Financial

posted on 13 August 2008 12:28

In its third quarter Brocade reported 11.6 percent growth in storage networking revenues contrasting starkly with Cisco's 14 percent revenue fall in the same period.

Brocade's Q3 fy08 revenues were $365.7 million, compared to the year-ago quarter's $327.5 million, and up 3 percent sequentially from Q2 fy08's $354.9 million. Pleasingly for Brocade Q3 is traditionally a seasonally weaker quarter than Q2.

Net income for Q3 fy08 was $20.3 million ($0.05/share), up 89.7 percent on Q3 fy07's $10.7 ($0.03/share).

CEO Michael Klayko mentioned record revenues for the switch business and embedded blade switches. The new DCX data center switch did well. Brocade director products seem to being accepted well by the McData installed base. The number of installed SAN ports reached 18.3 million. The introduction of 8Gbit/s switch products had been well received. The 8Gbit/s Host Bus Adapters (HBA) had received a good reception and are being qualified by OEMs with revenue shipments beginning this quarter and meaningful revenues hopefully coming in fy09.

Reassuringly North America revenues were good, indicating that any recessionary influence was non-existent.

The files business was disappointing with no meaningful revenues for the FME (File Management Engine) product. In fact there were quarter-on-quarter and year-on-year declines in the file business' revenues. Brocade does expect, though, meaningful FME revenues in fy09.

That financial year should also see the effects of the Foundry Networks acquisition. Brocade will say more about that at its analysts' day on Septemver 17th.

The Q4 fy08 outlook is for revenues in the range of $375 million to $385 million.

Regarding Cisco a financial analyst suspects that Brocade has made director market share gains against Cisco. That company has conceded conversationally that Brocade's DCX product is beating Cisco. We should expect a new 8Gbit/s Cisco DCX-competitor product in the next few quarters.

All in all Brocade is looking like a very well-run business with a better storage networking strategy and execution than Cisco.

^{[Chris Mellor.]}