Brocade: Fiscal 3Q10 Financial Results

(in US$ millions)	3Q09	3Q10	9 mo. 09	9 mo. 10
Revenues	493.3	503.5	1,432	1,544
*Growth*		2%		8%
Net income (loss)	(23.9)	21.9	(113.5)	95.4

Brocade Communications Systems, Inc. reported financial results for its third fiscal quarter ended July 31, 2010. Brocade recorded quarterly revenues of $504 million for an increase of two percent year-over-year, resulting in a diluted earnings per share (EPS) of $0.05 on a GAAP basis and $0.13 on a non-GAAP basis.

"Q3 was another solid quarter for Brocade in which we achieved better-than-expected results from our storage area networking business and continued to make progress in our Ethernet go-to-market initiatives," said Michael Klayko, CEO of Brocade.

Klayko continued: "As we look to Q4, we expect a strong finish to our fiscal 2010. Despite operating in a challenging global economy with variable IT spending patterns, we are confident that our sales and marketing strategies as well as our product portfolio are aligned well with customer imperatives."

Financial Highlights
and Additional Financial Information

Q3 revenue was $504 million, increasing approximately 1% sequentially and 2% year-over-year.
Q3 GAAP EPS (diluted) was $0.05, sequentially level, and increasing from a loss in Q3 2009.
Q3 non-GAAP EPS (diluted) was $0.13, sequentially level, and increasing 8% year-over-year.
Q3 non-GAAP operating margin was 17.3% versus 20.5% in Q2 2010 and 20.3% in Q3 2009.
Q3 effective GAAP tax rate was (220)%; non-GAAP effective tax rate was 0.2%.
Q3 Adj. EBITDA was $102 million, down from $116 million in Q2 2010 and $119 million in Q3 2009.
Q3 total Storage Area Networking (SAN) port shipments were approximately 1.0 million.

brocade_fiscal_10q3_results_540
3) Ethernet revenues include product and support revenues.

Comments

Abstracts of the earnings call transcript:

Mike Klayko, CEO:
"We executed well in our SAN business, which was up 4% sequentially; again, what is normally our toughest quarter. The SAN Switch business did very well, up 20% sequentially."

Dave Stevens, CTO:
"We've got a speed bump coming here over the next year or so that we've talked about before, and they're pleased that we'll go and do that and they are continuing to buy fiber channel. Where FCoE is having an impact is in the Ethernet business where people that are deploying Ethernet infrastructures are looking to deploy things that are future proof and that are capable of running all kinds of protocols including FCoE. In terms of deployment, we're seeing some modest deployment only in top-of-rack situations where we're server I/O consolidation. And we're not really seeing any production multi-hop deployment of FCoE at all.
"So the long answer is, it's not having any impact on the fiber channel business at all."

Ian Whiting, SVP of WW sales
"EMEA was slightly less than we had anticipated, but still good forward momentum.
"In Q3 we saw our first significant orders from EMC. So that's a nascent but an interesting opportunity for us going forward as well.
"So all of the OEM partnerships we have are in growth mode. They are still early with the exception of IBM, where there is a new opportunity that's emerged. I would characterize it as a positive momentum."