Brocade's New Weave

BROCADE COMMUNICATIONS, ONCE A LEADER in the network storage industry, is today under pressure to perform. The industry itself has taken a beating due to interoperability problems and the tech recession. Brocade provides switching solutions for storage area networks (SAN). The company's switching solutions utilize the fiber channel interconnect protocol. Brocade's family of SilkWorm switches enables a company to manage growth of its data storage requirements, improve the data transfer performance, and increase the size of its SAN.

According to Merill Lynch, SANs are still a high priority at IT shops. The Fibre Channel switching market grew 15% in 2002, which is quite good considering the lousy year it was for IT. But with a more malignant pricing environment margins, Brocade's destiny is unclear.

The company reported revenue of $123 million, down 20% Q/Q and break-even earnings for the first quarter, meeting analysts' average expectations. Earnings Per Share was $0.0. Brocade needs to show it can grow EPS. Growing EPS will require both cost cutting and revenue growth.

In the last quarter, Brocade completed the acquisition of Rhapsody Networks, a provider of intelligent switching platforms, in exchange for 20.5 million shares of Brocade common stock.

The last quarter also saw Brocade win 54 new accounts for its SilkWorm Fabric Application Platform. With support for fabric applications rapidly growing, Brocade should be well placed to tap new areas of the high-end market. The company has continued to expand its worldwide fiber channel switch market share, increasing its share of the total market to 58 percent, according to latest research by the Dell'Oro Group.

But with Cisco's fiber channel entrance, it remains to be seen how Brocade will defend its position successfully. Analysts believe that while Cisco is not taking the fiber channel switching market by storm, its presence will continue to weigh on Brocade's stock. Brocade was pushed into its recent expensive Rhapsody acquisition by Cisco's mounting threat.


Mphasis On Growth

Financial software services provider, Mphasis-BFL declared an impressive performance in the third quarter ended December 2002. Software services revenues at $18.6 million were up by 11% as compared to the previous quarter, and net profit jumped 13% to $3.8 million. Software services achieved a revenue growth of 11% sequentially, while its subsidiary Msource (call centre/ BPO business) reported 17% sequential growth. Growth was mainly contributed by existing client ramp-ups, with significant thrust on offshore.

With good customer traction, strong offshore delivery capacity and expertise in the banking and financial services industry (BFSI), Mphasis-BFL is well placed to continue delivering steady growth over the next few quarters. It appears that Mphasis is transforming itself into a Tier-One player. The company's foray into areas like system integration and BPO only indicates that it is all set to make it big in this space.

Mphasis-BFL came into existence by merger of BFL Software, India and MphasiS Corporation, U.S in 2000. Headed by Jerry Rao, an ex-Citibanker and an expert in financial services and in technology management, Mphasis' core competencies in the financial services logistics and retailing domains.

MphasiS is assessed at SEI CMM Level 5 and currently has 8 development centers in India, 18 offices across the globe and 3 call centers. MphasiS BFL is holding 74% stake in the BPO subsidiary Msource.

Top Clients: JP Morgan Chase, ABN Amro, Compaq, Singapore Airlines, Delta Airlines, Fedex, RSA Securities and Citigroup

Employees: 1180, Market Cap: $195 million