Brocade Plunges on Weak Networking Sales

Shares of Brocade (NASDAQ: BRCD) lost nearly a quarter of their value today after the storage networking switch leader posted unexpectedly weak sales in its Ethernet business acquired from Foundry a little more than a year ago.

Brocade’s Ethernet networking sales were down 26 percent, significantly worse than the recent performance of rivals Cisco (NASDAQ: CSCO), Juniper (NASDAQ: JNPR) and HP (NYSE: HPQ). The company blamed weak government sales and a faulty OEM sales model.

“We are frustrated with Brocade’s results, not just Government Ethernet switching, but also the clear market share losses in enterprise and persistent declines in service provider Ethernet switching, as well as what we consider a lack of definitive color with the company’s strategic direction toward a recovery going forward,” Aaron Rakers, an analyst at Stifel Nicolaus, wrote in a research note this morning.

Brocade’s nascent HBA and CNA business was flat, Rakers noted, “reflecting ongoing limited traction.”

The one strong area of Brocade’s earnings report was Fibre Channel storage area network (SAN) sales, which rose 16 percent from the previous quarter, much stronger than Cisco’s recent flat showing.

Wedbush analyst Kaushik Roy called Brocade’s data storage sales “super strong.”

“It is clear that Brocade remains the dominant provider of Fibre Channel switches, with close to 70 percent market share,” Roy wrote. “But at this point investors are watching the Foundry/IP revenues.”

Broadpoint AmTech analyst Brian Marshall said it will take “a couple of quarters” for Brocade to steady its Ethernet business.

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Paul Shread
Paul Shread
eSecurity Editor Paul Shread has covered nearly every aspect of enterprise technology in his 20+ years in IT journalism, including an award-winning series on software-defined data centers. He wrote a column on small business technology for Time.com, and covered financial markets for 10 years, from the dot-com boom and bust to the 2007-2009 financial crisis. He holds a market analyst certification.

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