Brocade Posts $539.5 Million in Revenue -- Storage Grows, Ethernet Weak

Brocade posted quarterly revenue of $539.5 million for its first fiscal quarter ended January 30, 2010, up 25% year-over-year. Q1 GAAP EPS (diluted) was $0.11, increasing 57% sequentially and from a loss in Q1 2009.


"Brocade's Q1 performance exceeded consensus non-GAAP EPS expectations for the 18th consecutive quarter thanks to the balance and diversity of our business model, our highly variable cost structure and our ability to execute," said Michael Klayko, CEO of Brocade. "At the same time, Q1 highlights the work ahead in building our Ethernet business to the levels we expect. Going forward, Brocade plans to reenergize our Ethernet business strategy, which targets opening hundreds of new direct enterprise Ethernet accounts each quarter. As one of two end-to-end networking companies worldwide, we believe Brocade is well-positioned and are optimistic about our ability to take advantage of the expected worldwide growth of networking spending in 2010 and beyond."


Brocade noted that storage strengthened to 65% of revenues in Q1 versus 58% in Q4. The company said migration to 8 Gig Fibre Channel continued to accelerate during the quarter, with identifiable 8 Gig Fibre Channel Director shipments increasing over 145% sequentially and now representing 77% of identifiable Director shipments.


However, Brocade's Ethernet business declined 25.7% sequentially and represented 18% of revenues in the quarter, versus 25% in Q4. The company said Ethernet revenues performance was mixed. While US enterprise (non-Government) revenues increased 8% quarter over quarter, government sales declined in part to delays to the US Defense appropriations bill, which was signed in mid-December instead of late November as previously
expected. Additionally, Brocade's Data Center Ethernet revenues did not grow as anticipated.
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