Brocade: Fiscal 4Q10 Financial Results

Brocade Communications Systems, Inc. reported financial results for its fourth fiscal quarter and full fiscal year ended October 30, 2010.

Brocade recorded quarterly revenues of $550 million, an all-time record for the company in terms of revenue, representing an increase of over nine percent quarter-over-quarter, resulting in diluted earnings per share (EPS) of $0.05 on a GAAP basis and $0.14 on a non-GAAP basis.

Brocade attributed the record performance to a number of factors including an all-time company high in revenue for its Ethernet business, which is composed of products and services. On a quarterly basis, Brocade also experienced strong sequential revenue growth in its storage networking business as well as solid performances from its Americas and Asia Pacific operations.

“We are pleased with our Q4 performance which drove record revenues, growth in our Ethernet business and a strong finish to fiscal 2010,” said Michael Klayko, CEO of Brocade. “Looking forward to FY11, we are particularly excited about Brocade’s successful launch of the industry’s first Ethernet fabric products and technologies, which we believe will serve as a catalyst for customers to rapidly migrate to virtualized data centers and cloud-optimized networks.”

Financial Highlights and Additional Financial Information

• Q4 revenue was $550 million, increasing 9.3% sequentially and 5.5% year-over-year.
• Q4 GAAP EPS (diluted) was $0.05, sequentially level, and decreasing from $0.07 in Q4 2009.
• Q4 non-GAAP EPS (diluted) was $0.14, sequentially increasing $0.01, and decreasing $0.01 year-over-year.
• Q4 non-GAAP gross margin was 62.3% versus 60.4% in Q3 2010. 2010 gross margins now exclude system engineer costs which have been reclassified as operating expense (see footnote #2)
• Q4 non-GAAP operating margin was 20.4% versus 17.3% in Q3 2010 and 22.7% in Q4 2009.
• Q4 effective GAAP tax rate was 20.4%; non-GAAP effective tax rate was 23.2%.
• Q4 Adjusted EBITDA was $128 million, increasing from $102 million in Q3 2010 and roughly flat from $130 million in Q4 2009.
• Q4 total Storage Area Networking (SAN) port shipments were approximately 1.1 million.
• Q4 ending headcount was 4,651, up 581 or 14.3% compared to Q4 2009.