8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 15, 2008

BROCADE COMMUNICATIONS SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 000-25601
(Commission File Number) 77-0409517
(I.R.S. Employer
Identification Number)

1745 Technology Drive
San Jose, CA 95110

(Address, including zip code, of principal executive offices)

(408) 333-8000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

þ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

     On October 15, 2008, Brocade Communications Systems, Inc. (the “Company”) issued a press release announcing that, in connection with its proposed acquisition of Foundry Networks, Inc. (“Foundry”), it intends to offer, pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), an unregistered offering of $400,000,000 aggregate principal amount of Senior Notes due 2014 (the “144A Offering”). A copy of the press release announcing the 144A Offering is attached hereto as Exhibit 99.1.

     The Company is filing as Exhibit 99.2 the Unaudited Pro Forma Condensed Combined Financial Statements together with the notes thereto, and furnishing as Exhibit 99.3 the Summary Unaudited Pro Forma Condensed Combined Financial Data, both of which were disclosed in connection with the Company’s 144A Offering.

     The Unaudited Pro Forma Condensed Combined Financial Statements together with the notes thereto give effect to the Company’s proposed acquisition of Foundry. The Summary Unaudited Pro Forma Condensed Combined Financial Data give pro forma effect to the Company’s proposed acquisition of Foundry, the completion of the 144A Offering and the Company’s entry into the senior secured credit facility that was previously announced on October 7, 2008.

     The Summary Unaudited Pro Forma Condensed Combined Financial Data attached as Exhibit 99.3 and furnished in Item 7.01 of this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.

     Non-GAAP Financial Measurements

     Tables included on Exhibit 99.3 contain non-GAAP financial measures. Please see the tables in Exhibit 99.3 titled “Reconciliation of Pro Forma Net Debt,” “Reconciliation of Pro Forma EBITDA,” and “Reconciliation of Pro Forma Adjusted EBITDA” for a description of these non-GAAP financial measures, including reasons for Brocade’s management’s decision to use each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles.

Item 8.01 Other Events.

     The information set forth in the press release attached hereto as Exhibit 99.1 and the Unaudited Pro Forma Condensed Combined Financial Statements together with the notes thereto attached hereto as Exhibit 99.2, are incorporated herein by reference into Item 8.01 of this Current Report on Form 8-K. The Unaudited Pro Forma Condensed Combined Financial Statements attached as Exhibit 99.2 update the Unaudited Pro Forma Condensed Combined Financial Statement contained in the Registration Statement on Form S-4 (File No. 333-153205), filed on August 26, 2008 and as amended on September 23, 2008 and September 25, 2008.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.		Description
	99.1	Press Release, dated October 15, 2008, “Brocade Announces Senior Note Offering.”
	99.2	Unaudited Pro Forma Condensed Combined Financial Statements Notes to Unaudited Pro Forma Condensed Combined Financial Statements
	99.3	Summary Unaudited Pro Forma Condensed Combined Financial Data

Additional Information

     In connection with the proposed acquisition of Foundry, on August 26, 2008, Brocade filed a Registration Statement on Form S-4 (File No. 333-153205), as amended on September 23, 2008 and September 25, 2008, that includes a proxy statement/prospectus for Foundry stockholders in connection with the transaction. Investors and security holders are urged to read the Registration Statement on Form S-4 and the related proxy/prospectus because they contain important information about the proposed transaction.

     Investors and security holders may obtain free copies of these documents and other documents filed with the SEC at the SEC’s web site at http://www.sec.gov and by contacting Brocade Investor Relations at (408) 333- 6758 or Foundry Investor Relations at (408) 207-1399. Investors and security holders may obtain free copies of the documents filed with the SEC on Brocade’s website at http://www.brcd.com or Foundry’s website at http://www.foundrynet.com/company/ir/ or the SEC’s website at http://www.sec.gov.

     Foundry and its directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of Foundry in connection with the proposed transaction. Information regarding the interests of these directors and executive officers in the proposed transaction is included in the proxy statement/prospectus described above. Additional information regarding the directors and executive officers of Foundry is also included in Foundry’s proxy statement for its 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 18, 2008.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BROCADE COMMUNICATIONS SYSTEMS, INC.
Date: October 16, 2008	By:	/s/ Richard Deranleau
		Richard Deranleau
		Vice President of Finance and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press Release, dated October 15, 2008, “Brocade Announces Senior Note Offering.”
	99.2	Unaudited Pro Forma Condensed Combined Financial Statements Notes to Unaudited Pro Forma Condensed Combined Financial Statements
	99.3	Summary Unaudited Pro Forma Condensed Combined Financial Data

EX-99.1

Exhibit 99.1

Filed by Brocade Communications Systems, Inc.
Pursuant to Rule 425 Under the Securities Act of 1933
And Deemed Filed pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Foundry Networks, Inc.
Commission File: 000-26689

Brocade Announces Senior Notes Offering

SAN JOSE, Calif., Oct. 15 /PRNewswire-FirstCall/ — Brocade(R) (Nasdaq: BRCD) announced today that, in connection with its proposed acquisition of Foundry Networks (R), Inc., it intends to offer, pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, an unregistered offering of $400,000,000 aggregate principal amount of Senior Notes due 2014.

The net proceeds from the proposed offering, together with cash on hand and borrowings under Brocade’s new credit facility, will be used to finance the acquisition of Foundry Networks(R), and pay related fees and expenses.

The notes for the proposed offering have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and any applicable state securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the notes, nor shall it constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction to Unaudited Pro Forma Condensed Combined Financial Statements

On July 21, 2008, Brocade, Foundry and Falcon Acquisition Sub., Inc. entered into a merger agreement under which, upon completion, Foundry will become a wholly-owned subsidiary of Brocade in a transaction to be accounted for using the purchase method of accounting for business combinations. Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of Foundry common stock (other than shares owned by Foundry, Brocade or their respective subsidiaries) will be converted into the right to receive a combination of $18.50 in cash, without interest, and 0.0907 of a share of Brocade common stock, subject to adjustment for stock splits, stock dividends and similar events. Certain outstanding options to purchase Foundry common stock and certain restricted stock units of Foundry, in each case to be identified by Brocade prior to the completion of the merger, will vest in full and be cancelled as of the effective time of the merger and converted into the right to receive the cash equivalent of the per-share merger consideration (less applicable withholding taxes and, in the case of Foundry options, the applicable option exercise price) derived from a formula set forth in the merger agreement and subject to applicable withholding requirements. All other options to purchase shares of Foundry common stock, whether vested or unvested, outstanding at the effective time of the merger will either be assumed by Brocade or replaced with a reasonably equivalent replacement option to purchase shares of Brocade common stock based on an exchange ratio derived from the per-share merger consideration as more fully set forth in the merger agreement, and will continue to be subject to substantially similar terms as in effect prior to the merger. All other restricted stock units of Foundry outstanding at the effective time of the merger will either be assumed by Brocade or replaced with a reasonably equivalent right to be issued Brocade common stock by Brocade based on the exchange ratio referred to above, and will continue to be subject to substantially similar terms as in effect prior to the merger. Each share of Foundry restricted common stock that is outstanding at the effective time of the merger and is unvested or is subject to a risk of forfeiture, a repurchase option or other condition pursuant to an applicable restricted stock purchase agreement or other agreement with Foundry shall be exchangeable for the same per-share merger consideration as other shares of Foundry common stock. However, unless otherwise provided under an applicable stock purchase agreement or other agreement with Foundry, the cash and shares of Brocade common stock to be received in exchange for such shares of Foundry restricted common stock will remain unvested and continue to be subject to the same repurchase option, risk of forfeiture or other conditions

The following unaudited pro forma condensed combined balance sheet is based on historical balance sheets of Brocade and Foundry and has been prepared to reflect the merger as if it had been completed on July 26, 2008. Such pro forma information is based upon the historical condensed consolidated balance sheet data of Brocade as of July 26, 2008 and Foundry as of June 30, 2008. The following unaudited pro forma condensed combined statements of operations give effect to the merger as if it had taken place on October 29, 2006. The unaudited pro forma condensed combined statement of operations for the fiscal year ended October 27, 2007 combines Brocade’s historical consolidated statement of income for the year then ended with Foundry’s historical consolidated statement of income for the fiscal year ended December 31, 2007 and McDATA’s historical consolidated statement of operations for the three months ended October 31, 2006. The following unaudited pro forma condensed combined statement of operations for the nine months ended July 26, 2008 combines Brocade’s historical consolidated statement of income for the nine months then ended with Foundry’s historical consolidated statement of income for the three months ended December 31, 2007 and the six months ended June 30, 2008. As a result, Foundry’s historical consolidated statement of income for the three months ended December 31, 2007 are included in both the pro forma condensed combined statement of operations for the fiscal year ended October 27, 2007 and the nine months ended July 26, 2008. The following unaudited pro forma condensed combined statement of operations for the last twelve month period ended July 26, 2008 combines Brocade’s historical consolidated statement of income for the twelve months ended July 26, 2008 with Foundry’s historical statement of income for the six months ended December 31, 2007 and the six months ended June 30, 2008. Foundry’s revenue and net income for the three months ended December 31, 2007 were $168.7 million and $28.9 million, respectively.

The merger will be accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” Under the purchase method of accounting, the total estimated purchase price, calculated as described in Note 1 to these unaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets of Foundry based on their estimated fair values. Management has made a preliminary allocation of the estimated purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. A final determination of these estimated fair values, which cannot be made prior to the completion of the merger, will be based on the actual net tangible and intangible assets of Foundry that exist as of the date of completion of the merger.

The unaudited pro forma condensed combined financial statements are based on the estimates and assumptions which are preliminary and have been made solely for purposes of developing such pro forma information. They do not include liabilities that may result from integration activities which are not presently estimable. The management of Brocade and Foundry are in the process of making these assessments, and estimates of these costs are not currently known. However, liabilities ultimately may be recorded for severance costs for Foundry employees, costs of vacating some facilities of Foundry, or other costs associated with exiting activities of Foundry that would affect the pro forma condensed combined financial statements. Any such liabilities would be recorded as an adjustment to the purchase price and an increase in goodwill. Since the final value associated with stock-based compensation will be calculated at the effective date of the merger, the amount allocated to this item could change materially depending on the price of Brocade common stock or the number of Foundry unvested options, restricted stock awards and restricted stock units outstanding as of the effective time of the merger. In addition, the pro forma condensed combined financial statements do not include any potential operating efficiencies or cost savings from expected synergies. The unaudited pro forma condensed combined financial statements are not necessarily an indication of the results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future.

There were no significant intercompany balances and transactions between Brocade and Foundry as of the dates and for the periods of these pro forma condensed combined financial statements. After July 26, 2008, Brocade acquired approximately 3.3 million shares of Foundry common stock not reflected in the pro-forma condensed combined financial statements.

These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of Brocade and Foundry and other financial information pertaining to Brocade and Foundry.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

	Historical
	Brocade			Foundry
	As of			As of
	July 26,			June 30,			Pro Forma			Pro Forma
	2008			2008			Adjustments(1)			Combined
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	459,399		$	257,940		$	(2,080,100	)(k)	$	13,689
								1,515,000	(g)
								(82,800	)(m)
								(55,750	)(y)
Short-term investments		244,922			590,906			(600,000	)(k)		235,828
Accounts receivable, net		174,103			112,362			10,612	(j)		297,077
Inventories		14,369			49,531			17,969	(i)		81,869
Deferred tax assets		73,100			45,828			—			118,928
Prepaid expenses and other current assets		75,091			14,294			(1,044	)(b)		88,341
Total current assets		1,040,984			1,070,861			(1,276,113	)		835,732
Long-term investments		59,906			101,273			—			161,179
Property and equipment, net		300,116			7,616			—			307,732
Goodwill		280,347			—			1,534,541	(h)		2,016,092
								201,204	(l)
Intangible assets, net		237,167			—			496,800	(e)		731,167
								(2,800	)(x)
Deferred tax assets		200,715			39,284			(201,204	)(l)		38,795
Other assets		19,064			5,697			(3,374	)(f)		99,482
								82,800	(m)
								(4,705	)(b)
Total assets	$	2,138,299		$	1,224,731		$	827,149		$	4,190,179
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	109,886		$	21,627		$	—		$	131,513
Accrued employee compensation		72,762			40,753			—			113,515
Deferred revenue		110,698			61,922			(50,268	)(n)		122,352
Current liabilities associated with facilities lease losses		13,930			—			—			13,930
Liability associated with class action lawsuit		160,000			—			—			160,000
Other accrued liabilities		75,110			12,441			9,563	(f)		97,114
Total current liabilities		542,386			136,743			(40,705	)		638,424
Long term debt		169,119			—			1,515,000	(g)		1,684,119
Non-current liabilities associated with facilities lease losses		16,929			—			—			16,929
Non-current deferred revenue		37,850			28,446			—			66,296
Non-current income tax liability		55,971			12,833			—			68,804
Other non-current liabilities		9,350			460			—			9,810
Total liabilities		831,605			178,482			1,474,295			2,484,382
Stockholders’ equity
Common stock		372			14			(14	)(a)		385
								13	(c)
Additional paid-in capital		1,369,959			867,049			(867,049	)(a)		1,771,849
								99,487	(c)
								302,403	(d)
Accumulated other comprehensive loss		(2,874	)		(6,981	)		6,981	(a)		(2,874	)
Retained earnings (accumulated deficit)		(60,763	)		186,167			(186,167	)(a)		(63,563	)
								(2,800	)(x)
Total stockholders’ equity		1,306,694			1,046,249			(647,146	)		1,705,797
Total liabilities and stockholders’ equity	$	2,138,299		$	1,224,731		$	827,149		$	4,190,179

(1) The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

	Historical
	Brocade			Foundry		McDATA
	Twelve Months			Twelve Months		Three Months
	Ended			Ended		Ended
	October 27,			December 31,		October 31,			Pro Forma			Pro Forma
	2007			2007		2006			Adjustments(1)			Combined
	(in thousands, except per share data)
Net revenues	$	1,236,863		$	607,205	$	156,089		$	—		$	2,000,157
Cost of revenues		575,451			236,418		92,949			7,339	(p)		954,469
										(2,397	)(r)
										44,709	(t)
Gross profit		661,412			370,787		63,140			(49,651	)		1,045,688
Operating expenses:
Research and development		213,311			77,052		30,522			—			320,885
Sales and marketing		211,168			160,220		36,541			—			407,929
General and administrative		46,980			44,935		8,716			(196	)(s)		100,435
Legal fees associated with indemnification obligations, SEC investigation and other related costs, net		46,257			—		—			—			46,257
Amortization of intangible assets		24,719			—		6,939			(6,939	)(o)		87,066
										6,907	(q)
										55,440	(u)
Acquisition and integration costs		19,354			—		6,096			—			25,450
Restructuring costs and impairment charges		—			—		393			—			393
Other charges, net		—			5,714		—			—			5,714
Total operating expenses		561,789			287,921		89,207			55,212			994,129
Income (loss) from operations		99,623			82,866		(26,067	)		(104,863	)		51,559
Interest and other income, net		38,501			43,536		5,152			—			87,189
Interest expense		(6,414	)		—		(4,963	)		(147,829	)(v)		(159,206	)
Gain on investments, net		13,205			—		—			—			13,205
Income (loss) before provision for income taxes		144,915			126,402		(25,878	)		(252,691	)		(7,252	)
Income tax provision (benefit)		68,043			45,259		469			(58,942	)(w)		54,829
Net income (loss)	$	76,872		$	81,143	$	(26,347	)	$	(193,749	)	$	(62,081	)
Net income (loss) per share — basic	$	0.21		$	0.55	$	(0.17	)				$	(0.15	)
Net income (loss) per share — diluted	$	0.21		$	0.52	$	(0.17	)				$	(0.15	)
Shares used in per share calculation — basic		362,070			148,143		154,637						404,672
Shares used in per share calculation — diluted		377,558			155,520		154,637						404,672

(1) The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Shares used in computing pro forma combined basic and diluted net income per share is the sum of Brocade shares, Foundry shares (Foundry shares are adjusted for the exchange ratios referred to below) and McDATA shares Foundry’s shares are calculated by multiplying each share of Foundry common stock by the exchange ratio of 0.0907 of a share of Brocade common stock for each share of Foundry common stock. McDATA’s shares are calculated by multiplying each share of McDATA common stock by the exchange ratio of 0.75. McDATA shares are included only for the three month period ended October 31, 2006. Dilutive potential common shares have been included only if they have a dilutive effect on earnings per share. Due to the uncertainty of the terms on which any convertible debt issued by Brocade in connection with the financing of the merger may be convertible into shares of Brocade common stock, Brocade did not include any potential dilutive effect relating to such conversion in the shares used in the per share calculation.

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

	Historical
	Brocade			Foundry
	Nine Months			Nine Months
	Ended			Ended		Pro Forma			Pro Forma
	July 26, 2008			June 30, 2008		Adjustments(1)			Combined
	(in thousands, except per share data)
Net revenues	$	1,068,440		$	479,389	$	—		$	1,547,829
Cost of revenues		453,204			179,034		(1,813	)(r)		663,957
							33,532	(t)
Gross margin		615,236			300,355		(31,719	)		883,872
Operating expenses:
Research and development		184,704			63,177		—			247,881
Sales and marketing		203,200			136,762		—			339,962
General and administrative		43,260			34,058		(345	)(s)		76,973
Legal fees associated with indemnification obligations and other related costs		22,399					—			22,399
Provision for class action lawsuit		160,000			—		—			160,000
Amortization of intangible assets		23,664			—		42,159	(u)		65,823
Facilities lease benefits		(477	)		—		—			(477	)
Total operating expenses		636,750			233,997		41,814			912,561
Income (loss) from operations		(21,514	)		66,358		(73,533	)		(28,689	)
Interest and other income, net		27,663			26,927		—			54,590
Interest expense		(4,384	)		—		(110,871	)(v)		(115,255	)
Loss on investments, net		(6,985	)		—		—			(6,985	)
Income (loss) before provision for income taxes		(5,220	)		93,285		(184,404	)		(96,339	)
Income tax provision (benefit)		(136,709	)		32,201		(43,888	)(w)		(148,396	)
Net income	$	131,489		$	61,084	$	(140,515	)	$	52,058
Net income per share — basic	$	0.35		$	0.42				$	0.13
Net income per share — diluted	$	0.34		$	0.41				$	0.13
Shares used in per share calculation — basic		376,455			146,163					390,062
Shares used in per share calculation — diluted		396,445			150,219					410,052

(1) The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Shares used in computing pro forma combined basic and diluted net income per share is the sum of Brocade shares and Foundry shares (Foundry shares are adjusted for the exchange ratio referred to below). Foundry’s shares are calculated by multiplying the number of outstanding shares of Foundry common stock by the exchange ratio of 0.0907 of a share of Brocade common stock to be issued in exchange for each share of Foundry common stock pursuant to the merger. Dilutive potential common shares have been included only if they have a dilutive effect on earnings per share. Due to the uncertainty of the terms on which any convertible debt issued by Brocade in connection with the financing of the merger may be convertible into shares of Brocade common stock, Brocade did not include any potential dilutive effect relating to such conversion in the shares used in the per share calculation.

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

	Historical
	Brocade			Foundry
	Twelve Months			Twelve Months
	Ended			Ended		Pro Forma			Pro Forma
	July 26, 2008			June 30, 2008		Adjustments(1)			Combined
	(in thousands)
Net revenues	$	1,408,424		$	638,886	$	—		$	2,047,310
Cost of revenues		609,778			238,461		(2,418	)(r)		890,530
							44,709	(t)
Gross profit		798,646			400,425		(42,291	)		1,156,780
Operating expenses:
Research and development		243,235			81,602		—			324,837
Sales and marketing		259,218			175,187		—			434,405
General and administrative		56,729			44,275		(416	)(s)		100,588
Legal fees associated with indemnification obligations and other related costs		30,210					—			30,210
Provision for class action lawsuit		160,000			—		—			160,000
Amortization of intangible assets		31,573			—		55,440	(u)		87,013
Facilities lease benefits		(477	)		—		—			(477	)
Acquisition and integration costs		303			—		—			303
Other charges, net		—			114		—			114
Total operating expenses		780,791			301,178		55,024			1,136,993
Income (loss) from operations		17,855			99,247		(97,315	)		19,787
Interest and other income, net		37,007			38,367		—			75,374
Interest expense		(6,057	)		—		(147,829	)(v)		(153,886	)
Gain on investments, net		4,980			—		—			4,980
Income (loss) before provision for income taxes		53,785			137,614		(245,144	)		(53,745	)
Income tax provision (benefit)		(109,724	)		48,962		(58,942	)(w)		(119,704	)
Net income	$	163,509		$	88,652	$	(186,201	)	$	65,960

(1) The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.   Basis of Presentation

On July 21, 2008, Brocade, Foundry and Falcon Acquisition Sub, Inc. entered into a merger agreement, upon completion, under which Foundry will become a wholly-owned subsidiary of Brocade in a transaction to be accounted for using the purchase method. The total estimated purchase price of approximately $3.2 billion includes $2.7 billion in cash, common stock valued at $99.5 million, stock options, and restricted stock units assumed with a fair value of $358.2 million, of which $55.8 million will be settled in cash, and estimated direct transaction costs of $13.4 million.

The unaudited pro forma condensed combined financial statements assume the issuance of approximately 13.4 million shares of Brocade common stock based on an exchange ratio of 0.0907 of a share of Brocade common stock for each outstanding share of Foundry common stock as of August 20, 2008. The actual number of shares of Brocade common stock to be issued will be determined based on the actual number of shares of Foundry common stock outstanding upon the completion of the merger. The average market price per share of Brocade common stock of $7.57 is based on an average of the closing prices for a range of trading days (July 17, 2008 through July 23, 2008) around the announcement date (July 21, 2008) of the merger.

Under the terms of the merger agreement, certain outstanding Foundry stock options and restricted stock units to be identified by Brocade prior to the effective time of the merger will be cancelled as of the effective time of the merger and converted into the right to receive the cash equivalent of the per-share merger consideration (less applicable withholding taxes and, in the case of Foundry options, the applicable option exercise price). The number of Foundry stock options and restricted stock units that will be converted will be determined based on the actual number of Foundry stock options outstanding and the five-day average closing price of Brocade common stock at the completion of the merger. The remaining Foundry stock options that are outstanding and unexercised immediately prior to the effective time will be converted into options to purchase Brocade common stock, to be effected by Brocade either assuming the stock option or replacing it with a reasonably equivalent option to purchase Brocade common stock based on an exchange ratio derived from the per-share merger consideration set forth in the merger agreement. Based on the number of Foundry stock options outstanding at June 30, 2008 and an estimated five-day average closing price of Brocade common stock of $4.46 based on the five-days ending on October 9, 2008, the cash acquisition consideration attributable to the conversion of Foundry stock options into the right to receive cash would have been $55.8 million and Brocade would convert Foundry stock options to purchase approximately 31.1 million shares of Foundry common stock into options to purchase approximately 155.5 million shares of Brocade common stock. The actual number of Brocade stock options into which Foundry stock options will be converted will be determined based on the actual number of Foundry stock options outstanding and the five-day average closing price of Brocade common stock at the completion of the merger. As the conversion ratios are dependent on the price of Brocade’s common stock upon completion of the merger, the conversion into the right to receive cash or options to purchase Brocade common stock can result in a significant increase or decrease in the purchase price of Foundry upon completion of the merger. The fair value of the outstanding options was determined using a Black-Scholes valuation model with the following weighted-average assumptions: volatility of 46.2%, risk-free interest rate of 3.1%, average expected life of 2.1 years and dividend yield of zero. In addition, at the effective time of the merger, Brocade will convert each other outstanding Foundry restricted stock unit into a Brocade restricted stock unit, to be effected by Brocade either assuming that restricted stock unit or replacing it with a reasonably equivalent restricted stock unit of Brocade based on the same exchange ratio referred to above. Based on the number of Foundry restricted stock units outstanding at June 30, 2008 and the estimated five days average closing price of Brocade common stock on October 9, 2008, and without taking into account the Foundry restricted stock units that will be cancelled in connection with the merger, Brocade would convert restricted stock units to purchase approximately 1.6 million shares of Foundry common stock into restricted stock units to purchase approximately 8.0 million shares of Brocade common stock. The actual number of Brocade restricted stock units into which Foundry restricted stock units will be converted will be determined based on the actual number of Foundry restricted stock units outstanding and the five-day average closing price of Brocade common stock at the completion of the merger. As this conversion ratio is dependent on the price of Brocade’s common stock upon completion of the merger, the conversion can result in a significant increase or decrease in the purchase price of Foundry upon completion of the merger. In addition, each outstanding share of Foundry restricted common stock

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

that is unvested and is subject to a risk of forfeiture, a repurchase option or other condition pursuant to an applicable restricted stock purchase agreement or other agreement with Foundry will be exchanged for the same per-share merger consideration as other shares of Foundry common stock. However, unless otherwise provided under an applicable stock purchase agreement or other agreement with Foundry, the cash and shares of Brocade common stock to be received in exchange for such shares of Foundry restricted common stock will remain unvested and continue to be subject to the same repurchase option, risk of forfeiture or other conditions. It is anticipated that such cash and shares of Brocade common stock will be held by Brocade until the repurchase option, risk of forfeiture or other condition lapses or otherwise terminates.

The estimated purchase price and the allocation of the estimated purchase price discussed below are preliminary as the proposed merger has not yet been completed. The actual purchase price will be based on the Brocade shares of common stock issued to Foundry stockholders, the options to purchase Foundry common stock assumed by Brocade, and the restricted common stock exchanged on the completion date of the merger. The final allocation of the purchase price will be based on Foundry’s assets and liabilities on the date the merger is completed.

The preliminary estimated total purchase price is as follows (in thousands):

Cash	$	2,680,100
Value of Brocade common stock issued		99,500
Estimated fair value of options assumed and restricted common stock and units exchanged		358,153
Direct transaction costs		13,400
Total preliminary estimated purchase price	$	3,151,153

Under the purchase method of accounting, the total estimated purchase price as shown in the table above is allocated to Foundry’s net tangible and intangible assets based on their estimated fair values as of the date of the completion of the merger. The preliminary estimated purchase price has been allocated based on preliminary estimates that are described in the introduction to these unaudited pro forma condensed combined financial statements. The allocation of the preliminary purchase price, estimated useful lives and first year amortization associated with certain assets are as follows (in thousands):

			First Year		Estimated
	Amount		Amortization		Useful Life
Net tangible assets	$	918,608	$	—	N/A
Identifiable intangible assets:
Developed products technology		245,900		44,709	5-6 years
Customer contracts and relationships		237,700		47,540	5 years
In-process research and development		2,800		—	N/A
Order backlog		5,400		5,400	3-12 months
Operating lease contracts		5,000		2,500	2 years
Goodwill		1,735,745		—	N/A
Total preliminary estimated purchase price	$	3,151,153	$	100,149

A preliminary estimate of $918.6 million has been allocated to net tangible assets acquired and approximately $496.8 million has been allocated to amortizable and non-amortizable intangible assets acquired other than goodwill. The amortization related to the amortizable intangible assets is reflected as pro forma adjustments to the unaudited pro forma condensed combined statements of operations.

Identifiable intangible assets. Acquired developed products technology include developed and core technology and patents. Developed technology relates to Foundry’s products across all of their product lines that have reached technological feasibility. Core technology and patents represent a combination of Foundry’s processes, patents and trade secrets developed through years of experience in design and development of their products.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

Brocade expects to amortize the fair value of the acquired product rights based on the pattern in which the economic benefits of the intangible asset will be consumed, which is assumed to be by straight-line depreciation.

Customer contracts and relationships represent existing contracts that relate primarily to underlying customer relationships. Brocade expects to amortize the fair value of these assets based on the pattern in which the economic benefits of the intangible asset will be consumed.

Goodwill. Approximately $1,735.7 million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” as amended, goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that the management of the combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

2.   Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the estimated purchase price, to reflect amounts related to Foundry’s net tangible and intangible assets at an amount equal to the preliminary estimate of their fair values, to reflect the amortization expense related to the estimated amortizable intangible assets and stock-based compensation, to reflect changes in depreciation and amortization expense resulting from the estimated fair value adjustments to net tangible assets, and to reflect the income tax effect related to the pro forma adjustments.

There were no significant intercompany balances and transactions between Brocade and Foundry as of the dates and for the periods of these pro forma condensed combined financial statements.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Brocade and Foundry filed consolidated income tax returns during the periods presented.

The unaudited pro forma condensed combined financial statements do not include liabilities that may result from integration activities which are not presently estimable. Management of Brocade and Foundry are in the process of making these assessments and estimates of these costs are not currently known. However, liabilities ultimately may be recorded for severance costs for Foundry employees, costs of vacating some facilities of Foundry, or other costs associated with exiting activities of Foundry that would affect the pro forma financial statements. Any such liabilities would be recorded as an adjustment to the purchase price and an increase in goodwill.

Brocade has not identified any pre-merger contingencies where the related asset, liability or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated. Prior to the end of the purchase price allocation period, if information becomes available which would indicate it is probable that such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation.

The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:

(a)  To eliminate Foundry’s equity;

(b)  To eliminate Foundry’s historical intangible assets;

(c)  To record the fair value of Brocade shares exchanged in the merger;

(d)  To record the fair value of Foundry common stock options assumed and of restricted common stock units exchanged;

(e)  To record the fair value of Foundry’s identifiable intangible assets;

(f)  To accrue the direct costs associated with the merger transaction and reverse prepaid direct costs;

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

(g)  To record the value of the new credit facility and senior notes obtained to finance the acquisition;

(h)  To record goodwill;

(i)  To adjust inventory to its fair value;

(j)  To adjust accounts receivables for products and support revenue with acceptance clauses, future upgrades, etc.;

(k)  To record cash tendered for the purchase consideration;

(l)  To record pro forma tax adjustment;

(m)  To record debt discount and fees associated with issuance of new debt;

(n)  To adjust deferred revenue to the fair value of the legal performance obligations under Foundry existing contracts;

(o)  To eliminate McDATA historical amortization of intangible assets;

(p)  To amortize acquired McDATA product rights based upon the pattern in which the economic benefits of the intangible assets will be consumed for the three months ended October 31, 2006;

(q)  To amortize other McDATA intangible assets based upon the pattern in which the economic benefits of the intangible assets will be consumed for the three months ended October 31, 2006;

(r)  To eliminate Foundry historical amortization of patent cross-license agreements;

(s)  To eliminate Foundry historical amortization of purchased intangible assets;

(t)  To amortize acquired Foundry product rights based upon the pattern in which the economic benefits of the intangible assets will be consumed;

(u)  To amortize Foundry intangible assets based upon the pattern in which the economic benefits of the intangible assets will be consumed;

(v)  To record interest expense including amortization of direct costs for new Brocade debt to be incurred in connection with the merger; adjustments for new debt are calculated assuming a fully drawn facility of $1,515.0 million and weighted average interest rate of 9.1%;

(w)  To record tax adjustment to pro forma income statements;

(x)  To record the effect of the write off in process research and development; and

(y)  To record the cash paid for stock options and restricted common stock units.

3.   Pro Forma Net Income (Loss) Per Share

Shares used in computing pro forma combined basic and diluted net income per share is the sum of Brocade shares, Foundry shares (Foundry shares are adjusted for the exchange ratios referred to below) and McDATA shares (where applicable). Foundry’s shares are calculated by multiplying each share of Foundry common stock by the exchange ratio of 0.0907 of a share of Brocade common stock for each share of Foundry common stock. McDATA’s shares are calculated by multiplying each share of McDATA common stock by the exchange ratio of 0.75 of a share of Brocade common stock for each share of McDATA common stock. McDATA shares are included for one quarter only. Dilutive potential common shares have been included only if they have a dilutive effect on earnings per share. Due to the uncertainty of the terms on which any convertible debt issued by Brocade in connection with the financing of the merger may be convertible into shares of Brocade common stock, Brocade did not include any potential dilutive effect relating to such conversion in the shares used in the per share calculation.

EX-99.3

Exhibit 99.3

NON-GAAP FINANCIAL MEASURES

The terms “EBITDA,” “Adjusted EBITDA,” “Pro Forma EBITDA,” “Pro Forma Adjusted EBITDA,” “Net Debt,” “Pro Forma Net Debt,” “Pro Forma Total Debt” and “Pro Forma Senior Debt” as presented in this Exhibit 99.3, are supplemental measures of Brocade’s performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. They are not measurements of Brocade’s financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities as measures of our liquidity.

Brocade cautions investors that amounts presented in accordance with its definitions of EBITDA, Adjusted EBITDA, Pro Forma EBITDA, Pro Forma Adjusted EBITDA, Net Debt, Pro Forma Net Debt, Pro Forma Total Debt and Pro Forma Senior Debt may not be comparable to similar measures disclosed by other registrants, because not all registrants and analysts calculate EBITDA, Adjusted EBITDA, Pro Forma EBITDA, Pro Forma Adjusted EBITDA, Net Debt, Pro Forma Net Debt, Pro Forma Total Debt and Pro Forma Senior Debt in the same manner. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Please see the footnotes to the tables below for a more thorough discussion of the use of EBITDA, Adjusted EBITDA, Pro Forma EBITDA, Pro Forma Adjusted EBITDA, Net Debt, Pro Forma Net Debt, Pro Forma Total Debt and Pro Forma Senior Debt in this report, including the reasons that Brocade believes this information is useful to management and why it may be useful to investors, and a reconciliation of EBITDA, Adjusted EBITDA, Pro Forma EBITDA, Pro Forma Adjusted EBITDA,Net Debt, Pro Forma Net Debt, Pro Forma Total Debt and Pro Forma Senior Debt to the most directly comparable GAAP financial measures.

In this Exhibit 99.3, Brocade sometimes collectively refers to the acquisition of Foundry, the offering of the senior notes and the entry into its new senior secured credit facility as the Transactions. Brocade’s proposed acquisition of Foundry is referred to as the “merger” or the “acquisition.”

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table presents summary unaudited pro forma condensed combined financial data which reflects the Transactions. The summary unaudited pro forma condensed combined financial data are derived from and should be read in conjunction with the unaudited pro forma condensed combined financial statements and related notes thereto included elsewhere in this report. The following unaudited pro forma condensed financial data are for informational purposes only and should not considered indicative of actual results that would have been achieved had the Transactions actually been consummated on the dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period.

Unaudited Pro Forma Condensed Combined Financial Data(1)

	Fiscal Year			Twelve Month
	Ended			Period Ended
	October 27, 2007			July 26, 2008
	(in thousands)
Unaudited Pro Forma Condensed Combined Statement of Operations Data:
Net revenues	$	2,000,157		$	2,047,310
Income from operations		51,559			19,787
Net income (loss)		(62,081	)		65,960

	As of July 26,
	2008
	(in thousands)
Unaudited Pro Forma Condensed Combined Balance Sheet Data:
Cash, cash equivalents and investments(2)	$	410,696
Working capital		197,308
Total assets		4,190,179
Long-term liabilities		1,845,958
Total stockholders’ equity		1,705,797
Pro Forma Senior Debt(3)		1,515,000
Pro Forma Total Debt(4)		1,684,119
Pro Forma Net Debt(5)		1,273,423

	Fiscal Year		Twelve Month
	Ended		Period Ended
	October 27, 2007		July 26, 2008
	(in thousands)
Unaudited Pro Forma Other Financial Data:
Pro Forma EBITDA(6)	$	292,010	$	249,218
Pro Forma Adjusted EBITDA(6)		455,072		535,053

Ratio of Pro Forma Adjusted EBITDA to interest expense	3.48	x
Ratio of Pro Forma Senior Debt to Pro Forma Adjusted EBITDA	2.83	x
Ratio of Pro Forma Total Debt to Pro Forma Adjusted EBITDA	3.15	x
Ratio of Pro Forma Net Debt to Pro Forma Adjusted EBITDA	2.38	x

(1)	The summary unaudited pro forma condensed combined statements of operations give effect to the acquisition as if it had taken place on October 29, 2006. The unaudited pro forma condensed combined statement of operations for the fiscal year ended October 27, 2007 combines Brocade’s historical consolidated statement of income for the year then ended with Foundry’s historical consolidated statement of income for the fiscal year ended December 31, 2007 and McDATA’s historical consolidated statement of operations for the three months ended October 31, 2006. The unaudited pro forma condensed combined balance sheet is based on historical balance sheets of Brocade and Foundry and has been prepared to reflect the acquisition as if it had been completed on July 26, 2008. Such pro forma information is based upon the historical condensed consolidated balance sheet data of Brocade as of July 26, 2008 and Foundry as of June 30, 2008. The unaudited pro forma condensed combined statement of operations for the twelve months ended July 26, 2008 combines Brocade’s historical consolidated statement of income for the twelve months ended July 26, 2008 with Foundry’s historical statement of income for the six months ended December 31, 2007 and the six months ended June 30, 2008. Foundry’s net revenue and net income for the three months ended December 31, 2007 were $168.7 million and $28.9 million, respectively.
(2)	Includes $13.7 million of cash and cash equivalents, $235.8 million of short-term investments and $161.2 million of long-term investments. Investments include U.S. government and government agency obligations, municipal obligations, and corporate notes and bonds.
(3)	The senior debt includes $1,100.0 million term loan facility, $15.0 million drawn under the $125.0 million revolving credit facility and $400.0 million senior notes.
(4)	Total debt includes the senior debt and $169.1 million McDATA convertible subordinated notes.
(5)	The following table reconciles Pro Forma Net Debt to Pro Forma Total Debt

	As of July 26,
	2008
	(in thousands)
Reconciliation of Pro Forma Net Debt:
Pro Forma Total Debt	$	1,684,119
Less: cash and cash equivalents		13,689
Less: short-term and long-term investments		397,007
Pro Forma Net Debt	$	1,273,423

(6)

Represents Pro Forma EBITDA and Pro Forma Adjusted EBITDA for Brocade after giving effect to the Transactions as if they had occurred at the beginning of the periods presented. Pro Forma EBITDA and Pro Forma Adjusted EBITDA are supplemental non-GAAP financial measures. GAAP means generally accepted accounting principles in the United States.

Pro Forma EBITDA is defined as net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization after giving effect to the Transactions as if they had occurred on July 26, 2008. Pro Forma EBITDA is a measure commonly used by financial analysts in evaluating the operating performance of companies. Accordingly, management believes that Pro Forma EBITDA may be useful for potential purchasers of notes in assessing past operating performance and our ability to meet our debt service requirements. A reconciliation of Pro Forma EBITDA to net income (loss) is provided below.

				Twelve
	Fiscal Year			Month Period
	Ended			Ended
	October 27, 2007			July 26, 2008
	(in thousands)
Reconciliation of Pro Forma EBITDA:
Net income (loss)	$	(62,081	)	$	65,960
Interest expense		159,206			153,886
Income tax expense (benefit)		54,829			(119,704	)
Interest income, net(a)		(100,395	)		(80,355	)
Depreciation and amortization		240,451			229,431
Pro Forma EBITDA	$	292,010		$	249,218

Pro Forma Adjusted EBITDA is defined as Pro Forma EBITDA adjusted to exclude unusual or one-time non-recurring items, non-cash items and other adjustments. Brocade’s management believes that Pro Forma Adjusted EBITDA may be useful for potential purchasers of notes in assessing Brocade’s operating performance and its ability to meet its debt service requirements following the Transactions because Pro Forma Adjusted EBITDA, as opposed to Pro Forma EBITDA, more accurately reflects past operating performance as it takes into account specific adjustments and one-time non-recurring items. A reconciliation of Pro Forma Adjusted EBITDA to Pro Forma EBITDA is provided below.

			Twelve
	Fiscal Year		Month Period
	Ended		Ended
	October 27, 2007		July 26, 2008
	(in thousands)
Reconciliation of Pro Forma Adjusted EBITDA:
Pro Forma EBITDA	$	292,010	$	249,218
Non-cash stock based compensation expense(b)		85,248		95,685
Legal fees associated with indemnification obligations, SEC investigation and other related costs, net(c)		46,257		30,210
Provision for class action lawsuit(d)		—		160,000
Acquisition and integration costs(e)		25,450		303
Restructuring and facilities lease losses (benefits), net(f)		393		(477	)
Other charges, net(g)		5,714		114
Pro Forma Adjusted EBITDA	$	455,072	$	535,053

(a)	Amount includes interest and other income (expense), net and gain on the sale of investments.
(b)	The adjustment reflects the effect of non-cash stock compensation expense recorded in the periods presented.
(c)	These expenses consist of non-recurring professional legal and accounting service fees for various matters, including applicable indemnification obligations, defense of Brocade in legal proceedings, the completed internal review and the SEC and Department of Justice joint investigations regarding historical stock option granting practices.
(d)	The adjustment reflects the preliminary settlement reached between Brocade and the lead plaintiff for the federal securities class action on May 30, 2008.
(e)	In connection with the acquisition of McDATA, Brocade recorded acquisition and integration costs during the year ended October 27, 2007, which consisted primarily of costs incurred for consulting services, other professional fees and bonuses paid to transitional employees.
(f)	The adjustment represents estimated facilities lease losses, net of expected sublease income.
(g)	The adjustment reflects Foundry litigation settlement charges relating to professional fees and other costs associated with the investigation of employee stock option grants.