Analysts Buy Brocade's Bravado - TheStreet

SAN JOSE, Calif. (

TheStreet

) --

Brocade's

(BRCD)

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) - Get Report

,

Dell

(DELL) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

.

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) - Get Report

. 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 inservices and positive cost synergies on the product side," wrote Park.

Analyst firm Robert W. Baird also raised its Brocade price target Wednesday, from $7 to $10, but said that investors should not get carried away.

"Though long-term market share dynamics are unclear, we like Brocade's market opportunity as a key partner to OEMs competing with Cisco," wrote Jason Noland. "To get more bullish on the stock at these levels, we would like to see revenue demonstrate more overall consistency relative to Cisco's comparable portfolio and see IP sales through major OEMs begin to materialize."

During its analyst day, Brocade's management also discussed plans to become a $10 billion company and reiterated their desire to remain focused on enterprise networks, unlike Cisco, which has branched out into server sales and the consumer market.

Despite its bullish tone at its analyst event, Brocade's shares dipped 12 cents, or 1.5%, to $8.24 Wednesday, while the Nasdaq tacked on 0.1%.