Brocade Recovers After Solid 4Q

Oppenheimer has published a research report on Brocade Communications BRCD after the company reported a better than expected 4Q. In the report, Oppenheimer writes "Brocade delivered a better than expected FY4Q10 with record sales and EPS at the high end of guidance. FY1Q11 guidance suggests a slow start to a critical growth year due to an expected delay in federal spending. While this is disappointing, we feel the weakness doesn't reflect lost business, but rather a pushout in spending as budgets have yet to firm. In fact, demand in other verticals is expected to continue to rise QoQ suggesting Brocade's Ethernet recovery is starting to yield results. Despite ongoing investments (focusing more internationally), we see potential operating leverage later in the year as Ethernet spending bounces back and SAN spending recovers after a seasonal inventory adjustment. Revising estimates." Oppenheimer maintains its Outperform rating and $6.50 price target. Brocade Communications closed yesterday at $5.70.