News

posted on 15 May 2008 08:24

Brocade recorded flattish second quarter revenues with a slight 2.8 percent rise year on year, but net income of $184.8 million was $184 million up on the derisory number reported in Q2fy07.

Beating its own and Wall Street analysts' expectations, for its Q2fy08 period SAN fabric product vendor Brocade earned revenues of $354.9 million compared to Q2fy07's 345.3 figure. Net income per share was $0.47/share compared to $0.00/share in the year-ago quarter. The company has become terrifically better at delivering profit from is revenues.

Tellingly cash generated from operations was at a record high and gross margin rose to 61.1 percent from Q2fy07's 53.4 percent. Michael Klayko's Brocade is clearly a much better run business now than it was in Greg Reyes' time.

Klayko's comment on the results was this: "It was another very good quarter for Brocade as we continued our excellent operational execution and performance. Our financial results were better than the Company expected, we added to the momentum of our aggressive product cycle, and we acquired Strategic Business Systems, Inc. (SBS), a privately held provider of data center-focused professional services, which significantly broadens our services offerings and expertise in the evolving data center market."

The flattish revenues confirm that competition in the SAN fabric product business is intense but Brocade is holding its own against competitors such as Cisco and QLogic.

Switch revenue was down 16 percent year on year and it is hoped that the new 8Gbit/s switch products will stop the rot.

Highlights of the quarter included record director-class product sales with the new DCX Backbone exceeding expectations. Embedded blade switch product sales and service revenues were also at record levels. The company has 17.2 million installed SAN ports.

Klyako confirmed that Brocade was working on an FCoE adapter, saying Brocade had won a tier one systems and storage provider OEM design win - think IBM, Sun or some other firm in that area. He added: "We’re clearly in the market with very competitive products. ... it’s another different type of product that fits nicely in our DCX and our data center fabric line of products. ... this is just an extension because its just fiber channel over a different physical layer"

FCoE is expensive and Brocade isn't seeing revenue from it until next year and being cautious about the amount.

In its File Area Network (FAN) sales area Brocade hasn't been as successful as it hoped. The recent FME product, which can move currently active files, is hoped to be the means by which Brocade can raise its FAN game. 

Guidance for the next quarter was $345 - $355 million, up 5 - 8 percent on Q3fy07.

^{[Paul Roberts, news editor.]}