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Post Earnings Coverage as Brocade Revenue Figures Climb 12%

Upcoming AWS Coverage on Pure Storage Post-Earnings Results

LONDON, UK / ACCESSWIRE / December 1, 2016 / Active Wall St. announces its post-earnings coverage on Brocade Communications Systems, Inc. (NASDAQ: BRCD). The company posted its fourth quarter and fiscal 2016 financial results on November 21, 2016. The computer networking company's top-line and bottom-line numbers surpassed market expectations as Brocade Communications Systems awaits its completion of acquisition by Broadcom Ltd. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Brocade Communications Systems' competitors within the Data Storage Devices space, Pure Storage, Inc. (NYSE: PSTG), has scheduled a conference call for Wednesday, November 30, 2016 at 2:00 pm PT to announce its Q3 financial results for the period ended October 31, 2016. AWS will be initiating a research report on Pure Storage in the coming days.

Today, AWS is promoting its earnings coverage on BRCD; touching on PSTG. Get our free coverage by signing up to:



Earnings Reviewed

For the three months ended on October 29, 2016, Brocade reported revenue of $657 million, an increase of 12% on a y-o-y basis and 11% from Q3 FY16. Revenue for FY16 was $2.35 billion, up 4% on a y-o-y basis. Revenue for both Q4 FY16 and FY16 were positively impacted by $14.4 million, or 2.2% and 0.6%, respectively, due to a change in channel revenue recognition methodology implemented in Q4 FY16. The company's revenue came in above analysts' forecasts of $640.4 million.

Brocade's GAAP diluted earnings per share (EPS) was $0.16 for Q4 FY16 and $0.51 for FY16, down 19% and 35%, respectively, from the year ago comparable period. The y-o-y decline in GAAP diluted EPS was due primarily to acquisition-related costs and higher operating expenses associated with Ruckus Wireless, partially offset by a favorable jurisdictional mix of earnings resulting in a lower effective tax rate. The company's non-GAAP diluted EPS was $0.33 for Q4 FY16 and $1.04 for FY16, up 27% and up 3% on a y-o-y basis, respectively. Brocade's Q4 FY16 EPS numbers surpassed Wall Street's expectations for adjusted earnings of $0.22 per share.

Segment Details

During Q4 FY16, Brocade's SAN product segment generated revenue of $303 million, down 7% from Q4 FY15 and up 8% from Q3 FY16. The y-o-y revenue decline was due to an 18% decrease in director sales and a 13% decrease in embedded switch sales, partially offset by a 7% increase in fixed-configuration switch sales. For FY16, SAN product revenue was $1.23 billion, down 6% on a y-o-y basis, primarily due to certain partner business transitions and a challenging storage spending environment, leading to lower director and embedded switch sales.

For Q4 FY16, revenue from Brocade's IP Networking product soared 51% on y-o-y basis and 22% on a q-o-q basis to $256 million. The y-o-y increase in revenue was attributed to the inclusion of $96 million of Ruckus Wireless product revenue, following the acquisition in Q3 FY16, and this was partially offset by lower service provider sales and lower sales into the education market. For FY16, IP Networking product revenue was $730 million, up 21% on a y-o-y basis, primarily due to the inclusion of five months of revenue from Ruckus Wireless, partially offset by lower service provider and U.S. federal sales.

Margins Matters

For FY16, Brocade's GAAP gross margin was 64.6%, down 290 basis points from FY15. The gross margin decline was primarily due to a shift in product mix primarily from SAN to IP Networking, and the purchase accounting adjustment to inventory related to the Ruckus Wireless acquisition. FY16 GAAP operating margin was 13.1%, down 870 basis points, primarily due to lower gross margins, higher acquisition-related costs, and higher operating expenses primarily associated with Ruckus Wireless. In FY16, Brocade's non-GAAP gross margin was 67.9%, down 50 basis points from FY15, while non-GAAP operating margin was 23.1%, down 320 basis points on a y-o-y basis.


Brocade's Board of Directors announced a quarterly cash dividend of $0.055 per share of its common stock. The dividend payment will be made on January 04th, 2017 to shareholders of record at the close of market on December 12th, 2016.

Pending Acquisition

On November 02nd, 2016, Brocade announced that it had entered into a definitive agreement under which Brocade would be acquired by Broadcom Limited. In light of the pending acquisition, Brocade did not provide Q1 FY17 guidance and also did not host a conference call to discuss these financial results.

Stock Performance

On Wednesday, November 30, 2016, the stock closed the trading session at $12.34, slightly down 0.16% from its previous closing price of $12.36. A total volume of 14.43 million shares have exchanged hands, which was higher than the 3-month average volume of 9.05 million shares. Brocade Communications' stock price rallied 16.42% in the last month, 38.26% in the past three months, and 40.04% in the previous six months. Furthermore, since the start of the year, shares of the company have soared 36.67%. The stock is trading at a PE ratio of 23.64 and has a dividend yield of 1.78%.

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SOURCE: Active Wall Street