News

posted on 15 February 2008 07:05

Brocade had a great quarter. Revenues rose nicely. In Q1 08 they were $347.8 million, up 55% from the same period a year ago.

But, regrettably net income for Q108 was $19.8 million, $0.05 per share diluted, a 38% decrease from net income of $32.0 million, or $0.08 per share diluted from the previous quarter, which included a one time gain of $11 million.

The net income figure compares to the Q107 amount of $33.3 million, or 12 cents per share. According to AP Costs nearly doubled to $151.3 million from $82.8 million. Legal fees had to be paid, by contractual obligation, to two former employees. This possibly included Greg Reyes, ex-CEO, recently jailed for back-dating stock options.

Once again Cisco has failed to steam-roller Brocade as it was once expected to do.

Michael Klayko, Brocade's CEO, said: "We are pleased with Brocade's continued operational execution and performance. In the quarter, we recorded top line growth, improvements in our margins, and continued our strong cash flow generation. We extended our market leadership position and launched our new DCX Backbone ahead of schedule in January, which we believe will afford us a strong advantage in the marketplace."

He summarized it thus in the earnings call transcipt: "We had a very good Q1 and landed within or above our expectations on virtually every metric."

Brocade said it had strong demand for its 48000 SAN director, with Klayko mentioning a record sales performance, and achieved a record quarter in sales of its bladed switch products, which enable SAN connectivity for bladed servers. Data centre consolidations apparently helped director sales.

CFO Richard Deranleau said that: "service(s) were down for often incredibly strong Q4, and then we didn't get the quite attraction that we are looking for in FAN (File Area Networks) ... The FAN revenue was basically flat year-over-year and down sequentially, it's still less than 5% of our revenue." 

Also switch sales were weaker than was hoped for.

Brocade is set to benefirt fom the server virtualization trend. In the earnings call transcript Klayko said: "The server virtualization trend is attracting more and more investment, and this is a very good dynamic for us. Virtual servers are four- to five-times more likely to connect to storage networks than physical servers are. This drives growth opportunities for us as virtualization scales in the enterprise. But remember, according to most industry sources less than 5% of the enterprise servers are virtualized today. So we’re still at the very beginning of a trend that we believe will be a fundamental long-term growth driver for us."

There is some progress on the Brocade host bus dapter (HBA) front; two OEM partners have committed to qualify and resell them. Hitachi Data Systems will be among the first to  qualify them and Fujitsu-Siemens in Europe has stated that they will qualify and include Brocade's HBA products in certain segments of their server portfolio. Brocade HBA product announcements are expected before the 2008 mid-year point.

Slowly does it; Emulex has a commanding market presence here.

Brocade is expected to refresh its SAN product line with new offerings throughout 2008. Klayko also said we should expect: "significant new product advancements for our Files business within the next 30 days,"

(Earnings transcript from http://ww.SeekingAlpha.com.)