Brocade Communications (BRCD): Upside Was Acquired, Reiterating Sell - UBS
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UBS analyst, John Roy, reiterated his Sell rating on shares of Brocade (NASDAQ: BRCD) after the company beat consensus estimates for F3Q but guidance was light. About half the $24mn revenue upside in F4Q was driven by Ruckus-related purchase accounting. In addition, half the EPS beat this quarter came from lower taxes. SAN revenue declined 9% YoY and guidance calls for 12% decline – not as steep as expected but on an accelerating downtrend nevertheless. SAN port declines are mirroring the revenue decline.
The Sell rating on Brocade is driven by public cloud incursion, weaker IT spending, and slower Fibre Channel growth. Brocade is planning to host an Analyst day at the end of September in New York.
Price target of $8.50 (from $8.00)
Shares of Brocade closed at $10.46 yesterday.
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