Brocade ended the year on a strong note. Fourth-quarter revenue grew 4% sequentially and improved 5% year-over-year to $578.3 million, easily beating the consensus estimate of $566 million. This is certainly encouraging, particularly for how tech stocks have disappointed investors due to a poor macro environment that has hurt enterprise spending.
The company was helped by better than expected performance in product revenue, which improved 7% year-over-year and 5% sequentially. Likewise, profitability was impressive. The company reported GAAP net income of $54 million. This compares to a loss of $4 million in the year ago quarter as operating income also grew 12% year-over-year.
Management has consistently shown its main objectives (among other things) include broadening the company and lessening its dependency on its storage business. Clearly, earnings showed the strategy has been working perfectly. But the company continues to be underestimated.
As enterprise spending continues to recover, Brocade will begin to see its stock price appreciate. I would be a buyer here at current levels and investors should expect shares to reach $8 by the second half of the year.
Of the group so far, Aruba Networks was 2012's best with gains of 12%. However, at one point the stock was up 35% on the year. Since then, shares have lost 26% of its value. As evident by a solid fourth-quarter report, which ended the year on a high note, investors should anticipate a much better performance from Aruba in 2013.
During the quarter revenue surged 22% year-over-year to $139.2 million. Aside from a 6% sequential improvement, sales topped analysts' estimates of $136.8 million. The company continues to do well in the U.S. as revenue soared 14% sequentially. Aruba earned $22.1 million or 18 cents per share, topping analysts' estimates by 1 cent.