Brocade Income Dips, CTO Resigns

Also, President and COO Michael Byrd will resign at the end of the first quarter next year.

Amid executive resignations, layoffs and negative fiscal projections, storage switch maker Brocade Communications Systems Inc. announced on Thursday income of $15.7 million for the fourth quarter, down from $18.3 million last quarter, Chairman and CEO Greg Reyes said.

However, Brocades revenue for the quarter was $153.1 million, up slightly from $151.2 million in the prior quarter. For the year, Brocade made $59.7 million on $562.4 million revenue, both figures better than last years.

"We are pleased with our progress in expanding our leadership position in fiscal 2002. In a challenging economic environment we grew revenue and market share," Reyes said.

Aside from Brocades recent acquisition of startup Rhapsody Networks Inc., the corporate situation at the San Jose, Calif., company is dark. Brocade will take in revenue of between $120 million and $125 million in the first quarter of 2003, officials said, which is down to the first-quarter, 2002 level. Brocade cut 12 percent of its workforce recently, while CTO and Vice President of Engineering Morris Taradalsky and General Manager/Vice President of Services, Solutions, and Alliances Rich Geruson both resigned, Reyes said. Also, President and COO Michael Byrd will resign at the end of the first quarter next year, Byrd said today.

On the products front, Brocade faces stiff competition from McData Corp., which reached profitability and projected future revenue increases in its most recent earnings, plus a looming threat from networking giant Cisco Systems Inc., which will ship competitive storage switches next year.

Asked about such factors, "I think were setting ourselves up for success… I dont think theres any cause for hand wringing," Reyes said, in the earnings call.

Taradalsky, as CTO, led the companys development in chip design, hardware and software. When asked who now leads those strategies, Reyes said "Weve got [separate] leaders of each of those groups… In effect weve gone back to the structure we had before we invested in expansion." The companys original leaders of marketing, operations and software remain, he said. Regarding products, Brocade Fabric API 3.0 is still on track to ship to storage partners next month, with general availability for users early next year, Reyes said. He declined to say whether McData, of Bloomfield, Colo., or Cisco, also of San Jose, is Brocades bigger concern.