McData Sees Another Quarter Pounding

Quarterly earnings meet low end of expectations, and next quarter looks worse

May 21, 2004

2 Min Read
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McData Corp. (Nasdaq: MCDTA) gave a mixed earnings report today. The good news: It didnt lose any key executives or lay off any employees. The bad news? It didn’t make much money last quarter and will be lucky to break even this quarter.

The SAN switch vendor reported revenues of $97.2 million, down 5.8 percent from a year ago and below the First Call

estimate of $98.94 million. Its earnings per share of $0.01 on $1.1 million net income beat a First Call estimate of break-even, but those figures were down from $0.06 and $6.7 million a year ago.

The results were in line with lowered guidance CEO John Kelley gave last month, when he lowered his estimates to between $94 million and $104 million in revenues and between a loss of $0.01 and a gain of $0.02 EPS. McData today blamed its lackluster performance on the same problems Kelley cited in April: slow product ramp, longer than expected product cycles due to more competition, and seasonality.

“We’ve had a very challenging quarter,” Kelley told analysts in a conference call today.

The current quarter doesn’t look much better. McData forecasts revenue in a range of $92 million to $100 million for an EPS of between minus $0.02 and break-even.McData’s revenue from products for the quarter was $79.3 million, down 16 percent from last quarter and 13 percent from last year. Software and services revenue also dropped 14 percent sequentially to $12.1 million, although that was up 44 percent compared to last year.

McData was the last of the three major SAN switch vendors to announce earnings.Cisco Systems Inc. (Nasdaq: CSCO) didn’t break out its storage numbers when it announced earnings May 11, though analysts say that doesn’t necessarily mean they were disappointing (see Cisco Call Puts SANs in Storage). Brocade Communications Systems Inc. (Nasdaq: BRCD) reported revenue of $145.6 million yesterday for $8.1 million in income, or $0.03 per share, but also announced a layoff of 110 employees, 9 percent of the workforce (see Brocade Hits Estimates, Lays Off 110).

Kelley didn't shed much light on the departure of marketing SVP Mike Gustafson (see McData Loses Another). He said Gustafson left because "he also has some aspirations personally, and I support those aspirations" and that McData is searching for a replacement.

— Dave Raffo, Senior Editor, Byte and Switch

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