Ahead of the Bell: Brocade dips on slower 1Q sales

AP News
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Posted: Nov 24, 2009 9:12 AM

Shares of Brocade Communications Systems Inc. fell Tuesday after the company said revenue for the first quarter won't be as strong as past quarters and an overall rebound isn't expected until the back end of the fiscal year.

Late Monday, the networking gear maker reported a 6 percent drop in fourth-quarter profit as higher costs offset an increase in revenue.

But while it affirmed its outlook for fiscal 2010, which it first gave in September, Brocade said first-quarter revenue should be up 4 to 5 percent from the fourth quarter instead of the typical seasonal increase of 6 to 8 percent, said Lazard Capital analyst Ryan Hutchinson in a research note.

The second and third quarter revenue could see no increase to some lift, and a strong fourth quarter is expected. The analyst kept his "Hold" rating on the stock.

"The sequential revenue growth commentary seems to imply a significant degree of uncertainty around the company's business," Hutchinson said.

Brocade earned $33.6 million, or 7 cents per share, in the quarter compared with $35.6 million, or 9 cents per share, a year ago. Excluding one-time items, earnings would have been 15 cents per share, beating the expectations of analysts polled by Thomson Reuters.

Revenue rose 31 percent to $521.8 million on strong growth in product sales helped by the company's Foundry Networks acquisition, topping analysts' $521.1 million estimate.

Shares of Brocade, based in San Jose, Calif., fell 18 cents, or 2.3 percent, to $7.62 in premarket trading.