Brocade Q2 Adj. Earnings Matches View, Revenues Beat; Initiates Dividend

(RTTNews) - Brocade Communications Systems Inc. (BRCD) on Thursday reported a loss for the second quarter, hurt by a goodwill impairment charge and slightly lower revenues. However, adjusted earnings per share for the quarter matched analysts' expectations, while revenues beat their estimates. In addition, the company's board of directors initiated a quarterly cash dividend to be paid in the third quarter.

San Jose, California-based Brocade's second-quarter net loss of $13.68 million or $0.03 per share, compared to net income of $46.95 million or $0.10 per share in the same period last year.

The latest quarter's results include a non-cash goodwill impairment charge of $82.70 million associated with the strategic repositioning of the ADX product family.

Excluding unusual items, adjusted earnings for the quarter were $86.91 million or $0.19 per share, compared to $77.57 million or $0.17 per share in the prior-year quarter. On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

Brocade, which makes computer switches for data-storage networks, said its total revenues for the quarter edged down to $536.91 million from $538.78 million in the year-ago period. Analysts had a consensus revenue estimate of $531.50 million for the quarter.

Storage Area Networking or SAN business revenue for the quarter rose 1 percent from the year-ago period to $379 million, primarily due to higher sales within the switch and embedded products as well as increased support revenue.

IP Networking business revenue declined 4 percent from last year to $157 million from a year ago, due to lower sales to the U.S. Federal government, the divestiture of the network adapter business, and the change in the company's wireless business strategy.

The company's gross margin, or gross profit as a percent of sales, advanced 400 basis points from last year to 66 percent. However, operating margin declined 680 basis points to 3.8 percent.

Brocade said that during the quarter, it made a strategic shift to reduce investment in the hardware-based ADX products and to increase investment in the software-based ADX products for the Layer 4-7 market, as part of its previously communicated strategy to focus on the data center and other key technology segments.

As a result of this change in strategy, the company expects hardware-based ADX and related support revenue to be negatively impacted by $20 million to $40 million on an annualized basis compared with fiscal 2013 results.

Brocade's board of directors initiated a quarterly cash dividend of $0.035 per share of the company's common stock. The first dividend payment will be made on July 2, 2014 to stockholders of record as of the close of market on June 10, 2014. Future dividend payments are subject to review and approval by the board.

BRCD closed Thursday's trading at $8.65, up $0.04 or 0.46 percent on a volume of 7.63 million shares. In after-hours, the stock further gained $0.16 or 1.85 percent to $8.81.