First Albany Maintains Buy on Brocade

Analyst Joel Wagonfeld says the networking-systems provider could see upside from Hewlett-Packard's growth

First Albany reiterates buy rating for infrastructure-services provider Brocade Communications Systems (BRCD ) and raises its price target.

Analyst Joel Wagonfeld says Brocade's fourth-quarter results are due out Nov. 22, and his estimates call for in-line earnings per share of 6 cents on $154 million in revenue. He notes, however, that he now sees a potential for upside due to Hewlett-Packard's strong quarter-over-quarter storage results.

Wagonfeld estimates that Hewlett-Packard typically represents 10% to 30% of Brocade's revenues in any given quarter. He notes Hewlett-Packard said that enterprise storage rose 16% quarter-over-quarter and thinks midrange storage (where Brocade has significant exposure) is experiencing much of that improvement. Also he notes Hewlett-Packard added new storage salespeople, and sees productivity ramping over coming quarters, which would benefit partners like Brocade. He raises the company's $7 price target to $8.50.

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