Brocade CEO says company not for sale, shares drop

AP News
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Posted: Nov 24, 2009 3:23 PM

Shares of Brocade Communications Systems Inc. fell Tuesday after the company denied speculation that it's looking for a buyer.

"That's just wrong. Why would we want to go ahead and do that when we have never been in a better position than we are today?" CEO Mike Klayko said in a corporate video on fourth quarter results.

He said Brocade has taken the trouble to provide a full suite of products and services to compete with larger competitors and it's "winning."

Shares of Brocade fell 71 cents, or 9.1 percent, to $7.09 in afternoon trading on heavy volume.

"Brocade's stock is under a little bit of pressure since investors hoping for an acquisition are exiting the stock," said Wedbush Morgan analyst Kaushik Roy in a research note.

Late Monday, the networking equipment maker also warned that the first quarter won't be as strong as the same quarter in past years and an overall rebound isn't expected until the back end of fiscal 2010.

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. The second and third quarter revenue could see no increase to some lift, and a strong fourth quarter is expected.

Brocade reported fourth-quarter earnings of $33.6 million, or 7 cents per share, 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 surveyed 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.