Inside Brocade’s SAN Business Performance in Fiscal 4Q16
SAN revenues fell 7% YoY in fiscal 4Q16
Brocade Communications’ (BRCD) total SAN (storage area network) segment revenues fell 7% YoY (year-over-year) in fiscal 4Q16 to $303 million. SAN’s product revenue rose by 8% QoQ (quarter-over-quarter).
The YoY decline was driven by an 18% fall in director sales and a 13% fall in embedded switch sales. This decline was offset by a 7% rise in fixed configuration switch sales. In fiscal 2016, Brocade’s SAN product revenue was $1.3 billion and fell 6% YoY. According to Brocade’s earnings press release, this decline was “primarily due to certain partner business transitions and a challenging storage spending environment, leading to lower director and embedded switch sales.”
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The above chart shows that SAN product revenue accounted for 55% of total revenue in fiscal 4Q15, 48% in fiscal 3Q16, and 46% in fiscal 4Q16.
Why Brocade’s non-GAAP gross margin fell in fiscal 2016
Brocade’s fiscal 2016 non-GAAP (generally accepted accounting principles) gross margin fell 50 basis points YoY to 67.9%. Brocade’s shift in product mix (from SAN to IP Networking) impacted its gross margins in fiscal 2016.
In fiscal 3Q16, Brocade’s non-GAAP gross margin fell 210 basis points to 66.5% as well, driven by its lower SAN revenue and an unfavorable shift in its product and customer mix.