Brocade Continues Wild Earnings Ride

The storage switch maker announced a $1.9 million profit on $133.5 million in revenue for 3Q-better than its revenue loss in 2Q, but far short from 2002's 3Q profit.

Storage switch maker Brocade Communications Systems Inc. continued its wild earnings ride yesterday, announcing a $1.9 million profit on $133.5 million in revenue for its third quarter.

The figures are better than the second quarters $146 million loss on $130.9 million in revenue, but still far short from 2002s third-quarter profit of $18.3 million on $146 million.

"Although the economic environment continues to be challenging, storage area networking remains an important area of IT investment as companies optimize their storage, server and application infrastructures to reduce cost and improve productivity," CEO and Chairman Greg Reyes said, in prepared comments.

"The actions that we have taken over the last several quarters have resulted in a more efficient and flexible business model. We are well positioned for continued revenue and earnings growth," he said.

"Over the last 90 days we took pricing action… to address the competition" in the entry-level and midrange segments, Reyes said. Brocade has seen SAN islands growing, from first-time customers to enterprises, he said.

Brocades competition is primarily high-end rival McData Corp., of Broomfield, Colo. Other competitors of the San Jose, Calif., company include SAN newcomer Cisco Systems Inc., also in San Jose; Computer Network Technology Corp.s Inrange division, in Lumberton, N.J., and niche vendors including QLogic Corp., of Aliso Viejo, Calif.

Brocade, of San Jose, Calif., finished the quarter with cash and investments of $909.1 million, officials said. The companys highlights for the quarter included several partnership expansions for its storage management software, and the appointments of Don Jaworski as vice president of engineering and co-founder Paul Bonderson CTO and chief engineer. The CTO role was unfilled since Morris Taradalsky left in an executive shake-up three quarters ago.

"While Brocade remains in a difficult competitive position, there remain enough means at Brocades disposal to improve," said analyst Laura Conigliaro, of The Goldman Sachs Group Inc., in a report.

Brocades partnerships and software plans are positives, she added.