Even though many customers will have held off buying McData hardware until the company’s latest Intrepid 10000 flagship director begins shipping, the company saw healthy revenue growth, driven largely by an OEM deal with IBM Corp that opened up sales in Europe and Asia Pacific.
It was a very good quarter for them, said Nancy Hurley, analyst at the ESG. Hurley highlighted not only the IBM contribution to McData’s sales, but McData’s efforts to develop sales independently of its OEM partners. Over the last year there’s been a big change in their sales force, and the way they approach customers and are reducing their reliance on OEMs About half of their sales staff has been replaced, some voluntarily, some not, she said.
For its fourth fiscal quarter ended January 31 2005 McData reported break even GAAP net income, compared to a net loss of $7.5m in the same quarter a year earlier, on net revenue of $106m, down 7% year-on-year, but up 7% sequentially. Given the effect of the i10K launch, that sequential increase compared well to Brocade Communications Systems Inc’s sequential growth of 4% in the same period. Guidance for the company’s current fiscal quarter was for revenue of $98m to $103m.
While director sales were flat sequentially and down year-on-year, switch sales grew sequentially for the third quarter in a row, and a lot of that growth was because of IBM’s contribution in EMEA and Asia, McData said. In October 2004 McData announced a deal that saw IBM change from a reseller to an OEM supplier of McData gear, increasing its non-US sales coverage.
Hitachi Data Systems became the first OEM outlet for the i10k at the end of last month. McData said yesterday that its other OEM partners who include EMC, HP and IBM will follow suit soon. We’re most anxious to get the i10K out there…we’re optimistic that it will put the heat on, said McData CEO John Kelley. Among other virtues, the new box outguns the dreadnought directors offered by Brocade and Cisco Systems Inc via a much larger port count.
The merger with CNT has passed the Hart-Scott-Rodino and SEC regulatory hurdles well ahead of schedule. McData described this as truly amazing, but stuck to its forecast that it will close the merger in the second quarter.
McData is still dependent on EMC for a major share of its business, and EMC accounted for 46% of its revenue during the quarter, with IBM accounting for 26%. During its earning call McData said more than once that its reseller and VAR revenues were up by 20% year-on-year, although this will have been from a very small base.
