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Brocade Grows Even Without Vyatta Acquisition Factored In

By Rory J. Thompson November 20, 2013

Brocade, a provider of comprehensive network solutions that help organizations transition smoothly to a virtualized world, announced quarterly earnings this week that presented mixed results.

Company earnings showed year-over-year net income growth, but also had a weak outlook for its IP networking business moving forward.

For fiscal 2013 Q4, Brocade reported revenue of $559 million, a 3 percent year-over-year decline. Yet while revenue for the full year was down by one percent (at $2.2 billion), net income is on the rise, the company said. For the fourth quarter, Brocade reported net income of $64 million, up from $54 million a year ago. For the full year, Brocade reported its net income at $208.6 million, up from $195.2 million in 2012.

One significant factor not added in was Brocade’s acquisition of Vyatta in November 2012. Ken Cheng, chief technology officer and vice president of corporate development and emerging business at Brocade, mentioned during the company's earnings call that Vyatta revenue is not yet material to Brocade's business. But Cheng did add that he expects bookings growth to continue in fiscal 2014.

"We are seeing a lot of service providers and telcos re-architecting their networks and services, leveraging SDN and NFV," Cheng said. "And we are at that table and fully engaged in these architectural conversations."

During the earnings call it was mentioned that Brocade anticipates growing its Software Defined Networking (SDN) efforts, including its Vyatta division.

While Brocade expects its storage (SAN) revenue to grow by 3 to 5 percent quarter-over-quarter, the company also noted it expects IP Networking revenue to shrink by 10 to 17 percent quarter-over-quarter. The company blamed the IP Networking weakness on U.S. government-related woes going back to the recent sequester-related disruptions.

Still, Brocade CEO Lloyd Carney tried to put a positive spin on the results, and looking toward the future said his guidance to his team was for Vyatta to be seen as a "land grab" opportunity.

"We're not focused on revenue. We're focused on footprint and customer wins and account wins," Carney said. "So it is all about grabbing as much market share as humanly possible, getting as many evaluations as possible done, as many downloads as possible done, because we have the right product and we just need to get as many people's hands on it as humanly possible."

Edited by Stefania Viscusi
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