Brocade shares are down 12 percent this morning, as the company announced that its second-quarter earnings will miss the mark.
The miss is partly due to the SAN market being even weaker than expected. And those expectations weren’t stellar to begin with. SAN is shrinking, as the company has acknowledged — and the second quarter tends to be inherently weak for SAN sales.
Brocade was originally predicting a 7 to 10.5 percent drop in SAN revenues, compared with the previous quarter.
But the company is also being blown back by what it calls “IP networking headwinds.” Brocade acknowledged the problem during its first-quarter earnings in February, and it’s been an ongoing trend among most of the traditional switch and router vendors for a few quarters now (Arista being a notable exception).
Cisco, for example, has been dialing back expectations, citing weakness in the general economy, although the company’s most recent quarter managed to be a little better than anticipated.
Juniper likewise told investors to brace for a tough first quarter. When things turned out even tougher than expected, Juniper executives noted that product transitions were putting an additional damper on sales.
Brocade now expects sales for the second quarter, which ended in April, to be $518 million to $528 million. That’s well off of the original target of $542 million to $562 million.
Non-GAAP net income will be 21 to 23 cents, Brocade said. Its previous target range was 22 to 24 cents.
Brocade is due to report earnings on May 19.
