End-of-Quarter Earnings Jitters Punish McData

Storage vendor McData(MCDTA Quote) was down sharply Thursday, apparently on concerns that a pricing dispute with a major customer could cause it to miss its October quarter.

In recent trading, the Broomfield, Colo. company was off $1.22, or 10%, to $10.89.

According to Robert Montague, the RBC Capital Markets analysts who broke the news in a note to clients Thursday morning, EMC(EMC Quote), a major buyer of McData's storage switches, has been pushing hard for end-of-quarter pricing concessions.

But McData, said Montague, is not "bending to EMC's pressure, resulting in what appears to be a serious impasse. Therefore, the October quarter is uncertain and a preannouncement is possible in the near future."

Analysts polled by Thomson First Call expect McData to earn a 4-cent profit on sales of $109.75 million in its fiscal third quarter.

McData, and its rival in the switching market, Brocade(BRCD Quote), face increasing competition from Cisco Systems(CSCO Quote), which has moved aggressively into their territory.