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Brocade Reports Fiscal Q1 2016 Results


/EINPresswire.com/ -- SAN JOSE, CA -- (Marketwired) -- 02/17/16 -- Brocade® (NASDAQ: BRCD) today reported financial results for its first fiscal quarter ended January 30, 2016. Brocade reported first quarter revenue of $574 million, flat year-over-year and down 2% quarter-over-quarter. The Company reported GAAP diluted earnings per share (EPS) of $0.23, up from $0.20 in Q1 2015 and up from $0.20 in Q4 2015. Non-GAAP diluted EPS was $0.29 for Q1 2016, up from $0.27 in Q1 2015 and up from $0.26 in Q4 2015. Tax benefits recognized in Q1 2016 increased both GAAP and non-GAAP diluted EPS by approximately $0.02 in the quarter.

"Brocade delivered another solid quarter, exceeding our revenue and earnings expectations," said Lloyd Carney, CEO of Brocade. "In particular, SAN revenue exceeded our outlook range, driven by strong customer demand for Fibre Channel storage array capacity. We believe that industry analysts' long-term projections for storage capacity growth is a solid indicator of the ongoing durability and health of our storage networking business. Looking forward, I am excited that over the next several quarters we will make a number of innovative new product announcements that we expect will expand our addressable market and enhance our capabilities in advanced storage networks, software defined data centers, and open, software-enabled New IP architectures."

Key Financial Metrics:


                                                          Q1 2016   Q1 2016
                                                            vs.       vs.
                            Q1 2016   Q4 2015   Q1 2015    Q4 2015   Q1 2015
                           --------- --------- --------- --------- ---------
Revenue                    $   574 M $   589 M $   576 M      (2%)         -
GAAP EPS - diluted         $    0.23 $    0.20 $    0.20       13%       14%
Non-GAAP EPS - diluted     $    0.29 $    0.26 $    0.27       12%        6%
GAAP gross margin              67.7%     67.0%     67.6%   0.7 pts   0.1 pts
Non-GAAP gross margin          68.8%     67.9%     68.4%   0.9 pts   0.4 pts
GAAP operating margin          21.1%     20.2%     24.2%   0.9 pts (3.1) pts
Non-GAAP operating margin      25.9%     25.0%     28.5%   0.9 pts (2.6) pts

Please see important note of explanation about the use of non-GAAP financial
measures below, including a detailed reconciliation between GAAP and non-
GAAP information in the tables included herein.

Highlights:

  • SAN product revenue of $347 million, although above our outlook range, was down 2% year-over-year. The year-over-year decline was primarily the result of softer demand for embedded and fixed-configuration Fibre Channel switches, partially offset by continued growth in director revenue. Sequentially, SAN product revenue increased 7%, which is consistent with typical fiscal Q1 seasonality. The sequential revenue increase was driven by increased fixed-configuration switch sales while director and embedded sales were flat. Brocade believes the resiliency of its Fibre Channel SAN business is primarily due to continued growth in overall Fibre Channel storage array capacity. Both IDC and Gartner predict strong storage array capacity growth throughout their long-range forecasts.
  • IP Networking product revenue was within our outlook range at $134 million, up 1% year-over-year. The growth was primarily due to stronger switch sales, up 19%, offset by weaker router sales, down 25%. The increased revenue year-over-year was primarily from enterprise customers, as revenue from the service provider and U.S. federal customers was down year-over-year. Sequentially, IP Networking product revenue decreased 21%. This was due to lower Ethernet switch and routing revenues, which were down 22% and 19%, respectively. This sequential decrease was primarily due to a more pronounced U.S. federal seasonal decline and lower router sales to service provider customers.
  • On February 16, 2016, Brocade announced a mobility platform and vision for building open, New IP networks that can support new services and business models for mobile network operators as they prepare for 5G adoption. These innovative offerings are expected to open a new addressable worldwide market for Brocade. They uniquely position the company as a disrupter as operators enter the next wave of infrastructure investment. The company also announced collaboration with 14 technology partners, enabling mobile operators to accelerate the adoption of SDN, NFV, and mobile edge computing and transform their operations to achieve increased automation and service agility. Brocade and its partners will be demonstrating these new mobile networking solutions at Mobile World Congress to be held February 22-25 in Barcelona, Spain.

Board Declares Dividend:

  • The Brocade Board of Directors has declared a quarterly cash dividend of $0.045 per share of the Company's common stock. The dividend payment will be made on April 4, 2016, to stockholders of record at the close of market on March 10, 2016.

Brocade management will host a conference call to discuss the fiscal first quarter results and the fiscal second quarter outlook today at 2:30 p.m. PT (5:30 p.m. ET). To access the webcast, please go to www.brcd.com/events.cfm. A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at www.brcd.com.

Other Q1 2016 product, customer, and partner announcements are available at http://newsroom.brocade.com/.

Brocade (www.brocade.com)
130 Holger Way, San Jose, CA 95134
T. 408.333.8000 F. 408.333.8101

Financial Highlights and Additional Financial Information


                                                Q1 2016   Q4 2015   Q1 2015
                                               --------- --------- ---------
Routes to market as a % of total net revenues:
  OEM revenues                                       67%       62%       67%
  Channel/Direct revenues                            33%       38%       33%
  10% or greater customer revenues                   34%       29%       44%
Geographic split as a % of total net revenues
 (1):
  Domestic revenues                                  55%       54%       58%
  International revenues                             45%       46%       42%
Segment split as a % of total net revenues:
  SAN product revenues                               61%       55%       61%
  IP Networking product revenues                     23%       29%       23%
  Global Services revenues                           16%       16%       16%
  SAN business revenues (2)                          70%       65%       71%
  IP Networking business revenues (2)                30%       35%       29%
IP Networking product revenues by use category
 (3) (4):
  Data Center                                        53%       60%       53%
  Enterprise Campus                                  38%       35%       34%
  Carrier Network (MAN/WAN)                           9%        5%       13%

Additional information:                         Q1 2016   Q4 2015   Q1 2015
                                               --------- --------- ---------
  GAAP net income                              $    94 M $    84 M $    87 M
  Non-GAAP net income                          $   119 M $   108 M $   118 M
  GAAP operating income                        $   121 M $   119 M $   139 M
  Non-GAAP operating income                    $   149 M $   147 M $   164 M
  EBITDA                                       $   144 M $   141 M $   159 M
  GAAP effective tax rate                          16.2%     23.6%     23.1%
  Non-GAAP effective tax rate                      16.7%     24.2%     23.1%
  Cash and cash equivalents                    $ 1,392 M $ 1,441 M $ 1,359 M
  Restricted cash (5)                          $       - $       - $   312 M
  Deferred revenues                            $   303 M $   317 M $   310 M
  Capital expenditures                         $    24 M $    16 M $    17 M
  Total debt, net of discount (6)              $   798 M $   794 M $ 1,082 M
  Cash, net of senior debt, convertible debt
   and capitalized leases (7)                  $   517 M $   566 M $   483 M
  Cash provided by operations                  $   112 M $   180 M $    10 M
  Days sales outstanding                         28 days   36 days   38 days
  Employees at end of period                       4,712     4,640     4,305
  SAN port shipments                               1.0 M     1.0 M     1.1 M
  Share repurchases (8)                        $ 144.5 M $  31.1 M $ 132.4 M

Please see important note of explanation about the use of non-GAAP financial
measures below, including a detailed reconciliation between GAAP and non-
GAAP information in the tables included herein.

(1) Revenues are attributed to geographic areas based on product delivery
    location. Since some OEM partners take delivery of Brocade products
    domestically and then ship internationally to their end users, the
    percentage of international revenues based on end-user location would
    likely be higher.
(2) SAN and IP Networking business revenues include hardware and software
    product, support, and services revenues.
(3) Product revenue by use category is estimated based on analysis of the
    information the Company collects in its sales management system. The
    estimated percentage of revenue by use category may fluctuate quarter to
    quarter due to seasonality and the timing of large customer orders.
(4) Each use category includes enterprise, service provider, and government
    revenues.
(5) Q1 2015 restricted cash was used to redeem the $300 million principal of
    the 2020 senior secured notes, and pay for the associated call premium
    and interest earned on February 13, 2015.
(6) Q1 2016, Q4 2015, and Q1 2015 total debt, net of discount, includes the
    debt discount recorded for the conversion feature that is required to be
    separately accounted for as equity for the $575 million convertible
    debt, thereby reducing the carrying value of the debt. The unamortized
    debt discount for the conversion feature was $66 million as of January
    30, 2016, $69 million as of October 31, 2015, and $80 million as of
    January 31, 2015.
(7) Q1 2015 Cash, net of senior debt, convertible debt and capitalized
    leases excludes restricted cash of $312 million and the 2020 senior
    secured notes of $300 million that have been called and were redeemed on
    February 13, 2015.
(8) $3.5 million of the $132.4 million in share repurchases in Q1 2015 were
    pending cash settlement as of January 31, 2015.

Non-GAAP Financial Measures
To supplement financial information presented on a GAAP basis, Brocade provides information presented on a non-GAAP basis. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, financial information presented on a GAAP basis. 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. The most directly comparable GAAP information and a reconciliation between the GAAP and non-GAAP amounts is provided in the tables at the end of this press release.

Management believes that the non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade's comparative operating performance, both from period to period and relative to its competitors. These non-GAAP financial measures also help with the determination of Brocade's baseline performance before gains, losses or charges that are considered by management to be outside of ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations and the allocation of resources.

Management believes these non-GAAP financial measures, when read in conjunction with Brocade's GAAP financials, provide useful information to investors by offering:

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

  • the ability to make more meaningful comparisons of Brocade's operating performance relative to its competitors;

  • the ability to better identify trends in Brocade's underlying business and to perform related trend analyses; and

  • a better understanding of how management plans and measures Brocade's underlying business.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP financial measures that are the result of infrequent events or events that arise outside the ordinary course of Brocade's continuing operations. Management believes that it is appropriate to evaluate Brocade's operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include, but are not limited to: (i) call premium cost and write-off of debt discount and debt issuance costs related to lenders that did not participate in Brocade's Q1 2015 debt refinancing; (ii) acquisition and integration costs; and (iii) restructuring and other related benefits.

Management also excludes the following non-cash charges in determining non-GAAP financial measures: (i) stock-based compensation expense; (ii) amortization of purchased intangible assets; and (iii) non-cash interest expense related to the convertible debt.

Management believes that the exclusion of stock-based compensation allows for more accurate comparisons of Brocade's operating results to Brocade's peer companies because of the varying use of valuation methodologies and subjective assumptions and the variety of award types. In addition, the exclusion of the expense associated with the amortization of acquisition-related intangible assets is appropriate because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and the exclusion of amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses. In connection with the convertible debt, under the relevant accounting guidance, a non-cash interest expense is recognized for the convertible debt as an imputed interest expense for the conversion feature. Management believes excluding the non-cash interest expense related to the convertible debt from its non-GAAP financial measures is useful for investors because the expense does not represent a cash outflow in the respective reporting periods and is not indicative of ongoing operating performance.

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 because they do not include all items of income and expense that impact the company. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies. Management compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. Management also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure, and management encourages investors to review carefully those reconciliations.

Forward-Looking Statements
This press release contains forward-looking statements including, but not limited to, statements regarding Brocade's financial results, goals, plans, strategy, business outlook and prospects. These statements are based on current expectations as of the date of this press release and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; the impact on Brocade of conditions in the market for Storage Area Networking products; Brocade's ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade's ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade's international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments. These and other risks are set forth in more detail in Brocade's Annual Report on Form 10-K for the fiscal year ended October 31, 2015. Brocade expressly assumes no obligation to update any such forward-looking statements whether as the result of new developments or otherwise.

About Brocade
Brocade (NASDAQ: BRCD) networking solutions help the world's leading organizations transition smoothly to a world where applications and information reside anywhere. (www.brocade.com)

ADX, Brocade, Brocade Assurance, the B-wing symbol, ClearLink, DCX, Fabric OS, Fabric Vision, HyperEdge, ICX, MLX, MyBrocade, OpenScript, The Effortless Network, vADX, VCS, VDX, vPlane, and Vyatta are registered trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned may be trademarks of Brocade or others.

© 2016 Brocade Communications Systems, Inc. All Rights Reserved.


                    BROCADE COMMUNICATIONS SYSTEMS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

                                                     Three Months Ended
                                                 --------------------------
                                                  January 30,   January 31,
                                                      2016          2015
                                                 ------------  ------------
                                                  (In thousands, except per
                                                       share amounts)
Net revenues:
  Product                                        $    481,167  $    486,238
  Service                                              93,117        90,001
                                                 ------------  ------------
    Total net revenues                                574,284       576,239
                                                 ------------  ------------
Cost of revenues:
  Product                                             144,097       149,926
  Service                                              41,372        36,630
                                                 ------------  ------------
    Total cost of revenues                            185,469       186,556
                                                 ------------  ------------
Gross margin                                          388,815       389,683
Operating expenses:
  Research and development                             93,257        85,231
  Sales and marketing                                 151,827       140,238
  General and administrative                           22,429        24,671
  Amortization of intangible assets                       902           138
  Restructuring and other related benefits               (566)            -
                                                 ------------  ------------
    Total operating expenses                          267,849       250,278
                                                 ------------  ------------
Income from operations                                120,966       139,405
Interest expense                                       (9,865)      (25,424)
Interest and other income (loss), net                     669          (559)
                                                 ------------  ------------
Income before income tax                              111,770       113,422
Income tax expense                                     18,124        26,155
                                                 ------------  ------------
Net income                                       $     93,646  $     87,267
                                                 ============  ============
Net income per share - basic                     $       0.23  $       0.20
                                                 ============  ============
Net income per share - diluted                   $       0.23  $       0.20
                                                 ============  ============
Shares used in per share calculation - basic          407,902       428,536
                                                 ============  ============
Shares used in per share calculation - diluted        415,085       439,156
                                                 ============  ============

Cash dividends declared per share                $      0.045  $      0.035
                                                 ============  ============


                    BROCADE COMMUNICATIONS SYSTEMS, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                (Unaudited)

                                                     Three Months Ended
                                                 --------------------------
                                                  January 30,   January 31,
                                                      2016          2015
                                                 ------------  ------------
                                                       (In thousands)
Net income                                       $     93,646  $     87,267
Other comprehensive income and loss, net of tax:
  Unrealized gains (losses) on cash flow hedges:
    Change in unrealized gains and losses              (2,300)       (1,774)
    Net gains and losses reclassified into
     earnings                                             626           603
                                                 ------------  ------------
  Net unrealized losses on cash flow hedges            (1,674)       (1,171)
  Foreign currency translation adjustments             (2,203)       (4,221)
                                                 ------------  ------------
Total other comprehensive loss                         (3,877)       (5,392)
                                                 ------------  ------------
Total comprehensive income                       $     89,769  $     81,875
                                                 ============  ============


                    BROCADE COMMUNICATIONS SYSTEMS, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                                  January 30,   October 31,
                                                      2016          2015
                                                 ------------  ------------
                                                  (In thousands, except par
                                                           value)
ASSETS
Current assets:
  Cash and cash equivalents                      $  1,392,009  $  1,440,882
  Accounts receivable, net of allowances for
   doubtful accounts of $1,741 and $1,838 as of
   January 30, 2016, and October 31, 2015,
   respectively                                       174,757       235,883
  Inventories                                          42,586        40,524
  Deferred tax assets                                       -        78,675
  Prepaid expenses and other current assets            51,708        56,235
                                                 ------------  ------------
    Total current assets                            1,661,060     1,852,199
Property and equipment, net                           442,158       439,224
Goodwill                                            1,617,041     1,617,161
Intangible assets, net                                 71,290        75,623
Non-current deferred tax assets                        68,968           813
Other assets                                           48,378        51,133
                                                 ------------  ------------
    Total assets                                 $  3,908,895  $  4,036,153
                                                 ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                               $     74,019  $     98,143
  Accrued employee compensation                       112,951       142,075
  Deferred revenue                                    228,582       244,622
  Other accrued liabilities                            69,287        77,524
                                                 ------------  ------------
    Total current liabilities                         484,839       562,364
Long-term debt, net of current portion                798,103       793,779
Non-current deferred revenue                           74,571        72,065
Non-current income tax liability                       47,651        47,010
Non-current deferred tax liabilities                        -        24,024
Other non-current liabilities                           2,538         3,376
                                                 ------------  ------------
    Total liabilities                               1,407,702     1,502,618
                                                 ------------  ------------
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.001 par value, 5,000
   shares authorized, no shares issued and
   outstanding                                              -             -
  Common stock, $0.001 par value, 800,000 shares
   authorized:
    Issued and outstanding: 402,556 and 413,923
     shares as of January 30, 2016, and October
     31, 2015, respectively                               403           414
  Additional paid-in capital                        1,529,313     1,632,984
  Accumulated other comprehensive loss                (28,879)      (25,002)
  Retained earnings                                 1,000,356       925,139
                                                 ------------  ------------
    Total stockholders' equity                      2,501,193     2,533,535
                                                 ------------  ------------
    Total liabilities and stockholders' equity   $  3,908,895  $  4,036,153
                                                 ============  ============


                    BROCADE COMMUNICATIONS SYSTEMS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                     Three Months Ended
                                                 --------------------------
                                                  January 30,   January 31,
                                                      2016          2015
                                                 ------------  ------------
                                                       (In thousands)
Cash flows from operating activities:
  Net income                                     $     93,646  $     87,267
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Excess tax benefits from stock-based
     compensation                                      (7,352)      (16,102)
    Depreciation and amortization                      22,812        19,575
    Loss on disposal of property and equipment            207           444
    Amortization of debt issuance costs and debt
     discount                                           4,325         1,056
    Call premium cost and write-off of debt
     discount and debt issuance costs related to
     lenders that did not participate in
     refinancing                                            -        15,122
    Provision for doubtful accounts receivable
     and sales allowances                                 (96)        2,403
    Non-cash stock-based compensation expense          24,044        24,082
  Changes in assets and liabilities, net of
   acquisitions:
    Restricted cash                                         -       (11,918)
    Accounts receivable                                61,222       (17,256)
    Inventories                                        (2,000)        1,155
    Prepaid expenses and other assets                     609        (5,746)
    Deferred tax assets                                    16           494
    Accounts payable                                  (23,859)       (8,776)
    Accrued employee compensation                     (38,993)      (77,033)
    Deferred revenue                                  (13,535)       (2,190)
    Other accrued liabilities                          (7,991)       (1,423)
    Restructuring liabilities                            (855)         (761)
                                                 ------------  ------------
      Net cash provided by operating activities       112,200        10,393
                                                 ------------  ------------
Cash flows from investing activities:
  Purchases of property and equipment                 (23,839)      (16,514)
  Purchase of intangible assets                             -        (7,750)
  Proceeds from collection of note receivable             250           250
                                                 ------------  ------------
      Net cash used in investing activities           (23,589)      (24,014)
                                                 ------------  ------------
Cash flows from financing activities:
  Increase in restricted cash                               -      (300,000)
  Payment of debt issuance costs                            -          (409)
  Payment of principal related to capital leases          (83)       (1,154)
  Common stock repurchases                           (144,490)     (128,966)
  Proceeds from issuance of common stock               19,482        21,036
  Payment of cash dividends to stockholders           (18,429)      (15,106)
  Proceeds from convertible notes                           -       565,656
  Purchase of convertible note hedge                        -       (86,135)
  Proceeds from issuance of warrants                        -        51,175
  Excess tax benefits from stock-based
   compensation                                         7,352        16,102
                                                 ------------  ------------
      Net cash provided by (used in) financing
       activities                                    (136,168)      122,199
                                                 ------------  ------------
  Effect of exchange rate fluctuations on cash
   and cash equivalents                                (1,316)       (4,230)
                                                 ------------  ------------
  Net increase (decrease) in cash and cash
   equivalents                                        (48,873)      104,348
  Cash and cash equivalents, beginning of period    1,440,882     1,255,017
                                                 ------------  ------------
  Cash and cash equivalents, end of period       $  1,392,009  $  1,359,365
                                                 ============  ============


                    BROCADE COMMUNICATIONS SYSTEMS, INC.
        RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
                                (Unaudited)

                                              Three Months Ended
                                   ----------------------------------------
                                    January 30,   October 31,   January 31,
                                        2016          2015          2015
                                   ------------  ------------  ------------
                                   (In thousands, except per share amounts)
Non-GAAP adjustments
  Stock-based compensation expense
   included in cost of revenues    $      2,905  $      3,189  $      3,816
  Amortization of intangible
   assets expense included in cost
   of revenues                            3,154         2,598           637
                                   ------------  ------------  ------------
    Total gross margin impact from
     non-GAAP adjustments                 6,059         5,787         4,453

  Stock-based compensation expense
   included in research and
   development                            5,476         5,475         4,933
  Stock-based compensation expense
   included in sales and marketing       11,078        10,689         9,843
  Stock-based compensation expense
   included in general and
   administrative                         4,585         4,581         5,490
  Amortization of intangible
   assets expense included in
   operating expenses                       902           902           138
  Acquisition and integration
   costs                                      -           809             -
  Restructuring and other related
   benefits                                (566)          (41)            -
                                   ------------  ------------  ------------
    Total operating income impact
     from non-GAAP adjustments           27,534        28,202        24,857

  Call premium cost and write-off
   of debt discount and debt
   issuance costs related to
   lenders that did not
   participate in refinancing                 -             -        15,122
  Convertible debt interest               3,776         3,730           678
  Income tax effect of non-tax
   adjustments                           (5,770)       (8,363)       (9,499)
                                   ------------  ------------  ------------
    Total net income impact from
     non-GAAP adjustments          $     25,540  $     23,569  $     31,158
                                   ============  ============  ============

Gross margin reconciliation
  GAAP gross margin                $    388,815  $    394,277  $    389,683
  Total gross margin impact from
   non-GAAP adjustments                   6,059         5,787         4,453
                                   ------------  ------------  ------------
    Non-GAAP gross margin          $    394,874  $    400,064  $    394,136
                                   ============  ============  ============
  GAAP gross margin, as a
   percentage of total net
   revenues                                67.7%         67.0%         67.6%
  Non-GAAP gross margin, as a
   percentage of total net
   revenues                                68.8%         67.9%         68.4%

Operating income reconciliation
  GAAP operating income            $    120,966  $    119,221  $    139,405
  Total operating income impact
   from non-GAAP adjustments             27,534        28,202        24,857
                                   ------------  ------------  ------------
    Non-GAAP operating income      $    148,500  $    147,423  $    164,262
                                   ============  ============  ============
  GAAP operating income, as a
   percentage of total net
   revenues                                21.1%         20.2%         24.2%
  Non-GAAP operating income, as a
   percentage of total net
   revenues                                25.9%         25.0%         28.5%

Net income and net income per
 share reconciliation
  Net income on a GAAP basis       $     93,646  $     84,388  $     87,267
  Total net income impact from
   non-GAAP adjustments                  25,540        23,569        31,158
                                   ------------  ------------  ------------
    Non-GAAP net income            $    119,186  $    107,957  $    118,425
                                   ============  ============  ============
  Non-GAAP net income per share -
   basic                           $       0.29  $       0.26  $       0.28
                                   ============  ============  ============
  Non-GAAP net income per share -
   diluted                         $       0.29  $       0.26  $       0.27
                                   ============  ============  ============
  Shares used in non-GAAP per
   share calculation - basic            407,902       414,769       428,536
                                   ============  ============  ============
  Shares used in non-GAAP per
   share calculation - diluted          415,085       422,315       439,156
                                   ============  ============  ============

BROCADE CONTACTS
Public Relations
Ed Graczyk
Tel: 408-333-1836
egraczyk@brocade.com

Investor Relations
Michael Iburg
Tel: 408-333-0233
miburg@brocade.com