Ahead of the Bell: Brocade shares fall

NEW YORK (AP) - Shares of Brocade Communications Systems Inc. tumbled in premarket trading Friday after the networking equipment maker posted mixed results for its fiscal second quarter, with profit above - but revenue slightly below - Wall Street's expectations.

The results were boosted by stronger sales to the federal government and significantly lower legal expenses from its efforts to defend former executives against charges of manipulating stock options. Even so, its revenue of $501 million was slightly less than analysts' projections for $503 million, according to Thomson Reuters.

Jefferies analyst Munjal Shah called it the "tale of two businesses."

"Brocade's Ethernet business is rebounding nicely as management implements corrective actions on sales front," Shah wrote in a note to investors. "However, the higher margin storage business is tracking below seasonal trends."

Shah, who rates the company "Hold," said the company faces "significant volatility" in its two businesses, which increases uncertainty and "meaningfully" lowers the predictability of the company's revenue.

Oppenheimer analyst Ittai Kidron agreed.

"Brocade's inconsistency further rattles investor confidence and enhances uncertainty regarding management's ability to execute," wrote Kidron, who rates Brocade "Outperform."

Shares of the San Jose, Calif.-based company plunged 86 cents, or 14.2 percent, to $5.20 in premarket trading Friday.