3 Reasons to Sell Brocade Communications Systems Today

Turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.

Consider storage networking provider Brocade Communications Systems (Nasdaq: BRCD  ) . Though the tech sector continues to show resilience, you'll find a few of the 625 Motley Fool CAPS members weighing in on the company offering reasons to be bearish.

Here at The Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I'm highlighting three of the main bearish arguments on Brocade today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Brocade in CAPS.                                                                              

1. Not there yet
Although Brocade pulled in higher sales in its fiscal fourth quarter, and other tech stalwarts like Intel (Nasdaq: INTC  ) , Cisco (Nasdaq: CSCO  ) , and Oracle (Nasdaq: ORCL  ) are showing signs of a tech recovery in recent quarterly reports, Brocade gave a weak fiscal-first-quarter sales outlook and doesn’t expect a full rebound until later in fiscal 2010. With some uncertainty surrounding the direction of its business, some investors are taking a cautious stance.                                                                                   

2. Competition
While Brocade has relationships with companies like Dell (Nasdaq: DELL  ) and IBM (NYSE: IBM  ) to expand product sales, investors continue to have concern over the threat of Cisco pushing its weight around and stealing market share from Brocade. At just a fraction of the size of Cisco, investors are keeping a close eye on Brocade’s competitive position and many view this threat as too real to discount.

3. Weak start to the new year
Brocade’s shares have gotten off to a rough start this year and have been on the decline as investors weigh recent reports from competitors like Juniper Networks and QLogic (Nasdaq: QLGC  ) . Declines in the broader market in recent weeks have been an influence, but some CAPS members are still treading carefully, noting that Brocade hasn't yet given a standout performance worthy of setting it apart from the pack.

To see details of what CAPS members are saying now about Brocade, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 50 points on average, take a free 30-day trial.

Fool contributor Dave Mock  votes 3 to be the number of the day. He owns shares of Intel, which is an Inside Value selection. Motley Fool Options has recommended a buy calls position on Intel. The Fool owns shares of Oracle. The Fool's disclosure policy sheepishly admits to playing the tambourine in high school.


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