Brocade Communications: There Is Blood on the Streets
Ockham Research submits:
Maker of data center networking equipment Brocade Communications Systems (BRCD) is enduring a very strong sell off on Tuesday. Following their first quarter earnings report, BRCD is trading down more than 20% on huge volume in early morning trading. The reason for the trouncing was a miss on the top line results in addition to a worse than expected guidance for the rest of the year. Excluding one-time events earnings came in at $.19 per share or four cents better than expectations, and compared favorably to a loss of 6 cents per share last year. However, revenue growth of 25% to $539.5 million was a disappointment from expectations of $548.4 million.
The more distressing factor was Brocade management’s cautious outlook for full year earnings $.54 to $.58 per share, which is less than previous guidance. They also anticipate sales to total $2.15-$2.19 billion, which pales in comparison to the previous outlook of $2.25-$2.45 billion. The softness is due to a slower than expected recovery in their Ethernet switching business. The company lost market share in enterprise and service provider Ethernet switching, which has caused a number of analysts to downgrade the company today, adding to pressure on
shares. On the whole though, the analyst community remains quite positive on BRCD, as the majority have a positive outlook on shares and the median price target is $9 per share. With the stock trading at $5 and change today, the analysts are seeing a 67% increase in price as a reasonable expectation.
Investing, Long Term Investment, stock market | admin February 23, 2010
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