Brocade Profit Soars Despite Falling Sales; Stock Up - Update

(RTTNews) - Shares of Brocade Communications Systems Inc. (BRCD) gained the most in a year, after reporting a better-than-expected jump in third-quarter profit, on higher margins and settlement gains, offsetting a drop in sales amid weakness in the storage market.

Shares of the company jumped 16 percent to $8.00 in after-hours trade on the Nasdaq.

Brocade, which makes computer switches for data-storage networks, posted quarterly net earnings of $119 million or $0.26 per share, compared with $43 million or $0.09 per share last year.

Results for the recent quarter included a gain of $77 million related to the litigation settlement with A10 Networks.

Excluding items, adjusted earnings for the quarter were $0.19 per share, compared with $0.14 per share a year ago. On average, 25 analysts polled by Thomson Reuters expected the company to earn $0.12 per share for the quarter. Analysts' estimates typically exclude special items.

The San Jose, California-based company's sales for the third quarter dropped 3 percent to $537 million from $555 million last year, but topped analysts' expectations of $518.84 million.

Revenue at its key Storage Area Networking business fell 2 percent year-over-year. CEO Lloyd Carney said the company is seeing recovery in the storage market.

IP Networking business revenue slid 6 percent.

However, results were helped by operating expenses that receded to $264 million from $270 million last year.

Gross margins improved to 63 percent from 61.3 percent, partly on a more favorable product mix within the IP Networking segment and lower spending, the company said.

The company's stock closed Tuesday at $6.90, up $0.07 or 1.02%, on a volume of 7 million shares on the Nasdaq. In after-hours, the stock gained $1.10 or 15.94% at $8.00.