McData Loses Another

Senior VP of marketing leaves switch vendor six months after sales chief exits

May 18, 2004

3 Min Read
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Three days before announcing earnings that it has already lowered guidance on, McData Corp. (Nasdaq: MCDTA) has lost its senior vice president of marketing.

Mike Gustafson, who has been with the company since 1998 and held the marketing senior VP post since 2002, became the second high-ranking executive to leave McData in the last six months. Alain Andreoli resigned as executive VP of worldwide sales and service last November to take over as CEO at privately run storage system vendor Xiotech Corp. (see McData Sales Boss McExits and Ex-McData EVP to Head XIOtech).

McData filed an 8-K statement today reporting Gustafson left the company to pursue other opportunities.” A company spokeswoman says Gustafson did not leave for another job, and that “our go-to-market strategy will stay the same.” Jeff Vogel, another McData veteran who had been VP of solutions and services, will serve as Gustafson’s interim replacement while the company searches for someone permanent.

Industry speculation is that Gustafson left on his own rather than get pushed out. Regardless of the circumstances, his departure could come at a tough time as the SAN switch maker battles traditional rival Brocade Communications Systems Inc. (Nasdaq: BRCD) and SAN switch newcomer Cisco Systems Inc. (Nasdaq: CSCO).

Last month, CEO John Kelley said McData would miss the guidance he gave in February for the quarter that just ended (see McData Slashes Guidance – Again). McData’s revised forecast was for revenue of between $94 million and $104 million, down from its previous estimate of between $108 million and $115 million. The new earnings forecast ranges from a loss of $0.01 to a gain of $0.02 per share from previous guidance between breakeven and $0.02.Kelley will likely be pressed on Gustafson’s departure when he speaks to analysts after reporting earnings Thursday, and he will have a tough time casting a positive light on it.

“I count that as bad,” Punk Ziegel & Co.

analyst Steve Berg says of Gustafson’s leaving. “He’s an important guy there, managing a lot of relationships.”

Another analyst looked at the departure of Gustafson and Andreoli and said, “Maybe they’re seeing the fundamentals are not as good as they’re expecting. It’s not like Veritas, where [CEO] Gary Bloom manages in a different style than what people there are used to. It’s not a culture clash at McData like it is at Veritas.” (See Veritas Loses CTO – Again.)

With Brocade announcing its earnings Wednesday, investors and analysts will be closely comparing the two. Most analysts say Brocade and Cisco are hurting McData, although Cisco’s decision not to break out its SAN switch numbers during its earnings report last week has cast some doubt (see Cisco Call Puts SANs in Storage).

"We believe Brocade is largely responsible for the pain McData is feeling in the volume space and that Cisco is responsible for the pressure on the high end,” analyst Cliff Su of Lazard wrote in a note.Joel Wagonfeld of First Albany Corp. countered last week in a note about McData: “On the positive side, we think the fact that Cisco didn’t comment about its progress in networked storage suggests its recent momentum there has slowed.”

— Dave Raffo, Senior Editor, Byte and Switch

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