Brocade: Fiscal 3Q08 Financial Results

Brocade reported financial results for its third fiscal quarter, which ended July 26, 2008.

Commenting on the Company’s third quarter financial results, Michael Klayko, Brocade CEO, said: "We delivered record results this quarter as we returned to double-digit revenue growth through continued, outstanding operational execution. These results validate that our product roadmap and solutions address customer demand for high-performance, ultra-reliable networking in the next-generation data center. We believe that they also indicate that the fundamental market trends and customer demand drivers remain intact."

Third Fiscal Quarter 2008 Business Highlights

• Brocade announced its intent to acquire Foundry Networks, a performance and total solutions leader for network switching and routing. The acquisition will position Brocade as a leading provider of enterprise and service provider networking solutions, with innovative technology and product leadership from the Internet to the heart of data centers.  The acquisition is subject to approval from Foundry stockholders, regulatory approvals and certain other closing conditions.
• Brocade’s industry-leading DCX Backbone, in only its second full quarter of shipments, continues to exceed initial sales expectations. Industry analyst data from the Dell’Oro Group also showed Brocade’s market share in the director segment climbed  5.5 percent over the previous quarter.
• Brocade’s switch business set new revenue records, driven by a combination of strong worldwide demand for the 4-Gbit/Sec products  and a robust initial ramp for the new 8-Gbit/Sec family. Brocade’s top OEMs made these switches available during the quarter, which is  expected to help expand market adoption of Brocade’s switch products in Q4 and into 2009.
• Increase in professional services helped drive record revenue for Brocade’s services business, as customers turn to Brocade as the trusted expert in the evolution of their data centers.
• Brocade announced the general availability of a new family of its 4- and 8-Gbit/Sec server host bus adapters (HBAs) that offers unique breakthroughs in terms of performance and end-to-end data center networking capabilities. Initial customer feedback has been very positive with early customer trials highlighting Brocade’s performance and integrated feature-set advantages.
• Brocade and NetApp announced a collaborative development effort that will enable data center customers to encrypt corporate data more quickly and easily for increased security and compliance.

Third Fiscal Quarter 2008 Financial Highlights and Additional Financial Information

• Brocade achieved record revenue and double-digit annual growth in a typically slower period.
• In Q3, the Company achieved record revenue in its switch business,  embedded blade switch product line and its Services Business Unit.
• The Company’s total installed base of SAN ports was approximately 18.3 million.
• In Q3, Average Selling Price (ASP) declines were in the low single digits compared to Q2 08.
• Net stock-based compensation expense was $11.9 million and has been excluded from the Company’s non-GAAP results.
• In Q3, Brocade repurchased approximately 4.7 million shares of the Company’s common stock for approximately $38.1 million. As of the end of Q3 08, the Company had $414.1 million remaining under its $800 million total stock buyback program authorization.  Since Q3 07 the company reduced the total number of shares outstanding by over 20M net, or by over 5%.
• Brocade’s non-GAAP effective tax-rate was 32.3% in Q3, and its GAAP tax rate was 61.1%.

  Earnings call transcript