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Brocade Revenue Down, IP Networking Slumps

Mitch Wagner
5/19/2016
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Brocade reported quarterly revenue down 4% year-over-year, to $523 million, reflecting declines in both its IP networking business and the traditional storage networking lines that make up the bulk of its sales.

Results were down 9% sequentially, with non-GAAP diluted earnings per share of $0.22, flat year-over-year and down from $0.29 sequentially.

CEO Lloyd Carney described the quarter as "productive" in a statement, despite "the challenging environment for both SAN and IP networking."

IP networking product revenue was $132 million, down 9% year-over-year, below outlook range, primarily due to lower router sales, down 33%, partly offset by stronger Ethernet sales, up 9% year-over-year. Reduced service provider and US federal sales drove the decline. Sequentially, IP Networking product revenue decreased 2% primarily due to lower Ethernet switch sales. That sequential revenue decline was primarily due to lower sales to enterprise customers as both the service providers and US federal revenue grew sequentially.

Revenue missed consensus by $75 million but was in line with guidance Brocade provided in a May 2 warning. (See Brocade Reports Fiscal Q2 Prelims.)

Brocade traded at $7.66, down 3.89% in after hours trading.

On the positive side, Brocade says it achieved its first customer wins for its Brocade Virtual Core for Mobile. SmartSky Networks is building an air-to-ground broadband network, using Brocade vEPC running on VMware vCloud NFV. "This solution enables SmartSky to take a software-defined approach to network infrastructure that is more agile, flexible and cost effective than a pure hardware-based approach." (See SmartSky Networks Picks Brocade, VMware for NFV.)

SAN product revenue was $297 million, down 5% year-over-year, "primarily the result of software demand across the product portfolio," Brocade said.

Brocade looked to its $1.2 billion acquisition of WiFi company Ruckus Wireless as a highlight of the quarter. Brocade says it plans to use Ruckus's assets to strengthen overall wireless and service provider and virtualized mobile strategy in the near term, and 5G in the future. (See Brocade's $1.2B Ruckus Buy to Raise 5G Game.)


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Brocade also highlighted this quarter's acquisition of StackStorm, which provides event-driven compute and storage management. (See Brocade Looks to Enterprise & Cloud With StackStorm Buy

For the third quarter, Brocade expects revenue of $510 million to $530 million, with non-GAAP EPS of $0.19 to $0.21. Brocade expects to finish its Ruckus acquisition this month, adding $50 million to $60 million to revenue, for a total $560 million to $590 million.

Brocade's board declared an increased dividend for the third fiscal quarter, $0.055 per share, a 22% increase from the $0.045 for each of the previous four quarters.

— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Enterprise Cloud, Light Reading.

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