This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Brocade Lowballs Guidance

Updated from 8.59 a.m. EST

Brocade's (BRCD - Get Report) management issued a hasty clarification of the guidance it had given earlier Tuesday, and told skeptical investors to expect top-line growth of 14% to 17% next year, well above the original forecast.

The disappointing earlier guidance, coupled with a precipitous drop in earnings in the fourth quarter that the storage gear maker reported before the opening bell, sparked a sharp selloff in the stock.

At the close, shares were off 34 cents, or 7.5%, to $4.19 on heavy volume.

Punk Ziegel analyst Steve Berg says the clarification will likely result in a higher valuation; he raised his own to $5 a share. In recent after-hours trading, shares were up 2 cents.

Brocade earned $1.1 million, or nothing per share, in the November quarter, including a charge of $5 million to cover an internal probe related to an ongoing Securities and Exchange Commission inquiry. Brocade earned $20.3 million, or 8 cents a share, a year ago.

Fourth-quarter sales fell 6% from a year ago to $145.5 million but still beat estimates by about $1.2 million. Brocade trumpeted a 12% sequential rise in "sell-through" to end users via OEM and channel partners to $160.2 million in the quarter.

Brocade said that the difference between reported revenue and sell-through mainly reflects inventory reductions at its OEM partners. "During the fourth quarter, several of the company's OEM partners reduced inventory on-hand by nearly one week across its switch and director product categories," Brocade said. "The company believes that OEM inventories at the end of Q4 05 were approximately two and a half weeks."

The difference between revenue and sell-through is the source of the confusion about the company's guidance. Brocade told investors to expect revenue growth of 8% to 10% -- but the company didn't make clear that it was calculating the percentage off the base of the company's $611 million sell-through.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BRCD $12.11 0.12%
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.37 -1.71%
TSLA $231.55 6.01%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs