First Albany downgraded McData Corp. (MCDT ) to neutral from buy.
Analyst Mark Kelleher says this is the second time the company preannounced for the first quarter. He says he believes McData is facing the same problems as those it cited previously. These include a heavy dependence on EMC Corp. as an original equipment manufacturer customer, and market share inroads by Brocade Communications using two-gigabit technology. Kelleher says, unfortunately, due to the fixed cost structure of McData, as revenue drops, earnings are severely impacted.
He cut his $70 million first quarter revenue estimate to $63 million. For 2002, he cut his $321 million revenue estimate to $291 million, and widened his $0.01 loss to a $0.20 loss. For 2003, Kelleher cut his $450 million revenue estimate to $400 million and reduced his $0.30 EPS to $0.16 EPS.