Brocade reported respectable fourth-quarter earnings (Brocade’s Q4) Monday, but its guidance for 2016 was disappointing to the analysts on the earnings call.
As a result, Brocade stock traded down 8 percent, at $9.29, this morning.
For its fourth quarter, ended Oct. 31, Brocade reported revenues of $589 million, an increase of 4 percent year-over-year.
Non-GAAP earnings per share were 26 cents for the fourth quarter — analysts had expected 24 cents — and $1.01 for fiscal year 2015, up 8 percent and up 12 percent, respectively, from the previous year.
For the first quarter, though, Brocade predicted revenues would drop sequentially, to between $550 million and $570 million. A lot of that is due to the router division, partly driven by U.S. federal seasonality.
First-quarter services revenue is forecast to be down 2 percent compared to the same quarter last year due to a nearly $3 million one-time catch-up benefit realized in the fourth quarter. On the plus side, Brocade expects first-quarter storage area network (SAN) revenue to be flat to up 3 percent quarter-over-quarter.
During the earnings call, CEO Lloyd Carney alluded to the mergers and partnerships going on in the industry, such as the Dell/EMC deal, saying, “This is a great trend for Brocade, as we have been building our company and our reputation on strong partnerships for more than 20 years.”
He mentioned that during the fourth quarter, Brocade expanded its partnerships in China with Huawei and Lenovo, giving the company greater access to China’s economy, “which is emerging as a growth market for Fibre Channel storage networking”.
SDN Is Good to Brocade
Sales for Brocade’s VDX switches grew 45 percent during the fourth quarter compared to the same quarter last year, and the product family was expanded with new software-defined networking (SDN) and cloud orchestration capabilities.
“We had several significant data-center IP wins in the quarter, including one of the largest Brocade VDX deals in our history with a major automotive manufacturer,” said Carney.
Also during the fourth quarter, AT&T announced it is using Brocade’s SDN and NFV technologies as part of its software-centric Network on Demand.
During the year, Brocade also acquired Connectem for its virtual evolved packet core (vEPC) technology and Riverbed’s SteelApp virtual application delivery controller (vADC).