Ryan Cerpa / Sr. Analyst
Brocade Communications Systems Inc. (Nasdaq: BRCD) is a supplier of data center networking solutions that help enterprises connect and manage their information. The company offers a line of data center networking hardware, software products and services. BRCD is organized in four operating units: The Data Center Infrastructure (DCI), The Server Edge and Storage (SES), The Services, Support and Solutions (S3) and The Files (Files). BRCD products and services are marketed, sold to end-user customers through distribution partners, including original equipment manufacturers (OEMs), distributors, systems integrators, value-added resellers (VARs) and by BRCD directly.
· BRCD plummeted from $9.25 to just over $8 after several analysts responded to the news that Hewlett-Packard (HPQ) will acquire 3Com (COMM) for $7.90/share, and a stern downgrade of BRCD by Lazard from Buy to Hold. Previously, BRCD was thought to be a top prospect for a tech takeover, specifically, from HP.
· In a true sign of the times, Oracle (ORCL) and BRCD today announced a deepening of their existing partnership that will result in more standard configurations and templates for deploying BRCD storage technologies alongside Oracle software. The three areas in which the two companies will work more closely to create these standard configurations and templates include virtual machine deployments, data warehousing and business intelligence applications that are included as part of the Oracle e-business suite. In these challenging economic times, customers are bringing more pressure to bear on vendors to reduce costs and reduce the amount of time it takes to get value out of an IT investment.
BRCD is trading above its 200 day moving average, yet below its 13 and 50 day moving averages. indicating a weakening in the stocks buying trend. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock. The recent dip below the 13 and 50 day averages indicates a weakening in the stocks buying trend, and a possible dip.
The MACD for BRCD currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.
The Stochastic Oscillator is registering a bearish signal as the %K line has crossed under the %D and the oscillator recently crossed below the critical value of 80, moving from its overbought condition.
