Channel upbeat on prospects but Cisco still benefiting from challenges
Brocade’s IP/Ethernet business appears to be stabilizing in its second quarter, according to a bulletin issued this week by investment firm Oppenheimer & Co. Based on interviews with 25 channel partners in the US and Europe, 80% believe Brocade remains competitive in IP/Ethernet and positive on the company’s position despite disappointing first quarter sales.
From its channel checks, Oppenheimer notes that Brocade’s Q2 is tracking in line with expectations, and that 60% of its interview respondents expect sequential growth in Q3. That appears to bode well for the IP/Ethernet business — enough, apparently, to prompt Oppenheimer to note that the business is stabilizing.
Earlier this year, Brocade posted Q1 sales of $97 million in IP/Ethernet products, roughly 28% lower than analyst expectations. Meanwhile, Cisco and other rivals in Ethernet switching saw a 20% uptake in sales for the quarter.
Brocade is revamping its go-to-market strategy to reverse its IP/Ethernet fortunes. It recently tapped former HP ProCurve veteran John McHugh as chief marketing officer, and McHugh has pledged to tap more channel expertise to augment Brocade’s traditional OEM sales strategy.
Observers are also waiting for signs of life from two Brocade IP/Ethernet OEM partners – IBM and Dell. McHugh is upbeat about the potential of these partners but analysts do not detect any significant activity from them as yet.
And despite the optimism from the channel, Oppenheimer also has a wait-and-see attitude on Brocade’s IP/Ethernet business:
we still expect potential near-term challenges and inconsistencies (potential positive for Cisco and Juniper). It’s not until later this year that we expect Brocade’s IP/Ethernet sales efforts and investments to deliver material results. Execution and a portfolio refresh will be key… We expect Brocade’s sales revamp will deliver material results only later in the year. Cisco was cited as the No.1 beneficiary of Brocade’s challenges given its market recognition and broad portfolio.
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