Brocade reported record profits in 2014, seeing a rise in data centre business of 14%. The OEM business, while important, is shrinking as a proportion of the total. Software-enabled network architectures are allowing innovative technology solutions and flexible product acquisition models to unseat entrenched competitors, it says.
Lloyd Carney, CEO: “Demonstrating our focus and ability to deliver on the commitments we have made, in Q4 we achieved year-over-year growth in both SAN and IP Networking product revenue, including a 14% increase in data centre IP revenue based on use case. We increased profitability through both gross margin expansion and greater operational efficiency. We also generated cash well above our targeted range in Q4, primarily through higher profits and better-than-expected use of working capital.”
Turning to the fiscal year, 2014 was the most profitable year in the company’s history, he says, reflecting “a strong focus on efficiency and delivering on the leverage in our business model. We completed the divestment and strategic shift of the non-core businesses we identified last year, focusing our energy and investment in growth areas”.
The split of IP Networking product revenue based on customer use cases is an important measurement of the progress in the data centre strategy, it says. “Although it is difficult to identify all end users and their specific network deployments due to our two-tier distribution channel, we are providing estimates of the split of our IP Networking product revenue. Our data center customers represented approximately 58% of IP Networking product revenue in Q4 14, compared with 55% in Q3 14 and 53% in Q4 13.”
SAN revenue is expected to rise 5%-7% Q/Q (seasonal strength), an IP networking revenue to fall 8%-14% (federal and service provider weakness). Services revenue is expected to rise 1%-3%.FQ4 SAN revenue was roughly flat Q/Q and Y/Y at $379m, and up 2% Y/Y when adjusted for the sale of Brocade's adapter business to QLogic. In Q4 14, three customers (EMC, HP , and IBM) each contributed at least 10% of total revenue. All other OEMs represented 19% of revenue in Q4 14, flat from both Q4 13 and Q3 14. Channel and direct routes to market contributed 37% of revenue in Q4 14, up 4% from Q3 14 and up 2% from Q4 13.
Brocade shares fell slightly after it revealed a forecast of FQ1 revenue of $560m-$580m.
