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Storage company Brocade beats estimates

The storage-switch maker reports lower income and revenue for its fiscal fourth quarter but manages to exceed analysts' expectations.

Storage-switch maker Brocade Communications Systems reported lower income and revenue Wednesday for its fiscal fourth quarter but managed to exceed analysts' expectations.

The San Jose, Calif.-based company posted pro forma net income of $10.9 million, or 5 cents a share, excluding items, on revenue of $116.5 million. That compares with income of $27.2 million, or 11 cents a share, and revenue of $132.1 million for the same quarter a year ago.

"In the face of a very challenging economic and geopolitical environment, not only did Brocade see its way through this, we executed flawlessly," boasted Chief Executive Greg Reyes in an interview.

Reyes attributed the company's comparatively good results to companies need to wring more use out of existing storage systems by sharing them among several servers with a storage area network (SAN) instead of directly attaching them to each server. "If you want to consolidate servers and storage, you need a SAN to do it," he said.

Brocade also said in a statement that about $1.16 million of pro forma net income came from the sale of securities in the fourth quarter.

In the previous quarter, the maker of switches and software for computer data storage equipment reported revenue of $116.3 million, reflecting sluggish times in the industry as corporations cut back on technology spending.

Analysts surveyed by First Call expected Brocade to post earnings of 4 cents a share and revenue of $110.9 million.

Including charges, Brocade reported a net loss of $53.7 million, or 24 cents a share, vs. a profit of $27.3 million, or 11 cents a share, for the same period a year ago.

Brocade has begun shipping its new Silkworm 3800 switch, a 16-port model that supports the newest 2 gigabit-per-second version of the Fibre Channel networking standard used to build storage networks. But the company didn't recognize any revenue from sales to companies such as EMC, IBM and Hitachi, which sell the Silkworm under their own product lines, Reyes said.

Coming in the first quarter of 2002 will be Brocade's Silkworm 12000, its most ambitious product yet, Reyes said. The new model, which competes against the likes of McData and Inrange, has 128 ports, support for 2gbps Fibre Channel and features to protect against the failure of internal components.

The 12000 is in beta testing now, and Brocade has built 100 units so far, Reyes said.

Brocade is one among numerous storage companies that faces a split in the industry about which networking technology should underlie SANs. While Fibre Channel prevails today, a newer standard using ordinary Internet Protocol (IP) networks has arrived.

Brocade has said the Silkworm 12000 will accommodate iSCSI, but Reyes predicted iSCSI won't be useful for higher-performance storage networks for two to three years.