Brocade 4Q profit drops on costs; backs guidance

AP News
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Posted: Nov 23, 2009 9:33 PM

Networking gear maker Brocade Communications Systems Inc. said Monday its fourth-quarter profit fell 6 percent as hefty costs offset a surge in revenue, but reiterated its guidance for fiscal 2010.

Net income in the three months ended Oct. 31 fell to $33.6 million, or 7 cents per share, from $35.6 million, or 9 cents per share, a year ago. The company said the cost of goods sold ballooned to $250.9 million from $153.4 million, while research and development, sales and markeing and legal fees also jumped year-over-year.

Still, adjusted to exclude one-time items such as litigation fees and restructuring costs, earnings would have totaled 15 cents per share in the latest period, beating the expectations of analysts polled by Thomson Reuters by 2 cents.

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

CEO Mike Klayko said in a statement that Brocade is benefitting from "the relentless growth in data and network traffic, which continues to remain robust regardless of economic cycles."

For the full year, Brocade lost $76.5 million, or 19 cents per share, reversing a year-earlier profit, though revenue grew 33 percent to $1.95 billion.

Brocade continues to see its adjusted earnings for fiscal 2010 ranging between 56 cents and 61 cents per share, with revenue between $2.25 billion and $2.45 billion. On average, analysts have forecast profit of 61 cents per share on revenue of $2.28 billion.

The company said in a statement posted on its Web site that it expects IT spending will continue to recover during the first half of 2010 and approach normalcy in the second half of the year.

Shares of Brocade closed down 21 cents, or 2.7 percent, at $7.80 before the earnings were released. The stock has fallen 16 percent since Hewlett-Packard Co. announced its $2.7 billion takeover of 3Com Corp. on Nov. 11. Analysts have said that deal dims the prospect of a partnership between HP and Brocade for corporate networking equipment.