McDATA Announces Third Quarter Fiscal Year 2005 Financial Results.BROOMFIELD Broomfield can be: In the United Kingdom:
MCDT Microsoft Certified Desktop Technician ), a leading provider of storage networking solutions, today reported results for its third quarter of fiscal year 2005 (Q3 05), which ended October October: see month. 31, 2005. Revenue for Q3 05 was $168.5 million, compared to $165.3 million reported in the second quarter of fiscal year 2005 (Q2 05), and $98.5 million reported in the third quarter of fiscal year 2004 (Q3 04). Non-GAAP net income for Q3 05 was $3.6 million, or $0.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, and included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. tax benefit of approximately $1.4 million. This compared to non-GAAP net income of $3.8 million, or $0.03 per diluted share in Q2 05, and non-GAAP net income of $4.6 million, or $0.04 per diluted share in Q3 04. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, McDATA reported a Q3 05 net loss of $(7.5) million, or $(0.05) per share, compared to a net loss of $(25.5) million, or $(0.18) per share in Q2 05, and a net loss of $(5.5) million, or $(0.05) per share in Q3 04. McDATA's Q3 05 and Q2 05 non-GAAP net income excludes restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs, charges related to the amortization of purchased intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , amortization of deferred compensation and amortization of debt discount. McDATA's Q3 04 non-GAAP net income excludes charges related to the amortization of deferred compensation and amortization of purchased intangible assets. Q3 04 non-GAAP net income also excludes charges related to the Company's share of the operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. associated with its investment in Aarohi Aarohi is the annual youth festival (Culfest) of Visvesvaraya National Institute of Technology, Nagpur, India. It is organised every year during winter in December-January. Students from undergraduate institutes in the city take part in many of the events organised. and certain restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . Non-GAAP results are a supplement to GAAP financial statements and exclude certain expenses to provide what McDATA believes is a more complete understanding of our underlying operational trends. McDATA management uses non-GAAP results as one of the primary indicators for planning of future periods. Non-GAAP financial measures should be considered in addition to results prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP, but should not be considered a substitute for, or superior to, GAAP results. A reconciliation of GAAP and non-GAAP net income is provided in the financial statements attached to this news release. "Our third quarter performance was marked by both success and disappointment," said John Kelley
Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . We also experienced renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. strength in fibre channel switching In a computer storage field, a Fibre Channel switch is a network switch compatible with Fibre Channel (FC) protocol. It allows the creation of a Fibre Channel fabric, that is currently the core component of most storage area networks. with the introduction of our Sphereon(TM) 4400 and Sphereon 4700 4Gb/s fibre channel switches Major manufacturers of Fibre Channel switches are: Brocade, Cisco, McData and Qlogic.
An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. in the Asia Pacific region. These achievements were offset by lower than expected director sales due to a combination of increased competition and more pronounced seasonality at the high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. of the market. Additionally, we experienced weakness in North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. sales as we continued to integrate our operations and sales organizations during our first full quarter as a combined company following the acquisition of CNT (Carbon NanoTube) See nanotube. . While I am disappointed in our overall performance this quarter, I believe in our ability to drive operational improvements and revenue growth as we focus on tighter integration, increased synergies, and stronger go-to-market strategies." Integration milestones achieved: --Successfully converted the domestic processes for CNT's JD Edward's ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. system to McDATA's Oracle System. --Achieved more than 90 percent of headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. related synergies by October 31, 2005. Q3 05 business highlights: --McDATA announced it has sold more than 20,000 Intrepid Directors worldwide, totaling more than 1.6 million ports since 1998. --Getronics PinkRoccade, the largest information and communication technology solutions company in The Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , purchased Intrepid 10000 Directors, Eclipse 2640 SAN routers and Sphereon 4500 fabric switches. --MoneyGram International, Inc. consolidated its storage with McDATA Intrepid Directors. The new SAN supports MoneyGram's requirements around mainframe and open systems server virtualization (1) Running applications in separate, isolated partitions within a single server. The "virtual machine" method can run different operating systems simultaneously, whereas the "OS virtualization" method runs applications for only one operating system (see virtual machine and OS and has saved the company $400,000 in hardware and network connectivity costs and $120,000 in annual bandwidth bandwidth Measurement of the capacity of a communications signal. For digital signals, the bandwidth is the data speed or rate, measured in bits per second (bps). For analog signals, it is the difference between the highest and lowest frequency components, measured in hertz fees. --McDATA's Sphereon 4400 and Sphereon 4700 4Gb/s fibre channel switches with FlexPort Flexport is a company incorporated in Sri Lanka to design and manufacture custom made trophies, medals, corporate gifts, plaques, souvenirs, signs and other light engineering products. The company's motto is "You name it, We make it". technology achieved general availability through partners Dell, EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. , HDS (Hitachi Data Systems, Santa Clara, CA, www.hds.com) A leading provider of high-end storage hardware, software and services. Part of the Information Systems & Telecommunications Division of Hitachi Ltd. , IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) and value added resellers See VAR. (company) value added reseller - (VAR, or "value added retailer") A company which sells something (e.g. computers) made by another company (an OEM) with extra components added (e.g. specialist software). and distributors. The new Sphereon fabric switches support wizards for simple installation; unrestricted, non-blocking The ability of a signal to reach its destination without interference or delay. In a non-blocking switch, all ports can run at full wire speed without any loss of packets or cells. universal fibre channel ports to minimize complexity of adds, moves and changes to a SAN; and FICON (FIber CONnector) An IBM mainframe channel introduced with its G5 servers in 1998. Based on the Fibre Channel standard, it boosts the transfer rate of ESCON's half-duplex 17MB/sec to a full-duplex 100MB/sec. CUP capability (on the 4700). --McDATA announced the general availability of its Intrepid FICON Converter (1) A device that changes one set of codes, modes, sequences or frequencies to a different set. See A/D converter. (2) A device that changes current from 60Hz to 50Hz and vice versa. (IFC (Internet Foundation Classes) A class library from Netscape that provides an application framework and graphical user interface (GUI) routines for Java programmers. IFC was later made part of the Java Foundation Classes (JFC). See JFC, AFC and AWT. See also ICF. ), a cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. solution for attaching ESCON (Enterprise Systems CONnection) An IBM S/390 fiber-optic channel that transfers 17 Mbytes/sec over distances up to 60 km depending on connection type. ESCON allows peripheral devices to be located across large campuses and metropolitan areas. peripherals directly to FICON channels. McDATA's IFC, powered by Optica Technologies' Prizm module, is the first product in the industry that performs native protocol conversion from FICON to ESCON, allowing customers to migrate mainframes to a switched FICON environment while protecting investments in legacy ESCON storage and peripheral devices See peripheral. peripheral device - peripheral . --McDATA appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. former Cisco executive Michael Frendo Michael Frendo (born July 29 1955) is a Maltese politician and a member of the Nationalist Party. He has been Malta's Minister of Foreign Affairs since July 3 2004.[1] Frendo was first elected to the House of Representatives of Malta in 1987. as senior vice president of engineering. Conference call and webcast McDATA will host a conference call to discuss its Q3 05 financial results today, Nov. 30, 2005, at 6:00 a.m. MST See micro systems technology. . The conference call is being webcast live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.mcdata.com. An archive of the webcast will be available for 12 months at www.mcdata.com. About McDATA (www.mcdata.com) McDATA (Nasdaq:MCDTA) (Nasdaq:MCDT) is the leading provider of storage networking solutions, helping customers build, globally connect, optimize optimize - optimisation and centrally manage data infrastructures across SAN, MAN and WAN environments. With nearly 25 years experience developing SAN products, services and solutions, McDATA is the trusted partner in the world's largest data centers, connecting more than two-thirds of all networked data. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains statements about expected future events that are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and subject to risks and uncertainties. Readers are urged to consider statements that include the terms "believes", "belief", "expects", "plans", "objectives", "estimates", "anticipates", "intends", "targets", or the like to be uncertain and forward-looking. Factors that could cause actual results to differ and vary materially from expectations include, but are not limited to, McDATA's relationships with EMC, IBM and Hitachi Data Systems See HDS. and the level of their orders, aggressive price competition by numerous other SAN and IP switch suppliers, OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and qualification of our new products -- such as the Intrepid 10000 Director, integration of CNT's sales and marketing functions, manufacturing constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , constraints in obtaining third party product for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. and other risk factors that are disclosed in McDATA's filings with the Securities and Exchange Commission. These cautionary statements by McDATA should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by McDATA. All cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. McDATA does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
McDATA CORPORATION
CONDENSED REPORTED CONSOLIDATED INCOME STATEMENTS (Note 1)
(in thousands, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
----------------- ------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2004 2005 2004 2005
----------------- ------------------
Revenue:
Product $92,805 $138,579 $279,382 $369,988
Service 5,720 29,926 14,593 62,694
----------------- ------------------
Total revenue 98,525 168,505 293,975 432,682
Cost of revenue
Product 38,804 68,566 116,589 175,737
Service 4,900 20,370 12,979 41,632
Restructuring charges - 134 - 826
----------------- ------------------
Total cost of revenue 43,704 89,070 129,568 218,195
----------------- ------------------
Gross profit 54,821 79,435 164,407 214,487
Operating expenses:
Research and development 22,828 31,464 70,077 83,783
Selling and marketing 26,755 35,787 74,447 98,091
General and administrative 11,432 21,863 36,783 51,632
Amortization of deferred
compensation 1,050 889 4,797 4,849
Restructuring costs (55) 526 1,263 10,278
----------------- ------------------
Operating expenses 62,010 90,529 187,397 248,633
Loss from operations (7,189) (11,094) (22,990) (34,146)
Interest and other income, net 1,310 (326) 3,618 775
----------------- ------------------
Loss before income taxes and
equity in net loss of affiliated
company (5,879) (11,420) (19,372) (33,371)
Income tax expense (benefit) (618) (3,936) 40 2,488
----------------- ------------------
Loss before equity in net loss of
affiliated company (5,261) (7,484) (19,412) (35,859)
Equity in net loss of affiliated
company (262) - (1,380) -
----------------- ------------------
Net loss $(5,523) $(7,484) $(20,792)$(35,859)
================= ==================
Basic net loss per share $(0.05) $(0.05) $(0.18) $(0.26)
================= ==================
Shares used in computing basic net
loss per share 115,624 152,646 115,377 135,750
================= ==================
Diluted net loss per share $(0.05) $(0.05) $(0.18) $(0.26)
================= ==================
Shares used in computing diluted
net loss per share 115,624 152,646 115,377 136,926
================= ==================
McDATA CORPORATION
CONDENSED NON-GAAP CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
----------------- ------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2004 2005 2004 2005
----------------- ------------------
Revenue:
Product $92,805 $138,579 $279,382 $369,988
Service 5,720 29,926 14,593 62,694
----------------- ------------------
Total revenue 98,525 168,505 293,975 432,682
Cost of revenue
Product 38,778 68,136 116,387 175,155
Service 4,900 20,370 12,979 41,632
Restructuring charges - - - -
----------------- ------------------
Total cost of revenue 43,678 88,506 129,366 216,787
----------------- ------------------
Gross profit 54,847 79,999 164,609 215,895
Operating expenses:
Research and development 22,426 31,192 68,634 82,920
Selling and marketing 26,622 35,695 74,137 97,942
General and administrative 5,667 10,358 19,294 24,082
Amortization of deferred
compensation - - - -
Restructuring costs - - - -
----------------- ------------------
Operating expenses 54,715 77,245 162,065 204,944
Income from operations 132 2,754 2,544 10,951
Interest and other income, net 1,310 494 3,618 2,142
----------------- ------------------
Income before income taxes and
equity in net loss of affiliated
company 1,442 3,248 6,162 13,093
Income tax expense (benefit) (3,108) (347) (1,505) 2,514
----------------- ------------------
Income before equity in net loss
of affiliated company 4,550 3,595 7,667 10,579
Equity in net loss of affiliated
company - - - -
----------------- ------------------
Net income $4,550 $3,595 $7,667 $10,579
================= ==================
Basic net income per share $0.04 $0.02 $0.07 $0.08
================= ==================
Shares used in computing basic net
income per share 115,624 152,646 115,377 135,750
================= ==================
Diluted net loss per share $0.04 $0.02 $0.07 $0.08
================= ==================
Shares used in computing diluted
net income per share 118,739 154,417 117,584 136,926
================= ==================
McDATA CORPORATION
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME (LOSS) (Note 2)
(in thousands, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2004 2005 2004 2005
-------- -------- --------- ---------
GAAP net loss $(5,523) $(7,484) $(20,792) $(35,859)
Adjustments:
Amortization of deferred
compensation and
acquisition-related
compensation 1,731 1,475 7,053 6,221
Amortization of intangible
assets 5,645 11,367 17,218 26,474
Other severance - 346 - 1,298
Restructuring costs
(recoveries) (55) 660 1,263 11,104
Interest expense - 820 - 1,367
Income tax (expense) benefit 2,490 (3,589) 1,545 (26)
Equity in net loss of
affiliated company 262 - 1,380 -
-------- -------- --------- ---------
Non-GAAP net income $4,550 $3,595 $7,667 $10,579
GAAP net loss per share - basic
and diluted $(0.05) $(0.05) $(0.18) $(0.26)
Non-GAAP net income per share -
diluted $0.04 $0.02 $0.07 $0.08
Shares used in non-GAAP per share
calculation - diluted 118,739 154,417 117,584 136,926
Note (1) - Certain prior period amounts have been reclassified to
conform to the fiscal 2005 presentation.
Note (2) - The condensed non-GAAP consolidated income statements for
all periods presented are for illustrative purposes only
and are not prepared in accordance with generally accepted
accounting principles. The following is provided as a
supplement to the non-GAAP reconciliation above:
Three Months Nine Months
Ended Ended
----------------- -----------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Non-GAAP Adjustments 2004 2005 2004 2005
-------------------- -------- -------- -------- --------
Cost of revenue:
Deferred compensation and
acquisition-related
compensation $26 $84 $202 $236
Restructuring costs - 134 - 826
Other severance - 346 - 346
-------- -------- -------- --------
Total cost of revenue
subtotal 26 564 202 1,408
-------- -------- -------- --------
Operating expenses:
Research and development:
Acquisition-related
compensation 402 272 1,443 828
Other severance - - - 35
Selling and marketing
Acquisition-related
compensation 133 92 340 149
General and administrative
Acquisition-related
compensation 120 138 271 159
Amortization of intangible
assets 5,645 11,367 17,218 26,474
Other severance - - - 917
Restructuring costs (55) 526 1,263 10,278
Amortization of deferred
compensation 1,050 889 4,797 4,849
-------- -------- -------- --------
Operating expenses subtotal 7,295 13,284 25,332 43,689
-------- -------- -------- --------
Interest expense - 820 - 1,367
-------- -------- -------- --------
Total non-GAAP Adjustments 7,321 14,668 25,534 46,464
Income tax expense (benefit) (2,490) 3,589 (1,545) 26
Equity in net loss of affiliated
company 262 - 1,380 -
-------- -------- -------- --------
After-tax impact of non-GAAP
adjustments $10,073 $11,079 $28,459 $46,438
======== ======== ======== ========
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Jan. 31, Oct. 31,
-------- ----------
2005 2005
-------- ----------
Assets
Cash, cash equivalents and short term
investments $209,766 $310,915
Securities lending collateral 130,804 86,715
Accounts receivable, net 63,810 110,037
Inventories, net 13,720 34,647
Other current assets 7,280 11,415
--------------------
Total current assets 425,380 553,729
Property and equipment, net 94,929 130,141
Long-term investments 95,589 32,966
Goodwill 78,693 260,812
Intangible assets, net 87,592 134,726
Other assets, net 36,052 68,768
--------------------
Total assets $818,235 $1,181,142
====================
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $64,894 $139,757
Securities lending collateral 130,804 86,715
Current portion of deferred revenue 22,736 34,403
Current portion of notes payable and capital
leases 912 2,859
--------------------
Total current liabilities 219,346 263,734
Notes payable and capital leases, less current
portion 256 4,548
Deferred revenue, less current portion 27,001 49,972
Convertible subordinate debt 172,500 292,621
Other long-term liabilities 1,908 24,558
--------------------
Total liabilities 421,011 635,433
Stockholders' equity 397,224 545,709
--------------------
Total liabilities and stockholders' equity $818,235 $1,181,142
====================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
Oct. 31, Oct. 31,
2004 2005
--------- ---------
Net cash provided by operating activities $10,056 $8,315
========= =========
Cash flows from investing activities:
Net purchases of property and equipment $(13,911) $(10,481)
Net purchases and sales of investments 8,161 63,001
Other investing - 46,678
--------- ---------
Net cash provided (used) by investing activities $(5,750) $99,198
========= =========
Cash flows from financing activities:
Payments on notes payable and capital leases and
other $(2,317) $(3,575)
Cash paid for treasury stock (10,100) (4,551)
Proceeds from the issuance of common stock 5,500 2,251
--------- ---------
Net cash provided (used) by financing activities $(6,917) $(5,875)
========= =========
Effects of exchange rate changes - $96
========= =========
Net increase (decrease) in cash and cash
equivalents $(2,611) $101,734
========= =========
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