Brocade Earnings Could Stay in No-Growth Mode

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Brocade Communications (NASDAQ: BRCD  ) will release its quarterly report on Tuesday, and the stock has climbed substantially in recent months, as investors begin to expect bigger and better things from the demands of Big Data, and other technological initiatives on the network-storage and Ethernet sector. Yet, those prospects haven't yet translated to strong growth in Brocade earnings, leaving shareholders concerned about whether the company will take advantage of favorable trends in the industry when they appear.

Value plays in the tech sector are few and far between, but Brocade has traded at relatively modest valuations for a long time. The problem, though, is that those low valuations merely reflect the skepticism that investors have about whether the company can ever return to a higher-growth trajectory. Let's take an early look at what's been happening with Brocade Communications over the past quarter, and what we're likely to see in its quarterly report.

Stats on Brocade Communications

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$518.84 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How can Brocade earnings begin to accelerate?
Analysts have trimmed their views in recent months on Brocade earnings, with $0.03 per share reductions in both July quarter and full-year fiscal 2013 estimates. The stock, though, has ignored those concerns and climbed substantially, with gains of more than 25% since early May.

Brocade's April-quarter results showed the dilemma that the company's investors face. On one hand, earnings came in better than expected, as adjusted net income rose 8%. But revenue fell almost 1% from the year-ago quarter, and Brocade's guidance didn't lead shareholders to conclude that strong growth would be forthcoming in future quarters.

Brocade has been doing its best to highlight its role in the Big Data movement. In June, the company made a presentation at the Hadoop Summit in San Jose, talking about its Ethernet-fabric offerings, and explaining why these products, which are specifically designed for virtualized data-center environments, are superior to traditional Ethernet architecture designs.

Yet, competition remains fierce. Cisco (NASDAQ: CSCO  ) has muscled its way into the storage-area networking space, which is responsible for more than half of Brocade's revenue. With Cisco's market share dwarfing Brocade's and hampering its storage-area network business, it's becoming increasingly likely that Brocade will have to focus more on its Ethernet business for future growth. In the virtualization space, Oracle (NYSE: ORCL  ) and VMware (NYSE: VMW  ) have both been working hard to cement their positions, although a partnership between Brocade and VMware should give Brocade a stronger presence in the cloud-based data center business. Like Cisco, Oracle is big enough to threaten Brocade with a potential price war, if necessary, to bolster its competitive position within the industry.

In the Brocade earnings report, watch to see how the company's various segments shape up. If Brocade can't stand up to competition in its core storage business, it could take a while for the potential of Ethernet fabric to make up for slowing storage revenue. In the long run, though, that might be the best way for Brocade to get out of no-growth mode and move forward more aggressively.

Interested in the next tech revolution? Then you'll need to learn about the radical technology shift some say forced the mighty Bill Gates into a premature retirement. Meanwhile, early in-the-know investors are already getting filthy rich off of it... by quietly investing in the three companies that control its fortune-making future. You've likely heard of one of them, but you're probably never heard of the other two... to find out what they are, click here to watch this shocking video presentation!

Click here to add Brocade Communications to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2589462, ~/Articles/ArticleHandler.aspx, 9/29/2016 11:58:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,302.44 -36.80 -0.20%
S&P 500 2,167.13 -4.24 -0.20%
NASD 5,294.94 -23.61 -0.44%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 11:42 AM
BRCD $9.18 Down -0.01 -0.05%
Brocade Communicat… CAPS Rating: ****
CSCO $31.46 Down -0.04 -0.13%
Cisco Systems CAPS Rating: ****
ORCL $39.52 Up +0.08 +0.21%
Oracle CAPS Rating: ****
VMW $73.72 Down -0.13 -0.18%
VMware CAPS Rating: ***