FBN Securities Reiterates Sector Perform and PT of $6.50 on Brocade Communications

FBN Securities reiterated Sector Perform on Brocade Communications

. At the same time, FBN left its Price Target unchanged at $6.50. In a research report published today, Wunderlich stated, "We retain our Sector Perform rating and $6.50 price target on BRCD after yesterday's FQ2 report. At first glance, we were impressed: NG EPS of $.13 beat consensus by $.03, the SAN business (where most of the value is) grew 14% Y/Y (flattish Q/Q) in its seasonally weakest quarter as HDS contributed to growth, and the Ethernet gross margin grew from 47% to 51% (approaching its target of 54-59%), and net debt was reduced again (to $394M from $503M in FQ1 and $725M a year before)." In spite of strong quarterly performance, Wunderlich remains concerned about the sector's long term outlook. The report states, "the outlook for SAN growth of 5% Y/Y implies roughly a 5% Q/Q decline (unusual) even though 16Gbps directors to EMC just started shipping and even though BRCD's SAN revenue usually grows Q/Q in FQ3. It is true that BRCD has a difficult Q/Q comparison. We expect the SAN business to rebound in FQ4 due to seasonality and 16Gbps ramping." In today's trading, Brocade lost 1.94% and is currently standing at $6.54.