Brocade Is Facing Multiple Headwinds, Oppenheimer Stays Neutral On Stock

Brocade Communications Systems, Inc. BRCD reported its second quarter financial results on Thursday, in line with the downbeat guidance provided by management in February, and mostly below the Street’s expectations. Analysts at Oppenheimer reiterated a Perform rating on the stock citing “multiple headwinds.”

The experts pointed out that the weakness in the company’s results mainly derived from feebleness in SAN, IP and macro trends. Guidance was also below par, as management expects challenges to linger, especially in the SAN segment.

Related Link: Given These 'Challenging' Times For Brocade, Barclays Lowers Its Target To $9

Overall, however, the results were consistent with Oppenheimer cautious stance, given the secular challenges faced by the SAN market and the difficult comps and lack of visible growth drivers in the IP Networking segment.

Assuming that SAN and IP Networking weakness will persist over the second half of the year, the analysts see very little room for upside. And, even though they remain positive regarding the potential of the Ruckus acquisition giving Brocade “a faster-growing business segment that can be integrated with its campus switching,” they also pointed out that the transaction “adds execution risk and near-term dilution.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.