McData Corp.'s (Nasdaq: MCDTA) latest earnings report indicates there is probably one player too many in the Fibre Channel switch market.
The Broomfield, Colo., company lost $50 million in the third quarter despite increasing revenues by 17 percent from the previous year. That follows disappointing earnings results from its major rivals Brocade Communications Systems Inc. (Nasdaq: BRCD) and Cisco Systems Inc. (Nasdaq: CSCO) (see Did Brocade Blow an Opportunity? and Cisco Still a Kid in Storage).
Even factoring in one-time charges for acquisitions of Nishan Systems and Sanera Systems and an investment in Aarohi Communications (see McData Sweeps Up Nishan, Sanera), it's apparent that McData will still face problems in 2004.
McDatas stock price tobogganed today [Ed. note: wheeeeee!], down more than 12 percent to $9.29 by midafternoon.
McData's guidance for the next quarter and comments made by CEO John Kelley indicate the company is still feeling the pain from price concessions that caused it to lower its third-quarter guidance a month ago (see McData Lowers Q3 Guidance). Kelley frequently referred to pricing pressure and lengthening sales cycles during his conference call with analysts.
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