November 23, 2010 – Brocade set an all-time revenue record in its fiscal fourth quarter, and narrowly exceeded analysts’ expectations, raking in about $550 million. That’s up 9.3% over the previous quarter and up 5.5% year-over-year.
However, the company posted a net profit of $66 million in 4Q10, or 14 cents a share, which is down from $73 million, or 15 cents a share, a year ago. In addition, guidance for the current quarter was, well, cautious. Company executives predicted revenue for the current quarter of $535 million to $550 million, which translates into flat to -3% growth vs. the previous year That guidance was below Street projections. Brocade’s 1Q11 guidance was variously described as “cautious,” “tepid” and “dour.”
In other words, the company’s performance in this quarter was stellar, but the outlook for 1Q11 disappointed. Mixed signals, indeed.
Brocade earned the applause of analysts – and some Buy ratings -- by (narrowly) exceeding their expectations, but investors sent the stock down late Monday, a slide that continued into Tuesday, presumably because of the lackluster projections for the current quarter.
Brocade (NASDAQ: BRCD) shares closed at $5.13 today, down 10%.
Personally, I don’t think Brocade’s guidance on this quarter looks very bad at all, given an expected slowdown or stall in federal spending and Brocade’s challenging competitive position on the Ethernet side of the business against Cisco, HP and others.
Speaking of which, Brocade’s Ethernet-related revenue numbers suggest that the company is picking up steam against those formidable rivals.
4Q10 revenue from Brocade’s Ethernet line was $142.6 million (representing 26% of total revenue.) That’s an increase of 17% vs. the previous quarter. And the company gained about 300 new customers for its Ethernet switch line in the fourth quarter, bringing the total to 1,600 since the acquisition of Foundry.
Brocade’s SAN storage business remained at about 57% of total revenue (vs. 58% in the last quarter), or $316 million. Services accounted for the remainder of the total revenue, or about $92 million.
Gross margin was 62.3%, compared to 54.1% in the previous quarter.
Related articles:
Brocade, HP debut 8Gbps SAN starter bundles
Brocade tackles network convergence, VM mobility
Brocade increases density, throughput of DCX Backbone
Showing posts with label Brocade. Show all posts
Showing posts with label Brocade. Show all posts
Tuesday, November 23, 2010
Monday, October 4, 2010
Who will be acquired next? And the Top 10 are . . .
UPDATED October 21, 2010 -- Following HP's $2.4 billion acquisition of 3PAR, speculation continues to run rampant over which storage vendors will be acquired next. Whether it's a good thing or a bad thing from the perspective of end users, further contraction in the industry is inevitable as the largest IT vendors attempt to control the entire IT stack and the pure-play storage vendors plug the gaps in their product lines in order to goose revenue growth.
For the following list of the Top 10 storage acquisition candidates, I factored in the opinions of InfoStor.com readers, which I received after posting "The Top 10 storage acquisitions of 2010." Interestingly, the majority of the reader responses came from channel professionals -- VARs and integrators -- leading me to believe that channel pros are much more interested in mergers and acquisitions than are end users. I also factored in opinions from industry and financial analysts. And topped it off with my own misguided opinions.
(Note: The ticker symbol links below take you to that company's entry page on the InfoStor Market Index, which provides up-to-the-minute info on the company's stock as well as company- and competitor-related news.)
#1 -- Isilon
I don't understand why CommVault's (NSDQ: CLVT) stock jumped so high during the HP-Dell-3PAR bidding war, but it did. I guess it was because CommVault has been an acquisition speculation darling for years.
CommVault has done a great job stealing revenue from the big four vendors in the data protection space, in part because CommVault's underlying architecture is newer and designed better for rapid enhancements, as evidenced in the recent release of its Simpana 9 software (see "CommVault unveils Simpana 9").
Conventional wisdom on Wall Street has Dell (NSDQ: DELL) as the most likely suitor under the assumption that none of the leading backup/recovery vendors (EMC, Symantec, IBM, CA) would be interested in CommVault, but I'm not so sure about that. Any of those vendors would have to eat some crow if they acquired CommVault, but they might be better positioned for the long haul.
Another possible CommVault suitor: NetApp which, by the way, is the #4 storage software vendor -- ahead of CA and HP (see "The Top 6 storage software vendors").
In addition to the fact that many financial analysts put the company at the top of their storage acquisition target lists, CommVault earns the #2 spot on this list because I think the storage M&A focus is going to shift from hardware to software. And with CommVault, it's hard to argue with low debt, high growth and high margins.
#3, #4 -- Compellent, Xiotech
Isilon, Compellent and Xiotech have all been cited often as potential Dell acquisitions post-3PAR/HP. I doubt it, because Isilon/Compellent/Xiotech are gap pluggers rather than the game changer that 3PAR would have been for Dell. Isilon, Compellent or Xiotech don't give Dell the high-end array technology that would enable Dell to go up against EMC/IBM/Hitachi, although they would be good complements to Dell's EqualLogic line. On the other hand, any one of these disk array vendors would help Dell doff its "Dude, you're getting a Dell" image.
Given their technology differentiators, and the difficulty of being a relatively small player in the contracting disk array market, it's likely that one or both of these vendors will be acquired by someone.
Xiotech, which is not publicly traded and has a nice differentiator with its Intelligent Storage Element (ISE) technology, would be the least expensive buy in this category.
The question with Compellent is whether the company has enough differentiation from what the potential acquirers already have in their portfolios.
#5 -- Permabit
Earlier this year, Permabit introduced an "OEM embeddable" version of its data deduplication software. dubbed Albierio. The company seems to be off to a good start with its OEM strategy, having already racked up reseller deals with BlueArc and Xiotech (see "Data deduplication: Permabit finds success with OEM model").
As the last standing "independent" data deduplication player, Permabit could thrive with its OEM model, but in light of the IBM-Storwize and Dell-Ocarina acquisitions in the data reduction space I think Permabit is an attractive acquisition candidate. The company's focus now is on deduplication for primary storage, but there's no reason Permabit's technology couldn't be used across all storage tiers -- and that could be very attractive for some of the larger storage vendors that have a diverse mix of data reduction solutions in their portfolios. Of course, that assumes that a "one size fits all" approach to data reduction is the way the larger vendors want to go in this space.
#6 - Brocade
IBM has been mentioned most frequently as a potential suitor for Brocade. That might have changed recently with Big Blue's announcement that it plans to acquire Blade Network Technologies (BNT), making it less likely that IBM would go for Brocade.
BNT specializes in blade and rack Ethernet switches, so it's not an overlap with Brocade's business, but the IBM-BNT acquisition will still dampen speculation that IBM will scoop up Brocade. More likely, perhaps, IBM will go after Juniper Networks. (Both Brocade and Juniper are IBM partners and, making it even more interesting, Juniper is a BNT partner.)
If we take IBM out of the Brocade acquirer lineup, that would leave Dell as the most likely acquirer (although Dell is also tight with Juniper). But that goes to the heart of the question of whether Dell will, post-3PAR, try for another disk array vendor (Isilon, Compellent, Xiotech?), software vendor (CommVault?) or surprise everyone and light out into LAN/SANland via Brocade.
Making a Dell acquisition shift toward networking more likely, Dell recently hired a former Cisco exec -- Dario Zamarian -- to run its networking business. Assuming Dell turns to networking in its acquisition spree, it's a 50/50 bet between Brocade and Juniper, according to some Wall Street wags.
In an article posted on MarketWatch (see "Brocade targeted by M&A rumor mill"), Wedbush analyst Kaushik Roy was quoted as saying, "It makes a lot more sense for Dell to buy Brocade than IBM. With Dell, it's a no-brainer. If Dell has half of a brain, they should be taking Brocade out right now."
Then again, if Dell goes after Brocade (NSDQ: BRCD), they could wind up in another crazy bidding war with, say, IBM or Oracle. And Dell's been there, done that.
In addition to IBM and Dell, analysts have cited Oracle and Hitachi as possible acquirers.
#7 -- BlueArc
Hitachi Data Systems (HDS) has been mentioned as a potential suitor for BlueArc, but it doesn't seem to be in HDS' genes to take the acquisitions route. But HDS and BlueArc do have a tight relationship and BlueArc has some attractive technology differentiators.
# 8 -- FalconStor
Only one of our readers mentioned FalconStor as an acquisition target, and it was in the context of the company potentially being acquired by HDS or NEC, but FalconStor would be relatively inexpensive and the company has great technology (although not everybody knows it because FalconStor's software is often sold "under the covers" by its OEMs and resellers).
In addition to getting storage management and data protection software (VTL, CDP, data deduplication, replication, etc.) across a variety of product lines, an acquirer could put the hurt on a lot of competitors because, although a relatively small company, FalconStor's tentacles reach across a lot of vendors via its reseller deals.
The possibility of FalconStor (NSDQ: FALC) being acquired heightened recently with the resignation of ReiJane Huai, the company's CEO. In the wake of the resignation, FalconStor tapped Jim McNiel as interim CEO and president. Some analysts think that McNiel may be more open to acquisition than was Huai.
#9 -- Symantec
The latest rumors regarding Symantec centered on Microsoft as a potential acquirer (see "Is Microsoft Looking to Buy Symantec?" on InfoStor sister site eSecurity Planet).
However, that (unlikely) move would be more for Symantec's security product line, rather than its storage software, and would be in response to Intel's acquisition of McAfee.
Given the breadth of Symantec's product line, and the fact that the company would be expensive and is not a pure-play storage vendor, I put Symantec low on this list. I don't see Symantec being bought any time soon, if only because of the company's huge market cap.
#10 -- NetApp
Rumors about NetApp (NSDQ: NTAP) being acquired have existed as long as the rumors surrounding CommVault and Brocade have, maybe longer. I think the time to buy NetApp is long gone, but due to the persistence of the rumors the company still makes our Top 10 list.
I see NetApp more as an acquirer than a target. The problem with that (for NetApp) is that, if the IT market does contract down to five or six soup-to-nuts vendors, NetApp doesn't have a chance of making that list even if it does dip into its deep piggy bank to make some acquisitions. It's that logic that keeps NetApp on our Top 10 acquisition targets list.
One other company that occasionally comes up in acquisition conversations is Quantum. This would be for the company's data deduplication technology and products. However, an acquirer would also get Quantum's tape business, and I don't think any of the likely acquiring vendors is looking to add tape to their portfolio.
And in the Least-Likely-But-Often-Mentioned category of acquisition targets: EMC. The Wall Street Journal reported last week that Oracle may be eying EMC (see "EMC Shares Rise On Oracle Buyout Rumor"). Sure, that would fill in the Tier-1 storage hole in Oracle's portfolio and, more importantly, give them VMware, but I still think the Oracle-EMC acquisition speculation is ludicrous.
Related blog post:
The Top 10 storage acquisitions of 2010
For the following list of the Top 10 storage acquisition candidates, I factored in the opinions of InfoStor.com readers, which I received after posting "The Top 10 storage acquisitions of 2010." Interestingly, the majority of the reader responses came from channel professionals -- VARs and integrators -- leading me to believe that channel pros are much more interested in mergers and acquisitions than are end users. I also factored in opinions from industry and financial analysts. And topped it off with my own misguided opinions.
(Note: The ticker symbol links below take you to that company's entry page on the InfoStor Market Index, which provides up-to-the-minute info on the company's stock as well as company- and competitor-related news.)
#1 -- Isilon
Isilon scooted to the top of this list because of two recent developments: (a) The company hired Qatalyst Partners to solicit potential acquisition offers. Qatalyst was the advisor to Data Domain when EMC acquired Data Domain, and Qatalyst also shepherded the HP-3PAR acquisition. (b) The NY Post reported on Friday that EMC may be close to acquiring Isilon for about $2 billion (see "EMC in exclusive talks to buy Isilon").
Isilon is known primarily for its strengths in scale-out NAS, but the company recently added support for the iSCSI SAN protocol in its OneFS operating system, enabling both file (NAS) and block (SAN) I/O under a single file system (although Isilon's storage systems do not support the Fibre Channel or FCoE protocols).
In addition to EMC, financial analysts have cited Dell, HP and IBM (and, less likely, Oracle or Cisco) as potential acquirers of Isilon (NSDQ: ISLN).
#2 -- CommVaultI don't understand why CommVault's (NSDQ: CLVT) stock jumped so high during the HP-Dell-3PAR bidding war, but it did. I guess it was because CommVault has been an acquisition speculation darling for years.
CommVault has done a great job stealing revenue from the big four vendors in the data protection space, in part because CommVault's underlying architecture is newer and designed better for rapid enhancements, as evidenced in the recent release of its Simpana 9 software (see "CommVault unveils Simpana 9").
Conventional wisdom on Wall Street has Dell (NSDQ: DELL) as the most likely suitor under the assumption that none of the leading backup/recovery vendors (EMC, Symantec, IBM, CA) would be interested in CommVault, but I'm not so sure about that. Any of those vendors would have to eat some crow if they acquired CommVault, but they might be better positioned for the long haul.
Another possible CommVault suitor: NetApp which, by the way, is the #4 storage software vendor -- ahead of CA and HP (see "The Top 6 storage software vendors").
In addition to the fact that many financial analysts put the company at the top of their storage acquisition target lists, CommVault earns the #2 spot on this list because I think the storage M&A focus is going to shift from hardware to software. And with CommVault, it's hard to argue with low debt, high growth and high margins.
#3, #4 -- Compellent, Xiotech
Isilon, Compellent and Xiotech have all been cited often as potential Dell acquisitions post-3PAR/HP. I doubt it, because Isilon/Compellent/Xiotech are gap pluggers rather than the game changer that 3PAR would have been for Dell. Isilon, Compellent or Xiotech don't give Dell the high-end array technology that would enable Dell to go up against EMC/IBM/Hitachi, although they would be good complements to Dell's EqualLogic line. On the other hand, any one of these disk array vendors would help Dell doff its "Dude, you're getting a Dell" image.
Given their technology differentiators, and the difficulty of being a relatively small player in the contracting disk array market, it's likely that one or both of these vendors will be acquired by someone.
Xiotech, which is not publicly traded and has a nice differentiator with its Intelligent Storage Element (ISE) technology, would be the least expensive buy in this category.
The question with Compellent is whether the company has enough differentiation from what the potential acquirers already have in their portfolios.
#5 -- Permabit
Earlier this year, Permabit introduced an "OEM embeddable" version of its data deduplication software. dubbed Albierio. The company seems to be off to a good start with its OEM strategy, having already racked up reseller deals with BlueArc and Xiotech (see "Data deduplication: Permabit finds success with OEM model").
As the last standing "independent" data deduplication player, Permabit could thrive with its OEM model, but in light of the IBM-Storwize and Dell-Ocarina acquisitions in the data reduction space I think Permabit is an attractive acquisition candidate. The company's focus now is on deduplication for primary storage, but there's no reason Permabit's technology couldn't be used across all storage tiers -- and that could be very attractive for some of the larger storage vendors that have a diverse mix of data reduction solutions in their portfolios. Of course, that assumes that a "one size fits all" approach to data reduction is the way the larger vendors want to go in this space.
#6 - Brocade
IBM has been mentioned most frequently as a potential suitor for Brocade. That might have changed recently with Big Blue's announcement that it plans to acquire Blade Network Technologies (BNT), making it less likely that IBM would go for Brocade.
BNT specializes in blade and rack Ethernet switches, so it's not an overlap with Brocade's business, but the IBM-BNT acquisition will still dampen speculation that IBM will scoop up Brocade. More likely, perhaps, IBM will go after Juniper Networks. (Both Brocade and Juniper are IBM partners and, making it even more interesting, Juniper is a BNT partner.)
If we take IBM out of the Brocade acquirer lineup, that would leave Dell as the most likely acquirer (although Dell is also tight with Juniper). But that goes to the heart of the question of whether Dell will, post-3PAR, try for another disk array vendor (Isilon, Compellent, Xiotech?), software vendor (CommVault?) or surprise everyone and light out into LAN/SANland via Brocade.
Making a Dell acquisition shift toward networking more likely, Dell recently hired a former Cisco exec -- Dario Zamarian -- to run its networking business. Assuming Dell turns to networking in its acquisition spree, it's a 50/50 bet between Brocade and Juniper, according to some Wall Street wags.
In an article posted on MarketWatch (see "Brocade targeted by M&A rumor mill"), Wedbush analyst Kaushik Roy was quoted as saying, "It makes a lot more sense for Dell to buy Brocade than IBM. With Dell, it's a no-brainer. If Dell has half of a brain, they should be taking Brocade out right now."
Then again, if Dell goes after Brocade (NSDQ: BRCD), they could wind up in another crazy bidding war with, say, IBM or Oracle. And Dell's been there, done that.
In addition to IBM and Dell, analysts have cited Oracle and Hitachi as possible acquirers.
#7 -- BlueArc
Hitachi Data Systems (HDS) has been mentioned as a potential suitor for BlueArc, but it doesn't seem to be in HDS' genes to take the acquisitions route. But HDS and BlueArc do have a tight relationship and BlueArc has some attractive technology differentiators.
# 8 -- FalconStor
Only one of our readers mentioned FalconStor as an acquisition target, and it was in the context of the company potentially being acquired by HDS or NEC, but FalconStor would be relatively inexpensive and the company has great technology (although not everybody knows it because FalconStor's software is often sold "under the covers" by its OEMs and resellers).
In addition to getting storage management and data protection software (VTL, CDP, data deduplication, replication, etc.) across a variety of product lines, an acquirer could put the hurt on a lot of competitors because, although a relatively small company, FalconStor's tentacles reach across a lot of vendors via its reseller deals.
The possibility of FalconStor (NSDQ: FALC) being acquired heightened recently with the resignation of ReiJane Huai, the company's CEO. In the wake of the resignation, FalconStor tapped Jim McNiel as interim CEO and president. Some analysts think that McNiel may be more open to acquisition than was Huai.
#9 -- Symantec
The latest rumors regarding Symantec centered on Microsoft as a potential acquirer (see "Is Microsoft Looking to Buy Symantec?" on InfoStor sister site eSecurity Planet).
However, that (unlikely) move would be more for Symantec's security product line, rather than its storage software, and would be in response to Intel's acquisition of McAfee.
Given the breadth of Symantec's product line, and the fact that the company would be expensive and is not a pure-play storage vendor, I put Symantec low on this list. I don't see Symantec being bought any time soon, if only because of the company's huge market cap.
#10 -- NetApp
Rumors about NetApp (NSDQ: NTAP) being acquired have existed as long as the rumors surrounding CommVault and Brocade have, maybe longer. I think the time to buy NetApp is long gone, but due to the persistence of the rumors the company still makes our Top 10 list.
I see NetApp more as an acquirer than a target. The problem with that (for NetApp) is that, if the IT market does contract down to five or six soup-to-nuts vendors, NetApp doesn't have a chance of making that list even if it does dip into its deep piggy bank to make some acquisitions. It's that logic that keeps NetApp on our Top 10 acquisition targets list.
One other company that occasionally comes up in acquisition conversations is Quantum. This would be for the company's data deduplication technology and products. However, an acquirer would also get Quantum's tape business, and I don't think any of the likely acquiring vendors is looking to add tape to their portfolio.
And in the Least-Likely-But-Often-Mentioned category of acquisition targets: EMC. The Wall Street Journal reported last week that Oracle may be eying EMC (see "EMC Shares Rise On Oracle Buyout Rumor"). Sure, that would fill in the Tier-1 storage hole in Oracle's portfolio and, more importantly, give them VMware, but I still think the Oracle-EMC acquisition speculation is ludicrous.
Related blog post:
The Top 10 storage acquisitions of 2010
Thursday, May 20, 2010
Brocade’s earnings report is boring
May 20, 2010 – Brocade’s report today on its fiscal second quarter earnings was boring, at least compared to, say, Dell’s dazzling report today, HP’s home run earlier this week, or even to Brocade’s bubbly Q1 results.
The best thing you could say about Brocade’s earnings was that there were earnings. The company turned a net profit of $22.4 million in the second quarter. That compares to a net loss of $66.1 million for the same period last year.
Brocade (NSDQ: BRCD) reported Q2 revenues of $501 million, which was 1.1% off its Q2 2009 revenue. That’s what was so surprising: There wasn’t much change in this period vs. the same period a year ago.
For example, if you break Brocade’s business into three major segments, the SAN (Fibre Channel) business accounted for 56% of the company’s total revenues in Q2 2010 vs. 58% in Q2 2009. Global services represented 18% of total revenues, vs. 17% last year, and Ethernet accounted for 26%, vs. 25% in Q2 2009.
The highlight of the Fibre Channel king’s revenue report was . . . Ethernet. Brocade’s Ethernet business posted a 34% gain over the first quarter of this year (although only 2% year-over-year). In fact, Q2 was Brocade’s highest revenue quarter for Ethernet ($156.7 million in products and services) since the company acquired Foundry.
The other bright spot was a surge in Brocade’s federal business, which soared 161% over Q1 revenues.
Brocade officials stuck to their previous prediction of full fiscal 2010 revenues in the $2.1 billion to $2.2 billion range.
Related articles:
EMC expands converged networking deals with Brocade, Cisco
Brocade, EMC lay groundwork for private clouds
Brocade CNAs qualified by EMC, HDS, IBM, NetApp
Solid storage growth in HP’s Q2 report
The best thing you could say about Brocade’s earnings was that there were earnings. The company turned a net profit of $22.4 million in the second quarter. That compares to a net loss of $66.1 million for the same period last year.
Brocade (NSDQ: BRCD) reported Q2 revenues of $501 million, which was 1.1% off its Q2 2009 revenue. That’s what was so surprising: There wasn’t much change in this period vs. the same period a year ago.
For example, if you break Brocade’s business into three major segments, the SAN (Fibre Channel) business accounted for 56% of the company’s total revenues in Q2 2010 vs. 58% in Q2 2009. Global services represented 18% of total revenues, vs. 17% last year, and Ethernet accounted for 26%, vs. 25% in Q2 2009.
The highlight of the Fibre Channel king’s revenue report was . . . Ethernet. Brocade’s Ethernet business posted a 34% gain over the first quarter of this year (although only 2% year-over-year). In fact, Q2 was Brocade’s highest revenue quarter for Ethernet ($156.7 million in products and services) since the company acquired Foundry.
The other bright spot was a surge in Brocade’s federal business, which soared 161% over Q1 revenues.
Brocade officials stuck to their previous prediction of full fiscal 2010 revenues in the $2.1 billion to $2.2 billion range.
Related articles:
EMC expands converged networking deals with Brocade, Cisco
Brocade, EMC lay groundwork for private clouds
Brocade CNAs qualified by EMC, HDS, IBM, NetApp
Solid storage growth in HP’s Q2 report
Wednesday, May 19, 2010
Solid storage growth in HP’s Q2 report
May 19, 2010 – Storage wasn’t the brightest spot in HP’s fiscal Q2 earnings report yesterday, but it was far from the darkest spot. In fact, there weren’t any dark spots.
The only laggards were software (down 1% from last year) and services (which grew only 2% from the previous year, to $8.7 billion).
Overall, HP (NYSE: HPQ) posted revenue for the second quarter of $30.8 billion, up 13% over the same quarter last year. Net earnings were $2.2 billion for the quarter, an increase of 28% from fiscal Q2 2009.
It’s difficult to put context on earnings these days because of the relative macro economic conditions today vs. a year ago, but by anyone’s estimates this was a stellar performance by HP in a still-tough climate.
In fact, it prompted The Motley Fool to pen a column comparing HP to IBM (see “HP is the New Big Blue”).
Unfortunately, HP does not get real granular in breaking down its product lines, but the Enterprise Storage and Server segment racked up $4.5 billion in total revenue, up 31% over the previous year. That segment was led by Industry Standard Server revenue, which increased 54%, while the Storage segment revenue increased a solid 16%, with the EVA product line up 3%.
Operating profit for the Enterprise Storage and Servers segment was $571 million (12.6% of revenue), which was up from $250 million (7.2% of revenue) in Q2 2009.
HP is clearly a bellwether for the overall IT industry, although not so much for the storage sector. However, NetApp and Brocade are bellwethers for the storage industry. Brocade (NSDQ: BRCD) will report results for its fiscal second quarter after the market closes tomorrow (Thurs., May 20), and NetApp (NSDQ: NTAP) will announce results for its fiscal fourth quarter next week (Wed., May 26).
Stay tuned to see if you’re in the right business or not as the market turns.
For comments on the results from Brocade’s and NetApp’s previous quarter earnings report, see my blog posts:
Brocade’s earnings a mixed bag
NetApp hit$ a home run
The only laggards were software (down 1% from last year) and services (which grew only 2% from the previous year, to $8.7 billion).
Overall, HP (NYSE: HPQ) posted revenue for the second quarter of $30.8 billion, up 13% over the same quarter last year. Net earnings were $2.2 billion for the quarter, an increase of 28% from fiscal Q2 2009.
It’s difficult to put context on earnings these days because of the relative macro economic conditions today vs. a year ago, but by anyone’s estimates this was a stellar performance by HP in a still-tough climate.
In fact, it prompted The Motley Fool to pen a column comparing HP to IBM (see “HP is the New Big Blue”).
Unfortunately, HP does not get real granular in breaking down its product lines, but the Enterprise Storage and Server segment racked up $4.5 billion in total revenue, up 31% over the previous year. That segment was led by Industry Standard Server revenue, which increased 54%, while the Storage segment revenue increased a solid 16%, with the EVA product line up 3%.
Operating profit for the Enterprise Storage and Servers segment was $571 million (12.6% of revenue), which was up from $250 million (7.2% of revenue) in Q2 2009.
HP is clearly a bellwether for the overall IT industry, although not so much for the storage sector. However, NetApp and Brocade are bellwethers for the storage industry. Brocade (NSDQ: BRCD) will report results for its fiscal second quarter after the market closes tomorrow (Thurs., May 20), and NetApp (NSDQ: NTAP) will announce results for its fiscal fourth quarter next week (Wed., May 26).
Stay tuned to see if you’re in the right business or not as the market turns.
For comments on the results from Brocade’s and NetApp’s previous quarter earnings report, see my blog posts:
Brocade’s earnings a mixed bag
NetApp hit$ a home run
Wednesday, February 24, 2010
Brocade’s earnings a mixed bag
February 24, 2010 – At first glance, Brocade’s Q1 financial report looked pretty good this week. The company reported revenue of $539.5 million. That compares to $431.6 million in the same period a year ago (although below the $548.4 million average predicted by analysts), for a 25% year-over-year increase.
And the company turned a tidy profit. Net income for Brocade’s first quarter (which ended January 30) was $51.1 million. That compares to a net loss of $23.9 million in the same period last year.
Not as good as NetApp’s recent financial report (see “NetApp hit$ a home run” ), but not bad.
However, Brocade’s stock price got hammered (plummeting more than 20%) and a number of financial analysts downgraded the company’s stock. Why?
It seems to be a combination of factors. For one, not living up to (internal and external) expectations. Two, a lackluster outlook for the remainder of its fiscal 2010. The company predicted sales growth of 8% to 12% for fiscal 2010, or up to $2.18 billion, but the company had previously forecast revenues of $2.25 billion to $2.45 billion. (Brocade’s fiscal year ends in October.)
Third, and this is the real culprit: The company had nothing but bad news on the Ethernet front, where it competes primarily with Cisco, Juniper Networks, and HP (see Kevin Komiega’s blog, “Ciscso-HP partnership implodes” ). Acknowledging the weakness in its Ethernet switching performance, and vowing to “re-energize” the company in that market, Brocade CEO Mike Klayko pinned some of the blame on weak sales in the government sector.
Actually, I’m not surprised by Brocade’s lackluster performance in the Ethernet switch market, but what do I know? If there’s not an iSCSI or FCoE angle, I don’t know squat about the Ethernet switch market.
Brocade’s storage news was pretty good: Revenues of about $350.7 million, which was essentially flat compared to the previous quarter but up from $310.75 million in its first quarter of last year.
Other than its Ethernet business, and puny compared to it, Brocade is also still weak in the Fibre Channel HBA market and doesn’t seem to be making any headway against the Emulex-QLogic duopoly. And it’s way too early to tell what Brocade’s positioning will be in the FCoE and converged network adapter (CNA) market.
Although I didn’t see any evidence of it, I assume that the plummet in Brocade’s stock price will probably revive rumors of the company being a takeover candidate. But who would the potential suitor(s) be?
And the company turned a tidy profit. Net income for Brocade’s first quarter (which ended January 30) was $51.1 million. That compares to a net loss of $23.9 million in the same period last year.
Not as good as NetApp’s recent financial report (see “NetApp hit$ a home run” ), but not bad.
However, Brocade’s stock price got hammered (plummeting more than 20%) and a number of financial analysts downgraded the company’s stock. Why?
It seems to be a combination of factors. For one, not living up to (internal and external) expectations. Two, a lackluster outlook for the remainder of its fiscal 2010. The company predicted sales growth of 8% to 12% for fiscal 2010, or up to $2.18 billion, but the company had previously forecast revenues of $2.25 billion to $2.45 billion. (Brocade’s fiscal year ends in October.)
Third, and this is the real culprit: The company had nothing but bad news on the Ethernet front, where it competes primarily with Cisco, Juniper Networks, and HP (see Kevin Komiega’s blog, “Ciscso-HP partnership implodes” ). Acknowledging the weakness in its Ethernet switching performance, and vowing to “re-energize” the company in that market, Brocade CEO Mike Klayko pinned some of the blame on weak sales in the government sector.
Actually, I’m not surprised by Brocade’s lackluster performance in the Ethernet switch market, but what do I know? If there’s not an iSCSI or FCoE angle, I don’t know squat about the Ethernet switch market.
Brocade’s storage news was pretty good: Revenues of about $350.7 million, which was essentially flat compared to the previous quarter but up from $310.75 million in its first quarter of last year.
Other than its Ethernet business, and puny compared to it, Brocade is also still weak in the Fibre Channel HBA market and doesn’t seem to be making any headway against the Emulex-QLogic duopoly. And it’s way too early to tell what Brocade’s positioning will be in the FCoE and converged network adapter (CNA) market.
Although I didn’t see any evidence of it, I assume that the plummet in Brocade’s stock price will probably revive rumors of the company being a takeover candidate. But who would the potential suitor(s) be?
Tuesday, November 24, 2009
Brocade gives thanks
November 24, 2009 – Brocade mildly surprised financial analysts this week when it reported its fourth fiscal quarter and full fiscal year end with, for the most part, good news. Highlights: Quarterly revenues increased 31% year-over-year to $521.8 million, and annual revenues increased 33% year-over-year to more than $1.95 billion.
CEO Mike Klayko noted that Brocade had exceeded the Street’s consensus non-GAAP EPS estimates for the seventeenth consecutive quarter.
In the fourth quarter, Brocade shipped about one million SAN ports.
Comparing Q4 2009 to Q4 2008, OEM revenues were down from 88% to 65% of total revenues, while channel/direct revenues jumped from 12% to 35% of total revenues. On a related note: storage-specific revenues, as a percent of total revenues, fell from 84% to 58%, while revenues from Ethernet products accounted for 25% of the total in Q4 2009 compared to 0% in the pre-Foundry-acquisition Q4 2008.
Klayko had plenty to say, but his comment about a possible acquisition was what made the news. “We’re not actively shopping ourselves. That’s false.” I suppose that depends on what “actively” means, but the financial community seems to think that an acquisition isn’t about to happen now that HP opted for 3Com, which squelched speculation that HP would scoop up Brocade. Since the HP-3Com announcement, Brocade shares have been down more than 10%. They closed at $7.10 today. The 52-week range was $2.05 to $9.84.
I’m sure stockholders were hoping for (betting on) an acquisition, but Brocade seems to be in great shape on its own. Cisco isn’t giving them much of a run for the money in the FC switch space; Brocade is gaining a toehold in the FC HBA space; it’s gaining share in the Ethernet market; and the company will be well-positioned in the FCoE/CEE field by the time that battle hits full stride. In other words, when end users actually start deploying FCoE.
For more info from Brocade:
Slides
Prepared Remarks
Summary Sheet
CEO Mike Klayko noted that Brocade had exceeded the Street’s consensus non-GAAP EPS estimates for the seventeenth consecutive quarter.
In the fourth quarter, Brocade shipped about one million SAN ports.
Comparing Q4 2009 to Q4 2008, OEM revenues were down from 88% to 65% of total revenues, while channel/direct revenues jumped from 12% to 35% of total revenues. On a related note: storage-specific revenues, as a percent of total revenues, fell from 84% to 58%, while revenues from Ethernet products accounted for 25% of the total in Q4 2009 compared to 0% in the pre-Foundry-acquisition Q4 2008.
Klayko had plenty to say, but his comment about a possible acquisition was what made the news. “We’re not actively shopping ourselves. That’s false.” I suppose that depends on what “actively” means, but the financial community seems to think that an acquisition isn’t about to happen now that HP opted for 3Com, which squelched speculation that HP would scoop up Brocade. Since the HP-3Com announcement, Brocade shares have been down more than 10%. They closed at $7.10 today. The 52-week range was $2.05 to $9.84.
I’m sure stockholders were hoping for (betting on) an acquisition, but Brocade seems to be in great shape on its own. Cisco isn’t giving them much of a run for the money in the FC switch space; Brocade is gaining a toehold in the FC HBA space; it’s gaining share in the Ethernet market; and the company will be well-positioned in the FCoE/CEE field by the time that battle hits full stride. In other words, when end users actually start deploying FCoE.
For more info from Brocade:
Slides
Prepared Remarks
Summary Sheet
Monday, October 12, 2009
Brocade on the block
October 12, 2009 – The rumors are swirling that Brocade has quietly put itself up for sale, and the buzz will probably pick up at the Storage Networking World show in Phoenix this week. It all started with an article in the Wall Street Journal, “Network Specialist Brocade Up for Sale."
I don’t think Brocade will be acquired, at least not in the next year. The company’s in great shape from a financial and market-share perspective, and its value will continue to grow. Why sell now?
When these acquisition rumors start flying, I like to check out what the financial analysts have to say. And two of my favorites are Paul Mansky at Canaccord/Adams and Glenn Hanus (and colleagues) at Needham & Company. Both analysts focus on the storage industry.
Here’s a clip from Paul Mansky’s notes on the subject:
“We agree Brocade boasts strong strategic positioning . . . but we take issue with the prevailing argument the company is a near-term acquisition target. The independent OEM-centric business model is central to the company's ability to maintain its storage footprint during the pending protocol transitions, while the ‘anybody but Cisco’ story in Ethernet switching has not even begun to ramp. Ownership by a single OEM would hasten the demise of Fibre Channel (60% of revs) while limiting the Ethernet switch TAM expansion story. In our view, a sale today is like punting on second down.”
Or tossing a Hail May on first possession, first down.
More Mansky:”To the degree that there is an appetite to flesh out or build Ethernet switch product lines or gain access to closely held Fibre Channel technology, we view there to be several less expensive candidates. In Ethernet switching, this would include 3Com, Extreme and Force10. In Fibre Channel, we view QLogic as an eager seller of its switching product line -- possibly for as little as $300-350 million.”
I agree: There are much cheaper ways to get what Brocade has to offer, even if it means acquiring two companies.
Speculation centers on HP and Oracle as the most likely acquirers, but Needham’s Hanus puts a number of other vendors in the potential mix, including an “A” list of HP, IBM and Juniper, with Oracle and Dell as remote possibilities.
Commenting on the most likely suitor, Hanus (with colleagues Rich Kugele and Greg Mesniaeff) writes:
“Historically, HP has had a strong relationship with BRCD in the fibre channel arena. It is speculated that HP will eventually at least resell/OEM BRCD's Foundry related gear as HP defends itself against Cisco getting into the server space and resells less Cisco IP networking gear. HP has its Procurve switch line as well. If BRCD were to get acquired by IBM, it would be a big problem for HP as BRCD has 70% or so of the fibre channel switch market. Cisco is the distant #2 player with Qlogic #3. Obviously, HP does not want to source FC switching from IBM or Cisco. If HP owned it, a challenge could be some reduction in BRCD revenue base as HP competitors IBM/Dell (current large BRCD partners) would try and move away. Also HP does not have a reputation for paying up for M&A targets. Overall though, we see HP as one of the leading contenders if BRCD decides to sell.”
I’ll be at the Storage Networking World conference for the next couple days, and if anything interesting happens – regarding Brocade or otherwise – I’ll let you know.
I don’t think Brocade will be acquired, at least not in the next year. The company’s in great shape from a financial and market-share perspective, and its value will continue to grow. Why sell now?
When these acquisition rumors start flying, I like to check out what the financial analysts have to say. And two of my favorites are Paul Mansky at Canaccord/Adams and Glenn Hanus (and colleagues) at Needham & Company. Both analysts focus on the storage industry.
Here’s a clip from Paul Mansky’s notes on the subject:
“We agree Brocade boasts strong strategic positioning . . . but we take issue with the prevailing argument the company is a near-term acquisition target. The independent OEM-centric business model is central to the company's ability to maintain its storage footprint during the pending protocol transitions, while the ‘anybody but Cisco’ story in Ethernet switching has not even begun to ramp. Ownership by a single OEM would hasten the demise of Fibre Channel (60% of revs) while limiting the Ethernet switch TAM expansion story. In our view, a sale today is like punting on second down.”
Or tossing a Hail May on first possession, first down.
More Mansky:”To the degree that there is an appetite to flesh out or build Ethernet switch product lines or gain access to closely held Fibre Channel technology, we view there to be several less expensive candidates. In Ethernet switching, this would include 3Com, Extreme and Force10. In Fibre Channel, we view QLogic as an eager seller of its switching product line -- possibly for as little as $300-350 million.”
I agree: There are much cheaper ways to get what Brocade has to offer, even if it means acquiring two companies.
Speculation centers on HP and Oracle as the most likely acquirers, but Needham’s Hanus puts a number of other vendors in the potential mix, including an “A” list of HP, IBM and Juniper, with Oracle and Dell as remote possibilities.
Commenting on the most likely suitor, Hanus (with colleagues Rich Kugele and Greg Mesniaeff) writes:
“Historically, HP has had a strong relationship with BRCD in the fibre channel arena. It is speculated that HP will eventually at least resell/OEM BRCD's Foundry related gear as HP defends itself against Cisco getting into the server space and resells less Cisco IP networking gear. HP has its Procurve switch line as well. If BRCD were to get acquired by IBM, it would be a big problem for HP as BRCD has 70% or so of the fibre channel switch market. Cisco is the distant #2 player with Qlogic #3. Obviously, HP does not want to source FC switching from IBM or Cisco. If HP owned it, a challenge could be some reduction in BRCD revenue base as HP competitors IBM/Dell (current large BRCD partners) would try and move away. Also HP does not have a reputation for paying up for M&A targets. Overall though, we see HP as one of the leading contenders if BRCD decides to sell.”
I’ll be at the Storage Networking World conference for the next couple days, and if anything interesting happens – regarding Brocade or otherwise – I’ll let you know.
Tuesday, April 21, 2009
Broadcom makes hostile bid for Emulex
April 21, 2009 -- Although overshadowed by the Oracle-Sun acquisition, things got hot in The OC today with Broadcom’s $764 million bid for fellow Orange County, CA resident Emulex.
Actually, this isn’t new. Broadcom approached Emulex in late December with an acquisition offer. Emulex told them to take a hike and subsequently, in January, concocted a poison pill and amended its bylaws (which subsequently led to Broadcom filing a lawsuit) to thwart Broadcom’s overture. What’s new is that Broadcom is taking its case public, or least to Emulex shareholders.
I have no idea if Broadcom will be successful in this bid. I suppose it depends on how Emulex execs and shareholders see the company’s future in the context of competition with QLogic and Brocade on the HBA and FCoE CNA battlefields. Is QLogic ahead of Emulex on the FCoE front? Can Brocade upset the Emulex-QLogic duopoly on the HBA front? If the answer to either of those questions is ‘yes,’ then now may be the time for a sale. And the price -- $9.25 per share -- seems to be sweet: about a 40% premium over yesterday’s share price of Emulex stock.
Obviously, Broadcom wants Emulex primarily for its Fibre Channel expertise and technology; more specifically, perhaps, its FCoE technology as Broadcom moves into the so-called converged networking space (Ethernet + Fibre Channel). As such, Broadcom is probably also eyeing QLogic. And it’s possible that the deal could turn as rapidly as the IBM-Sun to Oracle-Sun deal.
It’s also possible that Emulex could find a white knight or, more likely, push the acquisition price closer to the $1 billion mark.
If the Broadcom-Emulex deal does go through (financial analyst speculation is running about 50-50), it would have repercussions and a ripple effect across the storage industry, and would lead to more acquisition speculation. QLogic would be in play (with Brocade as a possible suitor, or maybe Cisco). Maybe even Brocade would be in play.
Given the Oracle-Sun acquisition, anything can happen.
Related articles:
QLogic delivers single-chip CNAs
Emulex CNAs support 10GbE, iSCSI, FCoE
Brocade launches FCoE switch, adapters
Actually, this isn’t new. Broadcom approached Emulex in late December with an acquisition offer. Emulex told them to take a hike and subsequently, in January, concocted a poison pill and amended its bylaws (which subsequently led to Broadcom filing a lawsuit) to thwart Broadcom’s overture. What’s new is that Broadcom is taking its case public, or least to Emulex shareholders.
I have no idea if Broadcom will be successful in this bid. I suppose it depends on how Emulex execs and shareholders see the company’s future in the context of competition with QLogic and Brocade on the HBA and FCoE CNA battlefields. Is QLogic ahead of Emulex on the FCoE front? Can Brocade upset the Emulex-QLogic duopoly on the HBA front? If the answer to either of those questions is ‘yes,’ then now may be the time for a sale. And the price -- $9.25 per share -- seems to be sweet: about a 40% premium over yesterday’s share price of Emulex stock.
Obviously, Broadcom wants Emulex primarily for its Fibre Channel expertise and technology; more specifically, perhaps, its FCoE technology as Broadcom moves into the so-called converged networking space (Ethernet + Fibre Channel). As such, Broadcom is probably also eyeing QLogic. And it’s possible that the deal could turn as rapidly as the IBM-Sun to Oracle-Sun deal.
It’s also possible that Emulex could find a white knight or, more likely, push the acquisition price closer to the $1 billion mark.
If the Broadcom-Emulex deal does go through (financial analyst speculation is running about 50-50), it would have repercussions and a ripple effect across the storage industry, and would lead to more acquisition speculation. QLogic would be in play (with Brocade as a possible suitor, or maybe Cisco). Maybe even Brocade would be in play.
Given the Oracle-Sun acquisition, anything can happen.
Related articles:
QLogic delivers single-chip CNAs
Emulex CNAs support 10GbE, iSCSI, FCoE
Brocade launches FCoE switch, adapters
Wednesday, April 8, 2009
FCoE FUD
April 8, 2009 – At the only press conference at this week’s Storage Networking World confab, Brocade tossed its hat into the FCoE ring with the announcement of a switch and converged network adapters (CNAs). See “Brocade launches FCoE switch, adapters.”
That announcement seemingly officially kicked off the FCoE battles between Cisco and Brocade on the switch front, and Emulex, QLogic and Brocade on the CNA front. (As storage bigots, we’re ignoring the traditional NIC and switch vendors which may, or may not, eventually be contenders in the FCoE ring.)
Brocade’s CNA announcement came on the heels of similar announcements from Emulex and QLogic:
“QLogic delivers single-chip CNAs”
“Emulex CNAs support 10GbE, iSCSI, FCoE”
Upon each announcement, competitors offered their services in bad-mouthing their rivals. Since most of the claims and counterclaims are at this point are impossible to verify, we chose a Joe Friday approach to reporting the announcements – “Just the facts, ma’am.”
The FCoE battles may have begun in the OEM qualification arena (raising the question of how many CNAs or switches the big server/storage vendors will qualify/resell), but the real battles won’t begin until end-user adoption of FCoE begins. At yesterday’s press conference, Brocade CTO Dave Stevens predicted that we won’t see end-user adoption of FCoE in any volume until late 2010 (about the same time that 16Gbps Fibre Channel products are supposed to appear). And that might be optimistic.
That announcement seemingly officially kicked off the FCoE battles between Cisco and Brocade on the switch front, and Emulex, QLogic and Brocade on the CNA front. (As storage bigots, we’re ignoring the traditional NIC and switch vendors which may, or may not, eventually be contenders in the FCoE ring.)
Brocade’s CNA announcement came on the heels of similar announcements from Emulex and QLogic:
“QLogic delivers single-chip CNAs”
“Emulex CNAs support 10GbE, iSCSI, FCoE”
Upon each announcement, competitors offered their services in bad-mouthing their rivals. Since most of the claims and counterclaims are at this point are impossible to verify, we chose a Joe Friday approach to reporting the announcements – “Just the facts, ma’am.”
The FCoE battles may have begun in the OEM qualification arena (raising the question of how many CNAs or switches the big server/storage vendors will qualify/resell), but the real battles won’t begin until end-user adoption of FCoE begins. At yesterday’s press conference, Brocade CTO Dave Stevens predicted that we won’t see end-user adoption of FCoE in any volume until late 2010 (about the same time that 16Gbps Fibre Channel products are supposed to appear). And that might be optimistic.
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