Brocade Communications Systems (NASDAQ:BRCD) is flying high today after reporting record revenue and solid adjusted earnings in the second quarter. Revenue jumped to $506.3 million while GAAP earnings slid down to a .16 per share loss. However, adjusted earnings came in at $0.11 per share after removing impairments mainly related to acquisition related write-downs.
GAAP numbers don't always tell the whole story, but this share price jump was justified any way you look at it. Hey, there's nothing wrong with growth by acquisition. The trick is to have the capital to spend when the market is right.
In plain GAAP terms, Brocade grew sales 43% year over year. If you back out the contributions of recently acquired Foundry Networks, you'd end up pretty much even with last year's $355 million. That's still not bad when you consider that enterprise storage rival EMC (NYSE:EMC) recently reported 9.2% year-over-year sales shrinkage, direct storage networking competitor Emulex (NYSE:ELX) plunged by 38.5%, and even everything-networker Cisco Systems (NASDAQ:CSCO) buckled under 17% lower revenue.
So stable sales on a comparable basis ain't bad at all, and the Foundry buyout added that extra oomph. Management gave credit to distribution deal with massive partners like Hewlett Packard (NYSE:HPQ) and International Business Machines (NYSE:IBM). CEO Michael Klayko hopes to leverage those "OEM and channel partner relationships to expand our footprint in the industry."
Adding Foundry to Brocade has enabled the company to reach for new markets where Ethernet switches and storage connections make a natural pairing. Having plenty of cash on hand plus a $1.1 billion credit line lined up before the financial crisis hit full force gave Brocade the opportunity to grow by acquisition when natural growth all but dried up. And as a result, the combined force looks ready and able to keep growing for years to come.
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