McData: 'We Gained Share'

Says it picked up ground in switch market, but director sales hurt by pending CNT deal

May 24, 2005

2 Min Read
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McData Corp. (Nasdaq: MCDTA) executives disagree with their Brocade Communications Systems Inc. (Nasdaq: BRCD) counterparts that the Fibre Channel switch market shrank last quarter. McData CEO John Kelley today said he thought the market grew last quarter, and McData gained share.

While McDatas overall earnings held little surprise, because the company gave preliminary numbers two weeks ago, Kelley said the company did better in the switch space while falling off a bit in its traditionally strong director segment (see McData Posts Q1 and RIP: CNT UMD).

McData reported revenue of $98.9 million, up 2 percent from $97.2 million a year ago and down 6 percent sequentially from $105.7 million. McData’s revenue was in the range it forecast May 9, while its $0.03 earnings per share (EPS) beat the high range of previous guidance by $0.01.

Last Thursday, Brocade executives claimed the overall switch market shrank last quarter, and they likely lost share after revenue fell sequentially and year-over-year (see Brocade Blasts 'Consultant' Reyes). But Cisco Systems Inc. (Nasdaq: CSCO) clearly gained share after increasing SAN switching revenue both sequentially and year-over-year, and Kelley says he believes McData also took share (see Cisco's Storage Climbs).

The numbers seem to prove him correct: McData reported a 9 percent increase in ports shipped, while Brocade’s ports decreased 10 percent from last year. As for the overall market, Cisco, McData, and QLogic Corp. (Nasdaq: QLGC) all increased Fibre Channel switch revenue from last year, while Brocade decreased 1 percent.“We’ll wait and see how the numbers play out,” Kelley said. “We think [the market] grew year-to-year. And we think we grew share.”

McData blames slow sales of its new Intrepid 10000 (i10K) director on confusion over its roadmap caused by its acquisition of Computer Network Technology Corp. (CNT) (Nasdaq: CMNT). McData announced its plans to acquire CNT in January, but didn’t reveal it would keep the i10K and kill CNT’s UltraNet Multi-service Director (UMD) until May 9 (see McData Bags CNT for $235M). Kelley said McData’s Spherion switch revenue increased in double digits sequentially and year-over-year and Eclipse SAN routers had a solid quarter (see McData Extends Router Family).

McData and Brocade agree in one area: Both gave soft guidance for the current quarter. McData’s forecast of $100 million to $105 million in revenue and EPS of $0.01 to $0.03 was below analysts’ forecast of $108 million and $0.03, according to Thomson First Call. McData is still waiting for EMC to qualify its i10K, and it won’t have its 4-Gbit/s switches available until the second half of the year. Brocade is already shipping 4-Gbit/s switches.

Kelley said he’s hoping to close the CNT deal by June 1. Both companies’ shareholders cast votes Tuesday.

— Dave Raffo, Senior Editor, Byte and Switch0

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