Brocade Reports Q1 2009 Results.

Revenue Up 24 Percent Year-Over-Year, 8 Percent Quarter-Over-Quarter with Inclusion of Foundry

SAN JOSE, Calif. -- Brocade([R]) (NASDAQ:BRCD) today reported financial results for its first fiscal quarter, which ended January 24, 2009. Brocade reported Q1 revenues of $431.6 million, GAAP net loss of $26.0 million or $(0.07) per share diluted, and net income of $63.6 million or $0.15 per share diluted on a non-GAAP basis.

Commenting on Brocade's first quarter financial results, Michael Klayko, Brocade CEO, said:

"Brocade achieved another strong quarter in terms of revenues and better-than-expected operating margins. These results were fueled by a healthy mix of products and services, including IP networking solutions from our recently integrated Foundry business. In addition, with our combined product portfolio and roadmap, we believe Brocade is well-positioned to take advantage of opportunities in key, growing market segments within the networking industry."

Brocade began the integration of Foundry upon the close in late December. The process is progressing ahead of schedule with the vast majority of the Foundry employee base and key members of the executive team still in place. The product and engineering teams have finalized Brocade's highly competitive, combined product roadmap. In addition, application of Brocade's supply chain optimization, Life Cycle Management and quality processes to Foundry's products and services is saving costs and improving reliability. Brocade has realigned its business to focus on three market segments: Enterprise Data Center solutions, Enterprise LAN Campus and Service Providers.

Regarding the integration, Michael Klayko continued:

"We have been successful to date in integrating the Foundry team into Brocade and have begun to re-organize the combined company in order to more quickly and proactively take advantage of the opportunities afforded us in the networking space by a broader and more comprehensive portfolio of products and offerings."

First Fiscal Quarter 2009 Business Highlights

* Brocade completed the acquisition of Foundry Networks on Dec. 18, 2008, positioning Brocade as a leading provider of comprehensive portfolio of IP and data center networking solutions;

* Brocade announced that it appointed Marc Randall as senior vice president of Products and Offerings and Dave Stevens as its Chief Technology Officer. The appointments of these two networking industry veterans will help Brocade further expand into the IP/Ethernet networking market;

* Brocade introduced the Brocade DCX-4S Backbone, which extends the industry-leading features and capabilities of the Brocade DCX Backbone to mid-sized IT environments;

* Brocade announced that IBM successfully completed systems integration testing of the Brocade 8 Gbit/sec Fibre Channel HBAs with the IBM System x server family. This will help enable both companies to deliver this new class of server connectivity that leverages Brocade Advanced Fabric Services to better meet the urgent needs of IBM System x customers;

* Brocade was named to Deloitte's Technology Fast 50 Program for Silicon Valley as well as the Billion Dollar Club, a category of companies that have achieved $1 billion (USD) or more in revenue in fiscal year 2007 and more than doubled in revenue growth over a five-year period;

First Fiscal Quarter 2009 Financial Highlights and Additional Financial Information

* In Q1 09, Brocade achieved record revenue of $431.6 million, an 8% quarter on quarter growth and a 24% year on year growth.

* Q1 09 includes a partial quarter of results from Brocade's acquisition of Foundry Networks, Inc. which closed on December 18, 2008.

* Brocade's total installed base of SAN ports was approximately 20.4 million.

* In Q1 09, Average Selling Price (ASP) declines were in the low single digits compared to Q4 08.

* In Q1 09, net stock-based compensation expense was $18.1 million.

* As of the end of Q3 08, Brocade suspended its share repurchase program due to the pending acquisition of Foundry Networks. In Q1 09 Brocade made no repurchases.

* Brocade's GAAP effective tax rate was (550.3)%, and its non-GAAP effective tax-rate was 30.0% in Q1 09.

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1. Based on Brocade estimates of adjustment for OEMs taking delivery of internationally bound shipments in the United States, end-user demand was 46% domestic and 54% international.

2. Days sales outstanding normalized for a partial quarter of Foundry revenue was 44 days.

Non-GAAP Financial Measures

This press release and the related conference call contain non-GAAP financial measures. In evaluating the Company's performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP.

Management believes that non-GAAP net income and other non-GAAP financial measures used in this press release allow management to gain a better understanding of the Company's comparative operating performance from period-to-period and to its competitors' operating results. Management also believes these non-GAAP financial measures help indicate the Company's baseline performance before gains, losses or charges that are considered by management to be outside ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations performance and the allocation of resources. Management believes these non-GAAP financial measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:

* the ability to make more meaningful period-to-period comparisons of the Company's ongoing operating results;

* the ability to better identify trends in the Company's underlying business and perform related trend analysis;

* a better understanding of how management plans and measures the Company's underlying business; and

* an easier way to compare the Company's most recent results of operations against investor and analyst financial models.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or arise outside the ordinary course of our continuing operations. Management believes that it is appropriate to evaluate the Company's operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include: (i) legal fees associated with indemnification obligations to former employees and other related costs, (ii) acquisition and integration costs (in connection with the Foundry acquisition), (iii) in-process research and development charge (in connection with the Foundry acquisition), (iv) loss on sale of investments and (v) acquisition-related financing charges (in connection with the Foundry acquisition).

Management also excludes the following non-cash charges in determining non-GAAP net income: (i) stock-based compensation expense and (ii) amortization of purchased intangible assets. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, management believes that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Management believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for the Company's newly acquired and long-held businesses.

Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Limitations. These non-GAAP financial measures have limitations, however, because they do not include all items of income and expense that impact the Company. Management compensates for these limitations by also considering the Company's GAAP results. The non-GAAP financial measures the Company uses are not prepared in accordance with, and should not be considered an alternative to, measurements required by GAAP, such as operating income, net income (loss) and net income (loss) per share, and should not be considered measures of the Company's liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measures reported by other companies.

First Fiscal Quarter 2009 Conference Call and Webcast Information

Brocade management will host a conference call to discuss first quarter 2009 results on Thursday, February 19, 2009, at 2:00 p.m. Pacific Standard Time. To access the live webcast, please visit Brocade's website at http://www.brcd.com at least 20 minutes prior to the call to download any necessary audio or plug-in software. A telephone replay will be available approximately two hours after the conference ends and will be available until 5:00 p.m. Pacific Standard Time on February 26, 2009. A replay of the conference call will be available via webcast at http://www.brcd.com for approximately twelve months.

Cautionary Statement

This press release contains statements that are forward-looking in nature, including statements regarding the Company's market positioning and integration of the Foundry acquisition. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, our ability to realize anticipated benefits from the acquisition of Foundry, the effect of changes in IT spending levels, market competition, and the Company's ability to manage its business effectively in a rapidly evolving market. Certain of these and other risks are set forth in more detail in "Item 1A. Risk Factors" in Brocade's Annual Report on Form 10-K for the fiscal year ended October 25, 2008. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.

About Brocade

Brocade[R] (Nasdaq:BRCD) develops extraordinary networking solutions that enable today's complex, data-intensive businesses to optimize information connectivity and maximize the business value of their data. For more information, visit www.brocade.com.

Brocade, the B-wing symbol, BigIron, DCX, Fabric OS, FastIron, IronPoint, IronShield, IronView, IronWare, JetCore, NetIron, SecureIron, ServerIron, StorageX, and TurboIron are registered trademarks, and DCFM, Extraordinary Networks, and SAN Health are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. All other brands, products, or service names are or may be trademarks or service marks of, and are used to identify, products or services of their respective owners.

[c] 2009 Brocade Communications Systems, Inc. All Rights Reserved.

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See explanation of non-GAAP information included herein.