Brocade Reports Q1 Beat, Guidance Concerns

announced results for the first fiscal quarter ending January 25, 2014 after the markets closed. First quarter revenue was down 4% year-over-year at $565 million. Revenue was up 1% quarter-over-quarter. GAAP diluted earnings per share were reported at $0.18 compared with a loss of $0.05 per share in the first quarter of 2013. Management reported non-GAAP diluted EPS of $0.24, up $0.03 from Q1 2013. GAAP gross margin hit 66.0% versus 63.5% in the first quarter of 2013 and beating the 64.9% figure from last quarter. GAAP operating margin was reported at 21.5% and non-GAAP margin came in at 27.9%. Non-GAAP operating expenses were down 10% year-over-year at $225 million. Brocade saw SAN business revenue at $412 million, down 1% year-over-year and up 8% sequentially. The company highlighted its Gen 5 Fibre Channel products which represented approximately 71% of director and switch revenue in the quarter. Operating cash flow for the company was up 85% year-over-year and down 36% quarter-over-quarter at $109 million. The results on the financial sheet emphasized that "The quarter-over-quarter decrease in operating cash flow was due to the payment in Q1 2014 of employee incentive compensation earned during fiscal 2013, as well as an increase in the amount of the excess tax benefit from stock-based compensation." In the first quarter 2014, Brocade repurchases 16.7 million shares for $140 million at an average price of $8.42. Management reported that second quarter 2014 revenue guidance of $520-$540 million versus the estimated $541.20. Brocade estimates a non-GAAP gross margin within a 65.5%-66% range. Non-GAAP operating expenses are estimated to be with 43%-44%. The company estimates non-GAAP EPS of $0.17-$0.19 versus the analyst estimate of $0.19. Brocade will host a webcast conference call at 5:30 p.m. EST on February 13. Investors and the general public can access the webcast at www.brcd.com/events.cfm.