Why Brocade Communications Systems, Inc. Stock Dropped Today

By Markets Fool.com

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What:Shares of Brocade Communications Systems, Inc.(NASDAQ: BRCD) were slipping today after the company reported third-quarter results and posted weak guidance for the current quarter. As of 12:21 p.m. ET, the stock was down 12.5%.

So what:Brocade's results actually beat estimates, but that seemed to be due to its recent acquisition of Ruckus Wireless. Per-share profit came in at $0.21, down from $0.27 a year, but was better than estimates at $0.17 a share. Revenue increased 7% from a year ago to $591 million, also topping the consensus at $576.3 million.

Analysts were unimpressed with the report, however, asJPMorgan Chaselowered its price target to $8.50 from $10, calling it a "disappointing quarter."DeustcheBankalso said it expects weak trends in Brocade's core business to continue.

Brocade CEO Lloyd Carney said, "Against the backdrop of a mixed macro environment, we posted solid results, with total revenue at the high end of our outlook range."

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Now what:The networking company said it expected a modest sequential increase in revenue for the current quarter and EPS of $0.21 to $0.23, down from $0.26 a year ago, and in line with the analyst consensus at $0.23. Analysts are also expecting a 9% increase in revenue to $643.5 million. Despite the benefits from the Ruckus acquisition, the general headwinds in Brocade's business seem to warrant today's sell-off.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.