Brocade Communications (BRCD) is expected to report Q1 earnings after the market close on Monday, February 22, with a conference call scheduled for 5:30 pm ET.

GUIDANCE

The consensus estimate is 15c for EPS and $548.43M for revenue, according to First Call.  Brocade had guided its Q1 revenue to be up 4%-5% sequentially vs. normal seasonal trend of +6%-8%, followed by a sequentially flat trend in Q2 and Q3.

ANALYST'S VIEW

RBC Capital believes Brocade will likely stick to its full fiscal year revenue guidance of $2.25B-$2.45B.  RBC is looking for revenues near $545M, up 4.5% quarter-over-quarter.  The firm believes Brocade’s Q1 EPS may beat the consensus of 15c by a penny due to moderation in its variable cost.  RBC’s Q1 EPS estimate is 14c.  Segment-wise, storage networking may show decent sequential growth although RBC did observe higher storage spend towards Cisco (CSCO), which is playing catch-up on the 4Gig to 8Gig switch cycle.  Ethernet bookings may have been modestly softer during the past few months but RBC is encouraged by the expanding sales programs with partner IBM (IBM), which points to a rebound in growth later this year.  RBC believes IBM is making Brocade the focus Ethernet partner ahead of Juniper Networks (JNPR).  RBC expects little change from Brocade’s gross margins of 59.5%.  Operating margins remain healthy and the firm is looking for modest improvements from last quarter’s 22.7%.  For Q2, RBC’s is forecasting a flat sequential quarter with EPS at 14c on $545M in revenue.  Consensus for Q2 revenue is 14c and $549M.  Key issues for the conference call: Guidance on the current quarter, and management’s assessment of what demand looks like.