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Important products were delayed, and carriers are waiting.

Brocade: Revenue Up Despite Soft Carrier Demand

Mitch Wagner
8/22/2014
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Brocade saw decreased demand from carriers for routers, but increased revenue and profitability, according to quarterly earnings announced Thursday.

Brocade Communications Systems Inc. (Nasdaq: BRCD) announced revenue of $545 million, up 2% year-on-year and 2% quarter-to-quarter for the third quarter ending August 2. GAAP diluted earnings per share were $0.20, down from $0.26 in the year-ago-quarter and up from a loss per share of $0.03 in the second quarter of this year.

"With another solid quarter behind us, we are seeing the tangible benefits of our data center-focused strategy," Brocade CEO Lloyd Carney said in a statement. Brocade's SAN business has "resiliency and durability" and VDX switch sales are "strong" and "validate our strategic direction."

IP networking business revenue, including products and services, generated $166 million, down 1% year-over-year and up 5% sequentially. The sequential increase was primarily due to higher sales of Ethernet switching products to the US federal government and strong VDX sales to data center customers, Brocade said.

Routing product revenue decreased 19% year-over-year and 20% sequentially, primarily due to customers waiting for new products scheduled to be released in fiscal Q4 2014.

Those new products are 100Gbit/s VDX blades, which faced manufacturing delays pushing them back to the next quarter. The products are scheduled to ship in the next two or three weeks, and Brocade many see difficulty meeting demand. None of the revenue is lost; it's just been delayed, said Jason Nolet, Brocade vice president, data center and campus networking, on the company's earnings call with analysts Thursday.

Brocade anticipates IT networking will be up 6% to 15% in the next quarter, primarily driven by increased demand in the carrier market for new products.


Find out more about key developments related to the systems and technologies deployed in data centers on Light Reading's data center infrastructure channel


Carney called out Telefónica SA (NYSE: TEF) benchmarking results as a recent highlight. Tests run by Telefónica in its labs show Brocade's software-based router can achieve 80Gbit/s throughput, matching the performance levels required for carrier applications and setting a benchmark that supports NFV deployment. (See Telefónica Proves Brocade Router Performs for NFV.)

Vyatta is another bright spot for Brocade; the software networking platform has been adopted by one of the world's largest cloud service providers, and is involved in about 30 proofs-of-concept with Tier 1 providers. Brocade expects to see production implementation in early 2015, CFO Dan Faifax said. (See Brocade Weaves Software-Based Networking Strategy .)

Brocade is also aggressively pursuing NFV customers, looking to maximize market share now and worry about margins later.

Brocade traded at 9.77, up 3.83% at 7:58 pm EDT in after-hours trading.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to wagner@lightreading.com.

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thebulk
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thebulk,
User Rank: Light Sabre
8/23/2014 | 10:27:22 PM
Re: It would seem
It will definatly be interesting to see How Cisco responds to them.
Steve Saunders
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Steve Saunders,
User Rank: Light Sabre
8/22/2014 | 9:03:54 PM
Re: It would seem
Brocade is in an amazing position to make the telecom industry interesting for everyone - including (especially) Cisco. 

Excited to see their rocket ship take off this year and next. 

Steve 

 
thebulk
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thebulk,
User Rank: Light Sabre
8/22/2014 | 5:36:24 AM
It would seem
So, it would seem that going heavy on data center has paid off for them. Let's see if there virtual play does the same.
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