Brocade Plummets on Weak Outlook

The company matches fourth-quarter estimates but says the current period isn't going as well.
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Updated from 5:17 p.m. EST

Brocade Communications

(BRCD)

reported fourth-quarter earnings in line with expectations but predicted a wide profit and revenue miss in its current quarter and disclosed a workforce reduction.

The networker said net income in the fourth quarter was $15.7 million, or 7 cents a share, matching analysts' estimates and reversing a year-ago loss of $53.7 million, or 24 cents a share.

Revenue in the fourth quarter at Brocade was up 31% to $153.1 million from $116.5 million in the fourth quarter of last year. The results slightly exceeded analyst estimates of $152.3 million.

On a conference call with analysts, Brocade said it expects first-quarter revenue of $120 to $125 million, below analysts' forecasts of $156.89 million. The company expects break-even net income, excluding restructuring and acquisition related charges. Analysts had forecast earnings of 7 cents a share.

"We expect this condition to last no more than one quarter," said Tony Canova, CFO of Brocade on the call. "And we look forward to resuming growth by the second quarter of 2003."

Brocade also said its chief operating officer, Michael Byrd, was stepping down for personal reasons.

Shares of Brocade ended the regular session up 13.9% at $7.28. After rising early in the after-hours session, they were lately down 15.8% at $6.13 and the most active stock on the Instinet platform.

Brocade said it has cut approximately 12% of its workforce, bringing its total number of employees to 1,200. The company expects the layoffs to result in cost savings of $8 million in the first quarter of 2003.

"With the expense reduction plan we have implemented, and the strategic investments we continue to make, we believe we are well positioned as the economy recovers," the company said in a statement.

Deferred revenue was $22.4 million in the fourth quarter, up $4.1 million from $18.3 million a year ago. Gross margins were 58.5%. And the company generated $20.6 million in cash from operations.