Brocade: Fiscal 1Q09 Financial Results

Brocade 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.