Investors Send Brocade Shares Into the Fire After Earnings Beat

By Chris Lange Updated Jan 13, 4:13AM EST · Published Aug 26, 10:55AM EDT

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Investors Send Brocade Shares Into the Fire After Earnings Beat — © Thinkstock

Brocade Communications Systems Inc. (NASDAQ: BRCD) reported its fiscal third-quarter results after the markets closed on Thursday. This company beat estimates handily on both the top and bottom lines, but this was apparently not enough for investors, as they sent the stock down.

The company posted $0.21 in earnings per share (EPS) on $590.7 million in revenue, which compared to consensus estimates from Thomson Reuters of $0.17 in EPS on $576.3 million in revenue. In the same period of last year, Brocade reported EPS of $0.27 and revenue of $552 million.

Toward the end of May, Brocade completed the acquisition of Ruckus Wireless, further enhancing Brocade’s position as a pure-play networking company with solutions spanning from the heart of the data center to the wireless network edge.

The company said IP Networking product revenue was up 36% from last year at $209 million, which included $73 million of product revenue from Ruckus Wireless. The increase was due to the acquisition of Ruckus Wireless, partially offset by lower U.S. federal revenue, which was down 26% year over year. Sequentially, IP Networking product revenue increased 59% due, primarily to the inclusion of Ruckus revenue.

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SAN product revenue of $282 million was down 9% year over year. The year-over-year decline was primarily the result of lower Fibre Channel director sales, which decreased 23%.

The board of directors declared a regular third fiscal quarter cash dividend of $0.055 per share of common stock. The dividend payment will be made on October 3, to stockholders of record at the market close on September 9.

Lloyd Carney, CEO of Brocade, commented:

Against the backdrop of a mixed macro environment, we posted solid results, with total revenue at the high end of our outlook range. During Q3, we also continued the momentum of new product innovations across our portfolio, building a solid foundation for business growth and expansion of our addressable markets. Furthermore, with the successful completion of our acquisition of Ruckus Wireless in the quarter, we are pleased to welcome this talented and committed team to the Brocade family. Our combined strengths open up new opportunities and distinguish Brocade as a pure-play networking company for the digital transformation era.

On the books, Brocade’s cash and cash equivalents totaled $1.15 billion at the end of the quarter, versus $1.44 billion at the end of the previous fiscal year.

Shares of Brocade were trading down over 12% to $9.18 on Friday, with a consensus analyst price target of $9.54 and a 52-week trading range of $7.40 to $10.94.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.