Brocade Communications Systems, Inc. has a market cap of $2.31 billion; its shares were traded at around $5.19 with a P/E ratio of 13 and P/S ratio of 1.1. Brocade Communications Systems, Inc. had an annual average earning growth of 3.8% over the past 10 years. GuruFocus rated Brocade Communications Systems, Inc. the business predictability rank of 2-star.BRCD is in the portfolios of Daniel Loeb of Third Point, LLC, John Buckingham of Al Frank Asset Management, Inc., Steven Cohen of SAC Capital Advisors, NWQ Managers of NWQ Investment Management Co, Pioneer Investments, Kenneth Fisher of Fisher Asset Management, LLC, Chuck Royce of Royce& Associates, Paul Tudor Jones of The Tudor Group, George Soros of Soros Fund Management LLC, PRIMECAP Management, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:Upon completion of the acquisition of Foundry in December 2008, Brocade increased its indebtedness by approximately $1.1 billion, which is substantially greater than its indebtedness prior to the acquisition. The $1.1 billion debt was originally issued under a term loan facility. In January 2010, that term loan was amended to permit Brocade to issue $600 million of senior indebtedness. Following the issuance of $600 million in Senior Secured Notes in January 2010, Brocade applied approximately $435 million of the proceeds to prepay a portion of the original $1.1 billion term loan, and used the remaining net proceeds, together with cash on hand, to retire the 2.25% Notes originally issued by McDATA. The financial and other covenants agreed to by Brocade in connection with such indebtedness and the increased indebtedness and higher debt-to-equity ratio of Brocade in comparison to that of Brocade on a recent historical basis will have the effect, among other things, of reducing Brocades flexibility to respond to changing business and economic conditions and increasing borrowing costs, and may adversely affect Brocades operations and financial results. The increased indebtedness may also adversely affect Brocades ability to access sources of capital or incur certain liens. In addition, Brocades failure to comply with these covenants could result in a default under the Senior Secured Credit Facility and under the $600 million in Senior Secured Notes, which could permit the holders to accelerate such debt or demand payment in exchange for a waiver of such default. If any of Brocades debt is accelerated, Brocade may not have sufficient funds available to repay such debt. The current debt under the Senior Secured Credit Facility has a floating interest rate and an increase in interest rates may negatively impact Brocades financial results. The mandatory debt repayment schedule on the Senior Secured Credit Facility may negatively impact Brocades cash position and reduce Brocades financial flexibility. In addition, any negative changes by rating agencies to Brocades credit rating may negatively impact the value and liquidity of Brocades debt and equity securities and Brocades ability to access sources of capital.
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