Ports.)
Analysts say the evidence suggests McData is beating its chief rival, Brocade Communications Systems Inc. (Nasdaq: BRCD), in both midrange and high-end segments of the SAN switch market. Brocade warned that its fiscal fourth quarter 2002 and first quarter 2003 earnings would fall below expectations (see Market Spanks Brocade Hard and Brocade Eats Crow).
McData's revised quarter "is in the realm of a blowout," says Jason Ader, an analyst at Thomas Weisel Partners. "This explains in some ways why there was a disconnect between what we were hearing from the OEMs and what we were hearing from Brocade... You have to look at it as a negative for Brocade in terms of market share shift."