Wednesday, August 17, 2011

Brocade Reports Flat Performance -- Cites Headwinds for IT

Brocade reported quarterly revenue of $503 million, representing flat revenue performance year-over-year and resulting in breakeven diluted earnings per share (EPS) on a GAAP basis and $0.09 on a non-GAAP basis. The results are consistent with the anticipated ranges it provided on August 5, 2011.

Revenue for Brocade's Storage business, including product and services was $334.3 million in the third quarter, down 6% year-over-year. The lower revenue for Storage reflects a reduction in the third quarter of approximately one-half week of Fibre Channel inventory held at the OEMs, representing approximately $24 million. In addition, the Company experienced weaker-than-expected Storage end-user demand, which was down approximately 1% from the previous quarter.

Revenue for Brocade's Ethernet business was $168.5 million in the third quarter, an increase of 13% year-over-year. The year-over-year growth in Ethernet was driven primarily by Service Provider and Enterprise customers, with revenues from those customers up 28% from the prior year. The Federal Ethernet business was down 33% year-over-year, but up 32% sequentially, as Federal spending improved in the third quarter.

"Headwinds in the IT market, federal spending, and overall global economy made for a challenging quarter for the company," said Michael Klayko, CEO of Brocade. "While we are doing well in areas such as our Ethernet business including the adoption and deployment of Ethernet fabric solutions, we recognize that there are opportunities to optimize and improve our business. We have already taken, and will continue to take, important steps to generate growth, improve our profitability and make ourselves more efficient. Our goal is to ensure that our resources and priorities are well-aligned with our go-forward strategies for long-term success in the networking industry."