Friday, February 11, 2011

Brocade Communications Systems Inc. (NASDAQ: BRCD): Q1 Earnings Preview

Brocade Communications Systems Inc. (NASDAQ: BRCD) is scheduled to report fiscal first-quarter earnings after the closing bell on Thursday, February 17, 2011. Analysts on average expect the company to report earnings of 10 cents per share on revenue of $543.89 million. In the year ago period, the company reported earnings of 19 cents per share on revenue of $539.49 million. 

Brocade Communications Systems, Inc. is a supplier of data center networking solutions that help enterprises connect and manage their information. The Company offers a line of data center networking hardware, software products and services. The company is organized in four operating units: The Data Center Infrastructure, The Server Edge and Storage, The Services, Support and Solutions and The Files.

In the preceding fourth quarter, the San Jose, California based company's net income was $23.4 million, or 5 cents a share, compared with a profit of $23.1 million, or 7 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 14 cents a share in the fourth quarter. Revenue grew 5.5% to $550.3 million from $521.7 million. Analysts, on average, expected the company to report earnings of 13 cents per share on revenue of $536.59 million.

At its last earnings call in November, the company said that it expects fiscal first-quarter revenue between $535 million and $550 million, flat to down 3 percent from a year ago. The company anticipates adjusted earnings in the range of 9 cents to 10 cents per share. Brocade also said that its federal Ethernet business will likely decline because power shifts in Congress after the recent U.S. elections could delay an appropriations bill. Brocade's Ethernet business contributes to about 31 percent of total revenue, with Federal business contributing to about 23 percent of the Ethernet business revenue.

Looking ahead to fiscal year 2011, Brocade is pinning hopes on the successful launch of Ethernet fabric products, expecting customers to move over to virtualized data centers and cloud-optimized networks.

Brocade is likely to benefit from a rebound in corporate technology spending. According to market research firm IDC's Worldwide Black Book, worldwide IT spending rose 8 percent from 2009 to more than $1.5 trillion.

The company has reorganized its sales force to focus on direct customers and the product channel. It has successfully integrated Foundry Networks, which it bought for $2.6 billion in 2008.. It has also expanded partnerships with large technology vendors such as IBM and Dell Inc to expand its customer base. 

However, the company's margin has remained under pressure amid increased competition. In September,the company forecast weaker margins as it cuts prices of its network equipment to better compete against bigger rival Cisco (NASDAQ: CSCO).

Brocade has long been considered a takeover target. Some names that have been thrown around as potential suitors are Dell (NASDAQ: DELL), IBM (NYSE: IBM) and Oracle (NASDAQ: ORCL). Data Storage companies have been some of the more popular targets in the latest String of M&A activity in the tech sector.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire