Brocade Stumbles Over Preliminary Earnings Results

Brocade Communications Systems Inc. (NASDAQ: BRCD) released its preliminary second-quarter financial results before the markets opened on Monday. The company expects to have revenue in the range of $518 million to $528 million, compared to the previously guided range of $542 million to $562 million. Earnings per share (EPS) are expected to be in the range of $0.21 to $0.23, down slightly from the previous range of $0.22 to 0.24.

Consensus estimates from Thomson Reuters call for $0.23 in EPS on $551.75 million in revenue for the quarter.

The company expects to report its full fiscal second-quarter financial results on May 19 after the markets close.

Lloyd Carney, CEO of Brocade, commented:

Consistent with the general softness in IT spending reported by many of our partners and peers, we expect revenue for the quarter to fall short of our original expectations. This is largely the result of weaker than anticipated SAN revenue. In addition, IP Networking headwinds, noted on our fiscal Q1 2016 earnings call in February, continue to negatively impact our sales, particularly in our service provider and U.S. federal business. We are addressing these near-term challenges by continuing our focus on sales execution in this weaker demand environment, maintaining prudent expense controls and managing our investments in line with our stated priorities. We continue to execute on our strategy to build a pure-play networking company for the digital transformation era that expands our market reach, diversifies our revenue mix, and creates exciting, incremental opportunities for growth.

So far in 2016, Brocade has slightly outperformed the broad markets, with the stock up 5% (excluding Monday’s move). Over the past 52 weeks, the stock was down 13%.

Shares of Brocade were trading down 11.7% at $8.48 Monday morning, with a consensus analyst price target of $10.29 and a 52-week trading range of $7.40 to $12.88.

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