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Brocade Revenue Climbs on Ruckus Acquisition, But Earnings Fall Hard

Brocade reported $591 million revenue for the third quarter, up 7% year-over-year, with growth primarily driven by the acquisition of Ruckus Wireless, which closed May 27.

Brocade enjoyed "healthy product demand" for Ruckus's indoor and outdoor wireless access points and managed services platforms in the quarter ending July, Brocade CFO Dan Fairfax said in a prepared statement on Thursday's earnings call, noting that the quarter included about two months' worth of Ruckus results. (See Brocade's $1.2B Ruckus Buy to Raise 5G Game and Brocade Reports $591M 3Q Revenue Up 7% YoY.)

But the Ruckus revenue wasn't enough to make happy news for Brocade investors. For the quarter, non-GAAP diluted earnings per share (EPS) were $0.21, down 21% year-over-year, though the EPS number did exceed the outlook of $0.14-$0.17.

"Against the backdrop of a mixed macro environment, we posted solid results, with total revenue at the high end of our outlook range," Lloyd Carney, CEO of Brocade, said in a statement.

Overall IP product revenue was $209 million, including $73 million from Ruckus, representing an increase of 36% year-over-year. This was partly offset by lower US federal revenue, down 26% year-over-year.

Excluding Ruckus revenue, Brocade IP networking product revenue was $136 million, below the outlook range of $141 million to $150 million, due primarily to lower-than-anticipated US federal sales. Ethernet switch sales were down 10% year-over-year primarily due to lower US federal sales, and router sales were down 14% year-over-year.

However, Brocade expects router sales to pick up following the upcoming announcement of a big new router product, due in mid-September. (See Brocade Teases Big September Router Launch.)

IP-based global services revenue was $44 million, up 21% year-over-year, primarily due to $5 million incremental service volume from Ruckus -- below the historical run rate.

SAN product revenue was $282 million, down 9% year-over-year and in line with outlook.

Ruckus's board of directors declared a regular third-quarter fiscal quarter cash dividend of $0.055 per share, to be made October 3.

For the fourth quarter, Brocade projected revenue of $630 million to $650 million, with IP networking revenue up 17-22% quarter-to-quarter and SAN revenue up 1-4% for consecutive quarters.

Brocade's stock traded at $10.36 down 0.96% after hours.

Brocade's biggest business is and has been storage networking, but it's been on a long expansion into IP networking, with acquisitions playing a key role. That process began in 2008, when Brocade acquired Foundry Networks, for Ethernet switches and routers. Four years later, Brocade acquired Vyatta for SDN assets. (See Brocade to Acquire Foundry and Brocade Buys Vyatta for Software Routing Smarts.)

Get the latest mobile news, analysis, and opinion on Light Reading's dedicated mobile content channel.

Several acquisitions have focused on wireless technology: In addition to Ruckus, Brocade acquired Vistapointe for mobile visibility and analytics in 2014, and Connectem, a carrier-focused wireless networking specialist, last year. (See Brocade Buys NFV Management Smarts, Brocade to Acquire Connectem for Virtual Mobile Networking and Brocade Aims for Global Mobile Domination.)

Brocade bought the SteelApp application delivery controller business unit from Riverbed Technology in 2015. (See Brocade Scoops Up Riverbed's SteelApp ADC.)

And this year, it bought StackStorm to bring DevOps style automation to Brocade's networking technology. (See Brocade Buys StackStorm to Boost DevOps.)

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

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