Gagging on the Hand That Feeds You

We would like to welcome IDC to the League of Brocade Disrespects. In their April earnings call, the Fibre Channel switch company attempted to drag IDC through the mud for apparently showing a lack of faith in Brocade's sales projections (see Brocade Breezes Through Q2 and IDC Slashes FC Forecast).

It is hard to understand why a reputable company like IDC would either not solicit data from Brocade Communications Systems Inc. (Nasdaq: BRCD), or find it so outlandishly over-optimistic so as not to include it in its final tally. Then again, perhaps over time IDC has learned how to interpret Brocade's data and has applied an appropriate fractional multiplier to it.

Analyst Robert Gray and the rest of the team at IDC have an excellent reputation for objectivity and integrity. Unfortunately, this sentiment is not evinced with the same high level of enthusiasm and consistency when it comes to Brocade.

Unlike the entourage of analysts who make calls on Brocade, IDC has no vested interest in Brocade's stock price. Furthermore, IDC is in constant contact throughout the entire industry and maintains excellent relationships with a large number of IT professionals. They can do their research independently and draw their own conclusions.

In July 2001, IDC published numbers that projected parabolic growth rates for the Fibre Channel industry. Brocade was more than happy to agree with those numbers then. But due to a multitude of reasons, those previous projections from IDC have clearly not materialized.IDC's analysts have apparently been working hard to reset their thinking. It's not a question of whether their new forecast is right; it is a question of integrity. IDC has exercised unusual integrity in an industry that barely knows the meaning of the word. If anything, their projections tend to be overly optimistic.

So whose numbers are better Brocade's or IDC's? Hmmmm.

Ashok Kumar is a managing director of U.S. Bancorp Piper Jaffray