Networking vendor Brocade Communications’ has recently indicated a lower revenue for Q2 2016 reflecting a strong weakness in the information technology industry globally.
The main hope for the San Jose-based networking vendor is the proposed acquisition of Ruckus Wireless though the move is now facing challenges from some shareholders. Brocade is also hoping that its technology innovation in the IP networking space will bring cheers to the company.
Brocade, which will announce the financial result for the second quarter on May 19, says revenue will be $518 million to $528 million against $542 million to $562 million previously announced on February 17, 2016.
Brocade confirms that its SAN revenue will dip 7 percent to 10.5 percent quarter-over-quarter, IP Networking revenue to increase 3 percent and 9 percent quarter-over-quarter, and flat growth in Global Services revenue in Q2 2016.
In fiscal Q1 Brocade posted revenue of $574 million (flat y-o-y and –2 percent q-o-q). SAN revenue was $347 million (–2 percent y-o-y), while IP Networking revenue was $134 million (+1 percent).
Brocade, while announcing the results of a federal IT survey, revealed three pain points when business-critical workloads are accessed through a shared rather than a dedicated IP storage network.
A secure environment (48 percent), data loss (34 percent) and poor application response time (30 percent) are the primary concerns for 200 decision makers at 57 federal IT agencies in the U.S.
The good news is that 78 percent are expecting to invest in the IP-storage capacity which will grow by at least 10 percent in the next year. Federal agencies already invested in converting 45 percent of total storage to IP-storage. Main drivers for storage growth are server virtualization, unstructured data and converged system deployments. 44 percent of mission-critical workloads and more than a third of business-critical workloads use a shared IP storage network.
Recent client wins
Earlier in May, China Pharmaceutical University (CPU) has consolidated server farms into a single cloud data center utilizing IP networking solution from Brocade. CPU is leveraging Brocade VCS fabric technology.
Nxtgen Data Center & Cloud Services adopted Brocade’s IP networking infrastructure solutions to increase business growth and innovation. The network infrastructure, comprising Brocade VROUTERS and VDX 6740T switches, will enable NxtGen to streamline enterprise cloud services at its data centers.
Malaysia’s KDU University College has deployed network from Brocade at its new 10-acre campus in the Klang Valley suburb of Glenmarie. The network is designed for reliable 24×7 cloud service access.
San-Jose-based SmartSky Networks is building an air-to-ground broadband network using Brocade and VMware’s network functions virtualization (NFV) solutions to implement a network, connecting more than 250 cell sites placed across the continental U.S.
At EMC World 2016, Brocade said its Gen 6 Fibre Channel and IP storage networking technologies are providing a network foundation enabling customers of the EMC Unity solution to optimize the storage deployments.
Meanwhile, Brocade G620, the industry’s first Gen 6 Fibre Channel switch for storage networking, promises better performance and scalability designed to support data growth and demanding workloads from applications.
Strategy and focus
In line with the changing business landscape, Brocade’s focus will be on addressing these near-term challenges.
Therefore, the company plans to continue focusing on sales execution in this weaker demand environment, maintaining prudent expense controls and managing investments in line with priorities.
Brocade CEO Lloyd Carney said: “We continue to execute on our strategy to build a pure-play networking company for the digital transformation era that expands our market reach, diversifies our revenue mix, and creates exciting, incremental opportunities for growth.”
Ruckus Wireless acquisition
Brocade announced its deal to buy Ruckus Wireless. The combination of Brocade and Ruckus Wireless will be #1 in storage area networking, #1 in service provider Wi-Fi, #2 in data center networking, #3 in enterprise wireless LAN, and #3 in enterprise edge networking in the U.S. and EMEA.
Further, the acquisition will strengthen Brocade’s ability to pursue emerging market opportunities around 5G mobile services, Internet of Things (IoT), Smart Cities, OpenG technology for in-building wireless, and LTE/Wi-Fi convergence.
Brocade will be betting big on the data center SAN market that will grow at a CAGR of 21.83 percent during 2016-2020. The Ethernet switches and routers markets will achieve growth rate of nearly 4 percent by 2020.
Brocade, despite the desire to add Ruckus Wireless to its kitty, faces significant challenges due to lack of scale and tough business conditions. The company’s innovation efforts are expected to pay off in the long run.