Analysts Buy Brocade's Bravado

SAN JOSE, Calif. (TheStreet) -- Brocade's(BRCD Quote) analyst day Tuesday provided yet more evidence of a tech rebound, although it could be next year before investors get a clear indication of the sector's health.

The San Jose, Calif.-based firm raised its 2010 revenue outlook, although its earnings projection fell short of analyst expectations thanks to the impact of its Foundry Networks acquisition.

Something of an analyst darling, Brocade also reiterated its desire to bolster partnerships with big-name firms such as IBM(IBM Quote), Dell(DELL Quote) and Hewlett-Packard(HPQ Quote).

Other Equipment Manufacturer, or OEM, deals whereby partners resell Brocade's gear, are the major source of revenue for the storage firm, which is hell-bent on gaining share from rival Cisco(CSCO Quote). Brocade is also rumored to be forging a deal with H-P to sell its Ethernet -- or IP -- gear, a move that would further isolate Cisco.

"Brocade's analyst day highlighted the increasing opportunities for the company's storage/data networking platform, as the ramp of its new OEM partnerships amid improving demand is expected to drive revenue growth higher in 2010," wrote Min Park, an analyst at Goldman Sachs, in a note released Tuesday. Goldman raised its Brocade price target to $9.50 Wednesday, and Park also pointed to the firm's improving margins.

The San Jose, Calif.-based firm raised its services gross margin target from between 38% and 45% to a range of 45% to 50% Tuesday. "Brocade's long-term margins are moving higher, driven by increased profitability in services and positive cost synergies on the product side," wrote Park.