Brocade: Fiscal 4Q11 Financial Results

Brocade Communications Systems, Inc. reported financial results for its fourth fiscal quarter and full fiscal year ended October 29, 2011.

The company reported fourth quarter revenue of $550 million, representing an increase of over 9% quarter-over-quarter and up slightly year-over-year, and resulting in a diluted loss per share of $(0.01) on a GAAP basis and diluted earnings per share of $0.16 on a non-GAAP basis.

During the fourth quarter, Brocade generated operating cash flow of $206 million, repurchased 46.5 million shares of common stock, over 9% of the outstanding shares, valued at approximately $200 million, and paid down $50 million on its existing term loan balance. For the fiscal year, Brocade reduced the outstanding amount of the term loan by a total of $161 million, a 46% reduction from the beginning-year balance, which resulted in a balance of $190 million exiting fiscal year 2011.

Revenue for storage business, including products and services, was $361.3 million in the fourth quarter, up 8% sequentially and down 4% year-over-year. The higher sequential revenue for storage reflected strong demand across all storage product families including the ramp of its next-generation 16Gbps FC products which reached approximately $40 million in the quarter.

(1) The company’s prior period financial results, including Q4 2010, have been revised to reflect an immaterial correction identified in Q3 2011. As a result of the revision, net income was decreased by $1.2 million for the three months ended October 30, 2010, $2.3 million for the year ended October 30, 2010, and $1.8 million for the six months ended April 30, 2011.
(3) Ethernet business revenues include product and global services revenues.

Revenue for Brocade’s Ethernet business, including products and services, was a record $189.2 million in the fourth quarter, an increase of 12% quarter-over-quarter and an increase of 11% year-over-year. The year-over-year growth in Ethernet was driven primarily by service provider and enterprise customers, with revenues from those customers up 18% from the prior year. The Federal Ethernet business was down 14% year-over-year, but up 39% sequentially, as Federal orders improved in the fourth quarter. Revenue for the Ethernet business for the full fiscal year 2011 was a record $670 million, up 11% compared to fiscal 2010, driven by growth in Service Provider and Enterprise customers.

"Brocade achieved outstanding results in Q4 that were led by record revenues for our Ethernet business, fast adoption of our 16 Gbps Fibre Channel products, improvements in profitability, and a record cash flow quarter from operations," said Michael Klayko, CEO of Brocade. "These strong performances demonstrate that we are executing well on our long-term strategy. Looking at FY 12, we plan to leverage this momentum along with our highly differentiated innovation strategy, expanding product portfolio, and our strong routes to market."