Shares of Brocade Communications Systems Inc. fell in Thursday morning trading after Wall Street was not satisfied by the data networking technology company's fiscal second-quarter results.
Brocade's adjusted profit and revenue were both greater than analysts estimated, but analysts had questions about how weakness in the U.S. economy might affect demand for Brocade products. Some were also disappointed by the company's fiscal third-quarter outlook.
BMO Capital Markets analyst Keith Bachman said Brocade reported less product revenue than he expected. Product revenue made up about 83 percent of the company's total in the April quarter, and while the smaller service business did better than expected, Bachman said product revenue has fallen in three of the past four quarters.
Operating expenses are taking up a larger portion of Brocade's revenue, he added.
In the third quarter, Brocade said it expects to earn 4 to 5 cents per share, or 13 to 14 cents per share excluding one-time items. The company forecast revenue of $345 million to $355 million, down slightly from the second quarter.
On average, analysts polled by Thomson Financial expect 14 cents per share in profit on $350.5 million in revenue.
Caris & Co. analyst Shebly Seyrafi downgraded the stock to "Average" from "Buy."
Shares lost 32 cents, or 4 percent, to $7.70 in morning trading.
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