Is Brocade Weaving A Winning Tale?

These are Dickensian times for the networking space; perhaps not the best of times for players like F5 (Nasdaq: FFIV), Meru (Nasdaq: MERU) and Aruba (Nasdaq: ARUN), but very strong all the same. On the other side of the ledger, a poor spending outlook at the federal government level led Cisco (Nasdaq: CSCO) to lower its guidance and now the same seems to be true for Brocade (Nasdaq: BRCD). Making matters worse, this quarter highlights that Brocade is still not able to deliver the sort of consistency that a lot of the Street really seems to crave right now. 

An Okay End to the YearIt is often wise to be wary of companies that boast of relatively meaningless accomplishments and the title of this quarter's earnings press release included mention of "all-time record revenue". Despite that yellow flag, revenue did grow more than 5% from the year-ago level, and better than 9% on a sequential basis.

Unfortunately for investors, Brocade is one of the many tech companies that muddies its financial reports with GAAP and non-GAAP reporting. On a non-GAAP basis, gross margins improved nicely on a sequential basis, as did operating margin - though the later was down on an annual comparison. At the bottom line, earnings were weaker whichever way an analyst wants to look - down 27% by GAAP math or 10% by non-GAAP calculations.


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