Brocade: Preliminary Fiscal 3Q11 Financial Results

Brocade Communications Systems, Inc. announced preliminary financial results for its third fiscal quarter ended July 30, 2011.

Brocade anticipates that it will generate quarterly revenue in the range of $500 million to $505 million, representing flat revenue year-over-year, and expected diluted earnings per share (EPS) of $0.08 to $0.09 on a non-GAAP basis. The company’s previous guidance for the third quarter was $540 million to $560 million for revenue and $0.10 to $0.11 for non-GAAP EPS.

Brocade anticipates that it will report $333 million to $336 million in revenue for its storage business, including product and services, which is down 5% to 6% year-over-year. The lower revenue range for storage reflects a reduction in the third quarter of approximately one-half week of Fibre Channel inventory held at the OEMs. In addition, the company experienced weaker-than-expected storage end-user demand, which was down slightly from the previous quarter.

Brocade anticipates that it will report $167 million to $169 million in revenue for its Ethernet business, which is an increase of 12% to 13% year-over-year. The company’s Ethernet results were impacted by lower-than-expected Federal revenue as well as a softer-than-expected IT spending environment.

"In Q3, we grew revenue in our Ethernet business; however I am disappointed that we were not able to drive growth across all of our segments and geographies to meet our original expectations for the quarter," said Michael Klayko, CEO of Brocade. "Despite strong economic headwinds that developed in the quarter, we continue to see progress and acceptance of our Ethernet product portfolio. We remain focused on our strategy outlined in our FY11 Playbook discussed at our 2010 Analyst Day. We will provide more details on our third quarter results as well as our plans to grow revenue and how we plan to manage expenses going forward at our earnings call on August 18."

Brocade plans to report its full financial results and provide more details for its third quarter 2011 on Thursday, August 18, 2011.

Preliminary Financial Information
and Estimates for Q3 2011

Total Revenue: $500M – $505M
Storage Business Revenue (Product + Services): $333M – $336M
Ethernet Business Revenue (Product + Services): $167M – $169M
Non-GAAP gross margin: 61.0% – 62.0%
Non-GAAP operating expense as % of revenue: 47.5% – 48.0%
Non-GAAP operating margin: 13.0% – 14.5%
Headcount: 4,772