Brocade Communications Systems maintains silky smooth computer network operations. A leading supplier of data center networking products, Brocade makes Fibre Channel switches and related software for connecting corporate storage systems and servers. Its products are used in storage area networks (SANs), which pool storage resources across enterprises for easier management and more efficient asset utilization. The company's SilkWorm switches reroute data upon path failure and reconfigure the SAN when new devices are added. Brocade's products support Internet connectivity and enterprise mobility, as well as key technologies such as virtualization and cloud computing. It generates more than half its sales from the US.
Brocade's products are made by such contract electronics manufacturers as Hon Hai Precision (Foxconn Electronics), Accton Wireless Broadband, Motorola, and Quanta Computer. The company also relies on Flextronics International for service repair.
SAN products -- which include switches, directors, and other products used for data storage - account for about 60% of sales. IP networking products (Ethernet switches and routers for network connectivity) and global services (maintenance, installation, consulting, and other assistance) contribute about 25% and 15%, respectively.
The US is the company's largest market, accounting for just more than 60% of sales. Outside the US, it gets nearly a quarter of sales from the EMEA region. The Asia-Pacific region accounts for more than 10% of revenue, with Japan by far Brocade's fastest-growing geographic segment.
Sales & Marketing
Brocade sells directly, as well as through systems integrators, distributors, and value-added resellers. EMC, Hewlett-Packard, and IBM together generate more than 45% of the company's sales.
Brocade has experienced solid growth over the past half dozen years; revenue rose about 4% in fiscal 2012 (ended October) to $2.2 billion as a result of 10% sales growth in storage area network products (the result of a shift to higher-end offerings) and growth in Japan (sales rose 32% in 2012, on top of 28% growth in 2011). The IP networking and global services segments were both down slightly year-over-year; the latter was impacted by the late 2011 divestiture of services subsidiary Strategic Business Systems (SBS).
The company's profitability took a tumble in fiscal 2011, falling more than 55% to about $50 million. In addition to increased operating expenses, Brocade recorded a nearly $13 million loss on the sale of SBS. Net income rebounded to its highest level ($195 million), however, in 2012.
One focus for the company is the Asia-Pacific region, where Brocade sees great opportunity for virtualization and cloud computing products. In early 2011 the company initiated a $100 million evaluation program to help Asia-Pacific customers use Ethernet fabrics in highly virtualized data centers. The following year it joined with Fujitsu Australia and New Zealand to provide network switching products for the High-Performance Supercomputer (HPC) at the Australian National University's National Computational Infrastructure data center.
To stay competitive and ahead of the trends in virtualized and cloud computing, Brocade is also focused on product development and partnerships, as well as strategic acquisitions.
Brocade sold IT services subsidiary Strategic Business Systems in 2011 to focus on its core operations.
Mergers and Acquisitions
In late 2012 the company purchased network virtualization software provider Vyatta. The deal opens Brocade to new opportunities in the data center virtualization and virtual private cloud computing markets.
Investment firm Franklin Resources owns about 12% of Brocade.