August 13, 2013 / 8:36 PM / 7 years ago

Brocade Communications sees demand for storage products rising

(Reuters) - Network equipment maker Brocade Communications Systems Inc BRCD.O reported third-quarter results above analysts’ estimates and said demand for its storage products was improving.

Brocade expects revenue from its SAN (Storage Area Networking) business to rise 1 to 4 percent in the current quarter compared to the third quarter.

The company’s shares rose 18 percent in after-market trading.

“We are seeing a rebound occurring in the broader storage market and believe that the recovery will strengthen for the remainder of this calendar year,” Chief Executive Lloyd Carney said in a statement.

Brocade makes hardware and software for connecting corporate storage systems and servers. Its products are used in storage area networks (SANs), which pool storage resources in big companies for easier management and higher utilization.

The company’s SAN business accounted for nearly 61 percent of its revenue last year.

“The storage market continues to be softer than it was a year ago, but we are receiving positive indications from our partners that end-user demand is improving,” Carney added.

Brocade’s SAN revenue fell 2 percent in the third quarter, but overall revenue, which fell 3 percent to $536.6 million, still beat analysts’ estimates.

“The company hasn’t performed that well in the past,” Craig Hallum analyst Rajesh Ghai said. “It has kind of come out and executed against the low bar.”

Net income almost tripled to $118.7 million, or 26 cents per share, from $43.3 million, or 9 cents per share, a year earlier.

Analysts on average had expected earnings of 12 cents per share on revenue of $519 million, according to Thomson Reuters I/B/E/S.

The company recognized a gain of $76.8 million in the quarter related to a litigation settlement with A10 Networks. Brocade said earlier this year that it had won a patent infringement lawsuit against A10.

The company repurchased about 18 million shares in the quarter, worth more than $100 million.

Brocade shares closed at $6.90 on the Nasdaq on Tuesday.

Reporting by Neha Alawadhi and Lehar Maan in Bangalore; Editing by Sreejiraj Eluvangal

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