- In addition to missing FQ2 revenue estimates (while beating on EPS), Brocade (NASDAQ:BRCD) has guided for FQ3 revenue of $540M-$560M, below a $561.4M consensus. EPS guidance of $0.21-$0.23 is in-line with a $0.22 consensus.
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Segment performance: FQ2 SAN product (Fibre Channel switch/director) revenue -11% Q/Q and -2% Y/Y to $314M; soft storage demand and "operational issues at certain OEM partners" (IBM and HP are possibilities) are blamed. IP networking (Ethernet switch/IP router) product revenue +9% Q/Q and +19% Y/Y to $133M; router sales rose 40%, and switch sales 8%, with U.S. federal demand (+78%) a strong point. Global services revenue -2% Q/Q and -7% Y/Y to $88M.
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Financials: EPS was lifted by a 40 bps Q/Q and 210 bps Y/Y increase in gross margin to 68.8% (above guidance of 66.2%-67.2%). Brocade attributes the growth to higher service provider and federal sales, a mix shift towards director and router sales, and lower manufacturing costs. Op. margin rose 140 bps Y/Y to 24.6%. $79.3M was spent on buybacks.
- SAN revenue is expected to fall 2%-6% Q/Q in FQ3, and IP networking revenue rise 9%-13%. GM guidance is at 67%-68%.
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BRCD -2.1% AH to $11.77.
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FQ2 results, PR (.pdf), slides/prepared remarks (.pdf)