Brocade Communications Systems, Inc. (

BRCD

)

F4Q2010 (Qtr End 10/30/2010) Earnings Call

November 22, 2010 5:30 pm ET

Executives

Rob Eggers - VP of IR

Mike Klayko - CEO

Richard Deranleau - CFO

John McHugh - CMO

Jason Nolet - VP, Data Center and Enterprise Networking Group

Ian Whiting - SVP of Worldwide Sales

Analysts

Ittia Kidron - Oppenheimer

Munjal Shah - Jefferies & Company

Mark Sue - RBC Capital Markets

Kaushik Roy - Wedbush Securities

Mark Moskowitz - JPMorgan

Simona Jankowski - Goldman Sachs

Glenn Hanus - Needham

Scott Smith - Morgan Stanley

Rajesh Ghai - ThinkEquity

Erik Suppiger - Signal Hill

Aaron Rakers - Stifel Nicolaus

Brian Marshall - Gleacher & Company

Jung Pak - BMO Capital Markets

John Slack - Citigroup

Presentation

Operator

Compare to:
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Welcome to the Q4 2010 Brocade Communications Systems earnings question-and-answer conference call. (Operator Instructions) And now, I would like to turn the program over to our speaker, Rob Eggers, Vice President of Investor Relations with Brocade.

Rob Eggers

Good afternoon and welcome to Brocade's Q4 earnings and question-and-answer conference call. By now you should have seen our press release and prepared comments which are available on www.brcd.com. The press release was also distributed by First Call and Business Wire and furnished to the SEC.

Before we take questions, investors should note our comments today may include forward-looking statements regarding Brocade's financial results, cash and debt positions, plans, market opportunities and business outlook, which are only predictions and involve risks and uncertainties such that actual results may vary significantly.

These and other risks are set forth in more detail on our Form 10-Q for the fiscal quarter ended July 31, 2010, and our Form 10-K for the fiscal year ended October 31, 2009. These forward-looking statements reflect beliefs, assumptions, outlook, estimates and predictions as of today, and Brocade expressly assumes no obligation to update any such forward-looking statements.

In addition, this presentation may include various third-party estimates regarding the total available market and other measures, which do not necessarily reflect the view of Brocade. Further, Brocade does not guarantee the accuracy or reliability of any such information or forecast.

This presentation includes non-GAAP financial measures, the most directly comparable GAAP information, and a reconciliation between the non-GAAP and GAAP figures are provided in our Q3 2010 press release, which has been furnished to the SEC on Form 8-K and in our slide presentation and prepared comments on www.brcd.com.

Here to take your questions are Mike Klayko, Brocade's CEO; Richard Deranleau, CFO; John McHugh, CMO; Jason Nolet, VP, Data Center and Enterprise Networking; and Ian Whiting, Senior Vice President of Worldwide Sales.

I will now turn the call over to CEO, Mike Klayko. Mike?

Mike Klayko

As Rob mentioned, please refer to the prepared comments and the slides for full details of our Q4 financial results. I did want to take a few minutes to summarize some of the key items and things that developed in the quarter.

I am extremely pleased with the record revenue performance of $550.4 million in Q4, which was an all-time high for our company in our 15-year history. The main driver was our outstanding performance of $171 million in the Ethernet business, representing 14% growth sequentially and 13% year-over-year. I believe that the strength of our Ethernet business in the latter part of this year indicates that the key growth initiatives we implemented earlier in the year are right on track.

Other company highlights in Q4 include 7% sequential revenue growth in our SAN business in what is a seasonally strong quarter. In terms of geographies, Americas and Asia Pacific led the way with sequential growth of 11% and 9% respectively. On a year-over-year basis, Asia Pacific ended 2010 with 22% growth, which is certainly noteworthy.

Innovation is a significant factor to the company's differentiation to the market and a foundation for future growth. In that regard, 2010 was a solid year for us with a number of highlights in this area.

These include the introduction of virtual cluster switching or VCS technology, which we believe is a game changer for the data center networking industry. VCS forms a basis of Ethernet fabric through cloud optimized networking, and we believe that it will advance the adoption of fully virtualized cloud-enabled data centers. Just last week, we helped deliver on the promise of VCS by introducing the Brocade VDX, which is the first product based on VCS technology.

Another highlight was the introduction of the Brocade MLXe Core Router and the two-port 100 gigabit Ethernet modules, which we believe helps Brocade offer our customers the world's most powerful 100 gig Ethernet router.

These products are designed to tackle the massive growth in both network traffic and digital data that our customers are dealing with today. It is little wonder that five of the world's largest internet exchange points or IXPs run on Brocade networks.

The final innovation or highlight I wanted to touch upon is our recently announced commitment to 16 gigabit Fibre Channel technology. Our commitment is not only important to our install base, but is critical to the Fibre Channel industry. It also reaffirms what our customers have been telling us. Fibre Channel continues to be a key technology now and will continue to be a critical technology for the future.

In FY '11, we will turn our innovation focus to other game changing areas namely virtualization, cloud computing and the continuing development of Ethernet fabrics. Please refer to my prepared comments for more details on the strategies to address these important opportunities.

With that, I'd like to open up the conference call for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) We'll go first to Ittia Kidron with Oppenheimer.

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