Citigroup downgrades Brocade Communications Systems (BRCD) to hold from buy.
Analyst Paul Mansky says his downgrade reflects near-term end-market softness. He sees long-term risks associated with increased competition expected in the bladed switch market at the hands of QLogic, which has original equipment manufacturer relationship with McDATA, expected imminent deal with Cisco.
He says with small- to medium-sized business market showing slower-than-expected adoption rates for fibre channel switching solutions and growth increasingly predicated on Brocade's higher end products, which also face competition.
Mansky cuts his $8.25 target to $6. He cuts his 43 cents 2005 earnings per share estimate to 41 cents, and 48 cents 2006 earnings per share estimate to 47 cents.