McData Manages Not To Miss Twice-Lowered Numbers

The company predicts second-quarter revenue will be similar to the first's.

Author:: Diane Hess
Publish date:: Apr 18, 2002 5:36 PM EDT

After warning two times about its first quarter, storage switch maker

McData

managed not to disappoint a third time with its actual earnings report.

McData reported a first-quarter pro forma loss of $4.2 million, or 4 cents a share, compared with pro forma earnings of $9.5 million, or 8 cents a share, a year ago. Analysts were expecting a 6-cent loss. The results exclude non-cash charges for deferred compensation and amortization and other charges.

"Following strong demand for our products and services that resulted in record quarterly revenue in the fourth quarter 2001, and despite a continuing strong pipeline, first-quarter revenue slowed significantly, in part due to caution and delayed IT spending," said Jack McDonnell, CEO of McData.

McData's sales fell 22.3% in the first quarter to $64.5 million from $83 million a year ago.

In early April, McData warned that its loss would range from 4 cents to 7 cents a share, because of a "further order reduction for its largest customer," which is storage giant

EMC

(EMC)

Before that warning, the switch maker lowered its guidance to a loss of 2 cents to 4 cents a share at its midquarter update, saying that information technology spending was still very bleak.

In its earnings statement, McData said that it expects a "continuation of first-quarter trends," including delayed IT storage and infrastructure spending, especially at the high-end of the market.

That assessment was consistent with what EMC said in its earnings release Thursday: "The well for new application deployment remains fairly dry, suppressing demand for major new IT projects."

At the time of McData's warning, analysts said EMC may have either delayed orders or given more of its business to rival switch maker

Brocade

(BRCD)

, whose products favor EMC's more successful mid-range offerings.

Looking ahead, McData expects second-quarter revenue to be in line with the first quarter, while its main customer EMC said that it expected a slight gain in its second-quarter sales.