Brocade: Fiscal 2Q17 Financial Results

(in $ million)	2Q16	2Q17	6 mo. 16	6 mo. 17
Revenue	523.3	552.8	1,098	1,134
*Growth*		6%		3%
Net income (loss)	43.1	(11.0)	136.7	(16.9)

Brocade Communications Systems, Inc. reported financial results for its second fiscal quarter, ended April 29, 2017.

The company reported second quarter revenue of $553 million, up 6% year-over-year and down 5% quarter-over-quarter.

The company reported a GAAP diluted loss per share of $0.03, down from diluted earnings per share (EPS) of $0.11 in 2Q16 and down from a diluted loss per share of $0.01 in 1Q17.

Non-GAAP diluted EPS was $0.10 for 2Q17, down from non-GAAP diluted EPS of $0.22 and $0.16 in Q2 2016 and Q1 2017, respectively.

The year-over-year decline in both GAAP and non-GAAP diluted EPS is primarily due to lower SAN and wired IP networking revenue and the incremental operating expenses associated with the Ruckus Wireless acquisition.

In addition, the year-over-year decline in GAAP diluted EPS also reflects the inclusion of certain acquisition-related expenses that negatively impacted 2Q17 results.

The sequential decline in the GAAP diluted loss per share and non-GAAP diluted EPS is primarily due to seasonally lower SAN revenue.

In light of the pending acquisition of Brocade by Broadcom Limited, Brocade will not provide fiscal 3Q17 guidance and will not hold a conference call to discuss these financial results.

SAN product revenue of $282 million was down 5% year-over-year. The decline was primarily the result of lower director and embedded switch sales, which declined 6% and 12% year-over-year, respectively. The year-over-year revenue performance was impacted by competition from alternative storage networking technologies and architectures, and customer uncertainty surrounding the pending acquisition of Brocade by Broadcom. Sequentially, SAN product revenue decreased 8%, consistent with historical seasonal revenue trends, with fixed-configuration and embedded switch revenues down 15% and 18%, respectively, partially offset by a 4% increase in director revenue.

IP Networking product revenue of $173 million, including $71 million of product revenue from Ruckus Wireless, was up 32% year-over-year. The increase was primarily due to added wireless revenue following the acquisition of Ruckus Wireless in 3FQ16, partially offset by lower wired switch and router revenue, due in part to Broadcom’s planned divestiture of Brocade’s IP Networking business. Sequentially, IP Networking product revenue was flat.

The board of directors has declared a regular third fiscal quarter cash dividend of $0.055 per share of the company’s common stock. The dividend payment will be made on July 5, 2017, to stockholders of record at the close of market on June 12, 2017.