February 22, 2012 / 12:12 AM / 6 years ago

UPDATE 3-Brocade first qtr beats; says ethernet segment to grow

* Q1 adj EPS $0.20 vs est $0.13

* Q1 rev up 3 pct at $561 mln vs est $542.4 mln

* Sees Q2 adj EPS $0.11-$0.12 vs est $0.12

* Sees Q2 rev $530-$545 mln vs est $537 mln

* Shares rise 7 pct after hours

By Siddharth Cavale and Nicola Leske

Feb 21 (Reuters) - Network gear maker Brocade Communications Systems Inc reported better-than-forecast quarterly results, helped by a rise in sales of its storage equipment products, and said it expects faster growth at the ethernet segment this year.

Shares of Brocade, which have rebounded more than 80 percent from their August 2011 lows, jumped 7 percent to $5.85 in after-hours trading on Tuesday.

The company expects its ethernet business to “fully outpace” the market in terms of year-over-year growth as many enterprise customers continue to build out their ethernet fabrics to keep pace with the growing demands of their data center networks.

In the first quarter, sales at the ethernet business, which contributes about 30 percent to total revenue, fell 18 percent sequentially, hurt by softness in federal sales and lower enterprise revenue.

“Q1 (for ethernet) was what it was and we are expecting to get back to growth in Q2 and beyond,” the company said.

Revenue rose 3 percent to $561 million in the quarter. Sales from the company’s storage segment grew 4 percent to $406.4 million.

“They are very dependent on the U.S. economy, which is doing better. They have the right strategy but we’re in a risky environment,” analyst Edward Zabitsky of ACI Research said and added the company was also facing a lot of pressure from rivals like Cisco Systems.

The San Jose, California-based company forecast earnings of 11 cents to 12 cents a share on revenue of $530 million to $545 million for the second quarter.

Analysts, on average, were expecting the company to earn 12 cents a share, on revenue of $537 million, according to Thomson Reuters I/B/E/S.

For the first quarter, the company posted an adjusted profit of 20 cents a share, 7 cents above the average analyst expectations.

Last month, Reuters reported the company had received first-round bids from a handful of potential buyers and hired Frank Quattrone’s Qatalyst Partners to focus on a deal that could result in a leveraged buyout.

Shares of Brocade, whose current sale process is the third since 2009, closed at $5.50 on the Nasdaq.

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