SUBSCRIBE TO OUR NEWSLETTER
Stay informed! Sign up to get expert advice and insight delivered direct to your inbox
Storage Returns a Mixed Bag
Upgrades, downgrades, and investor waffling marked this earnings batch
February 13, 2004
4 Min Read
Storage companies got mixed reviews from analysts and investors this earnings season -- and the two groups weren't always in sync. Brocade Communications Systems Inc. (Nasdaq: BRCD), for instance, was upgraded by two analysts today, though its stock price stayed put.
Credit Suisse First Boston Corp. and First Albany Corp. upgraded Brocade today following the company's earnings report last night (see Brocade Battles Back). Brocade's quarterly revenues increased by 18 percent sequentially, and earnings per share beat First Call estimates by $0.02.
Analysts seemed happy to see Brocade report a solid quarter in the face of recent inroads in the Fibre Channel director market by Cisco Systems Inc. (Nasdaq: CSCO). We have greater conviction about the company’s earnings visibility in light of its solid execution, a strong gross margin, a better pricing environment and the potential opportunity for its upcoming products,” wrote First Albany analysts in a note today. The firm upgraded Brocade to Buy.
Some accolades didn't come with upgrades. Brenden Smith of Goldman Sachs & Co. wrote that Brocade lived up it his previous rating of In-Line/Attractive. “We view this quarter as a critical step in reinforcing our positive view,” Smith wrote.
Still, while Brocade's stock price started strong today, it closed at its opening price -- $6.76.Upgrades have been rare, though storage companies generally posted favorable results for the December quarter. Another storage mainstay to receive upgrades was Veritas Software Corp. (Nasdaq: VRTS). The company's stock was pushed up by Banc of America Securities LLC, Buckingham Research Associates (BRA),and Merriman Curhan Ford & Co.
Others weren't so bullish on Veritas, expressing disappointment that its revenue mix held too much maintenance and not enough new licenses (see Veritas Sees No Problem). Susquehanna Financial Group and RBC Capital Markets released notes with negative tones, and the company's stock price dropped 13 percent the day after earnings.
In line with the overall uptick this quarter, several storage networking companies raised guidance for coming quarters. The list includes:
EMC Corp. (NYSE: EMC) It completed a strong turnaround year with quarterly revenues of $1.86 billion, up 23 percent sequentially (See EMC: Everything's 'Better'.)
Storage Technology Corp. (StorageTek) (NYSE: STK) It reported $655 million in revenue and EPS of $0.56, ahead of the guidance it raised less than two weeks earlier (See StorageTek Announces Q4 and StorageTek Aims Higher.)
Emulex Corp. (NYSE: ELX) It beat expectations with EPS of $0.24 on revenue of $94.4 million, mainly because of 35 percent sequential increase in Fibre Channel host bus adapter (HBA) sales (See Emulex Reports Record Revenue.)
Cisco Systems Inc. (Nasdaq: CSCO) It broke out storage networking numbers for the first time, reporting $40 million in revenue and approximately 540 customers (See Cisco Storage Growing Up.)
Dot Hill Systems Corp. (Nasdaq: HILL) It beat expectations for revenue and earnings, and renewed a contract with Sun Microsystems Inc. (Nasdaq: SUNW) for low-end SANs (See Dot Hill's Alive & Well.)
Other storage vendors dealt disappointment:
QLogic Corp. (Nasdaq: QLGC) Positive income and strong HBA and overall sales were tempered by loss of $1 million in revenue because one of its hard-drive controller chip OEMs failed to ramp up product as fast as expected (See OEM Rains on QLogic's Quarter.)
Advanced Digital Information Corp. (Nasdaq: ADIC) Reported income of $4.9 million for the quarter but sales of enterprise tape libraries and stand-alone software were below expectations. Saying he doesn’t share other storage CEOs’ rosy spending outlook, ADIC CIO Peter van Oppen expects two more quarters of flat revenue (See ADIC Banks on Disk.)
Seagate Technology Inc. (NYSE: STX) Income of $205 million, or $0.41 per share, on revenue of $1.76 billion was significantly below analysts’ expectations. The hard-disk vendor lowered guidance for the current quarter (See Seagate Sails Into Rough Seas.)
Iomega Corp. It lost about $16 million on its NAS product line last year, cut 29 NAS staffers, and discontinued its high- end system (See Iomega Gets Its NAS Kicked.)
— Dave Raffo, Senior Editor, Byte and Switch0
Read more about:
2004You May Also Like
More Insights
