Michael Klayko, Brocade's outgoing CEO, told analysts on the company's fourth-quarter earnings call this week that the search for his successor is nearing completion.
"I will tell you that the board is being very diligent," Klayko told a Wells Fargo analyst during a Q&A session Monday. "And I will also tell you that a lot of progress is being made to the point that this will probably be my last earnings call with you."
Brocade announced Klayko's departure during its third-quarter earnings call back in August, which, like the fourth quarter, showed strong sales growth to ballast Brocade for the new year.
Klayko, who became CEO in 2005 -- two years after Brocade acquired his previous company, Rhapsody Networks -- oversaw two seminal Brocade acquisitions: McData in 2005 and Foundry in 2008. Brocade is known to be in play, and rumors of its acquisition by other vendors or by private equity concerns are frequently floated.
Brocade hasn't signaled any likely CEO candidates. A source close to the situation told CRN last week that a range of inside and outside candidates have been vetted already.
Meanwhile, Klayko appears to be leaving Brocade on a high note. For its fiscal fourth quarter, the company reported a $54 million loss on $578 million in revenue, higher than Wall Street's average projection of $566.6 million. Brocade's traditional stronghold, storage area networking (SAN), hit $394 million in the quarter, up 9 percent compared to a year earlier, though its IP networking business -- a needed source of strength if Brocade is to fulfill its data center ambitions -- hit $184 million, a decline of 3 percent compared to last year.
Klayko described the quarter as a strong one, in which Brocade made key hires and expanded its software-defined networking (SDN) strategy. Earlier in November, Brocade entered into an agreement to buy hotshot virtualized networking company Vyatta. Brocade will attack the data center and SDN opportunities, Klayko said on the earnings call.
"Brocade intends to lead in this category to complement its Ethernet fabric and cloud-routing solutions," he said. "We have outlined a comprehensive SDN strategy that includes a four-pronged approach: innovation through internal R&D, strategic industry partnerships, advanced technology acquisition and talent recruitment of industry leaders. The recent acquisition of Vyatta is a key part of this strategy, and we believe this will help us address the virtual routing, security and VPN opportunities in the software networking segment."
Aaron Rakers, an analyst with Stifel Nicolaus, wrote in a research note this week that Brocade's Ethernet networking challenges are still a concern, but that steady adoption of products such as its VDX Ethernet fabric switches -- Brocade reported more than 800 VDX customers as of the four quarter -- is a plus.
"The company noted that Ethernet GM% is nearing 50%, continuing to watch mix shift toward VDX solutions as a positive long-term driver," Rakers noted.
Brocade's made a number of investments in channel this year, and also changed channel chiefs, with Regan McGrath, former vice president, Americas sales, becoming vice president, global channel sales.
PUBLISHED NOV. 21, 2012