What Next for Brocade?

Most public corporations adopt one of two strategies when releasing quarterly earnings statements.

If the news is good, you focus on the past – on why earnings were strong and how you managed to get everything right. If earnings were poor, you focus on the future – how changing market forces or repositioning strategies will produce better results down the road.

For Brocade this quarter, however, there is very little wiggle room in the past, present or future. The very fact that fourth-quarter sales rose by nearly a third over the same period last year is almost an afterthought considering the fact that HP, a leading contender for the purchase of Brocade, decided to acquire 3Com instead. That bit of bad news from the past has now shifted attention to the future, namely: what will Brocade do now?

Perception being a powerful force in business – more powerful than reality, some might argue – CEO Mike Klayko tried to put the best spin on the recent sale rumors, arguing that the company was not really being shopped around and couching the whole thing as “misinformation.” Funny how no one tried to correct this “misinformation” three weeks ago when it was driving up the company stock price.

But hey, that’s all in the past. The present and the future are what count now, and on that score, the company at least seems to be making the most of the hand it’s been dealt. In the crowded Ethernet sphere, there’s little chance it will unseat Cisco in terms of market dominance, but at least it has a broad-enough portfolio that can be leveraged across multiple markets. Take the new CER 2000 router, for example. With one product, the company can target the metro carrier edge market, MPLS service providers and small data centers and branch offices.

The company also has the fact that even with 3Com under its wing, HP still does not have an FCoE switch, which is a crucial component in enterprises’ converged networking strategies. I expect we’ll be hearing a lot more of Brocade’s FCoE portfolio, such as the new FX8-24 and FCoE 10-24 blades, in the coming year.

The upshot here is, all is not lost for Brocade. The company probably will have a tougher time moving its DCX Backbone switch now that HP has 3Com’s technology in-house, but competition in that space is bound to be tough anyway.

Of course, if Brocade sees fit to continue as a standalone networking company, the pressure will be on to do that one thing better than anybody else.