Brocade Beats Estimates, Busts Out Big Q2

Brocade posted a strong set second quarter results today and is eyeing opportunities around Fibre Channel Over Ethernet (FCOE) and 8-Gbit/s switches.

The vendors second quarter revenues were $354.9 million, up from $345.3 million in the year-ago quarter, and well above analyst estimates of $346.6 million. Brocade also topped its own revenue guidance of between $340 million and $350 million.

On a GAAP basis, Brocade reported earnings of 47 cents on net income of $184.8 million, up from flat earnings per share and net income of $800,000 in the same period last year.

Brocade’s non-GAAP EPS was 15 cents on net income of $59.7 million, up from 11 cents and $46.6 million in the year-ago quarter. Analysts had estimated earnings of 14 cents.

”Q2 was another good quarter for Brocade -- our financial performance was better than expected,” said Michael Klayko, the vendor’s CEO, during a conference call this evening. “There was a strong initial ramp of our new DCX Backbone.”The exec explained that the initial take-up of the recently announced DCX switch outpaced the initial demand for any of the company’s other high end products.

Sales of Brocade’s Directors, including the DCX offering, were up 19 percent year-over-year, and services revenues rose 32 percent over the same period.

The vendor’s embedded switch sales rose 49 percent year-over-year, although Fibre Channel switch revenues were down in the mid-teens over the same period, something which Brocade is already trying to address.

“We expect to further solidify our position through the remainder of the year with the introduction of our 8-Gig products,” said Richard Deranleau, the Brocade CFO, alluding to the Fabric switches announced earlier this week.

The switches are already gaining traction among OEMs, according to Brocade, with IBM and Sun planning to offer the switches in the third quarter.Brocade also unveiled a set of 8-Gbit/s HBAs earlier this week, which will combine with the Fabric switches and the vendor’s DCX Backbone.

“We expect to add major Tier 1 commitment for our Fibre Channel HBAs soon,” said Klayko, adding that the vendor has also grabbed a “Tier 1 design win” for its FCOE adapter. “We’re clearly in the market, [but] it’s an 09 type of revenue statement.”

Despite Brocade’s strong second quarter, the exec admitted that there is still plenty of uncertainty in the economy.

“The current economic environment makes the ability to forecast with precision difficult,” he said.

Brocade nonetheless issued third quarter guidance of between $345 million and $355 million during tonight’s call, a 5 percent to 8 percent increase on the same period in 2007.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.