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): November 19, 2012

BROCADE COMMUNICATIONS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

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

130 Holger Way

San Jose, CA 95134

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

(408) 333-8000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

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):

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

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

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

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

Item 2.02 Results of Operations and Financial Condition.

On November 19, 2012, Brocade Communications Systems, Inc. (the “Company”) issued a press release regarding financial results for the fourth quarter and fiscal year ended October 27, 2012. The Company also posted on its website (www.BRCD.com) slides with accompanying prepared remarks regarding such financial results and forward-looking statements, including statements relating to the Company’s estimated financial results of the first quarter of fiscal year 2013. Copies of the press release and slides with accompanying prepared remarks by the Company are attached as Exhibits 99.1 and 99.2, respectively, and the information in Exhibits 99.1 and 99.2 is incorporated herein by reference.

The information in Item 2.02 and Item 9.01 in this Current Report on Form 8-K and the exhibits attached hereto shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit

Number Description of Document

99.1 Press release, dated November 19, 2012, regarding financial results of Brocade Communications Systems, Inc. for the fourth quarter and fiscal year ended October 27, 2012.

99.2 Slides with accompanying prepared remarks of Brocade Communications Systems, Inc., dated November 19, 2012, regarding financial results of the fourth quarter and fiscal year ended October 27, 2012 and forward-looking statements, including statements relating to the Company’s estimated financial results of the first quarter of fiscal year 2013.

SIGNATURES

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:	November 19, 2012	By:	/s/ Daniel W. Fairfax
			Daniel W. Fairfax
			Chief Financial Officer and Vice President, Finance

EX-99.1

Exhibit 99.1

BROCADE CONTACTS
Public Relations John Noh Tel: 408-333-5108 jnoh@brocade.com	Investor Relations Robert Eggers Tel: 408-333-8797 reggers@brocade.com

Brocade Reports Fourth Quarter and Fiscal 2012 Earnings

Achieved Record Fourth Quarter and Full Year Results

SAN JOSE, Calif., November 19, 2012 — Brocade^® (NASDAQ: BRCD) today reported financial results for its fourth quarter and full fiscal year 2012 ended October 27, 2012. Brocade reported record fourth quarter revenue of $578 million, representing an increase of 5% year-over-year and 4% quarter-over-quarter. Revenue for fiscal year 2012 was $2,238 million, a record for the company, up 4% year-over-year. The resulting GAAP diluted earnings per share (EPS) was $0.11 for Q4 and $0.41 for fiscal 2012, on record annual net income of $195 million. Non-GAAP diluted EPS was $0.17 for Q4, the fifth consecutive quarter of year-over-year EPS growth, and $0.66 for the year.

“Q4 was an excellent quarter for Brocade and a strong ending for fiscal year 2012 during which we established a number of company records including revenue, net income, and operating cash flow,” said Michael Klayko, CEO of Brocade. “Our product portfolio across all areas of our business is the strongest it has ever been and we are driving industry transformation in emerging areas of growth including virtualized data centers, cloud computing, and software-defined networking. We believe Brocade is well-positioned for continued growth in fiscal 2013.”

Summary of Q4 and fiscal 2012 results:

• Q4 2012 Storage Area Networking (SAN) business revenue, including products and services, was $394 million, up 9% year-over-year and 4% quarter-over-quarter. SAN product revenue increased 12% year-over-year and 5% quarter-over-quarter, in a seasonally strong quarter for the Company. Brocade's 16 Gbps Fibre Channel products represented nearly 35% of director and switch revenue in the quarter. Fiscal 2012 SAN business revenue was $1,578 million, up 7% year-over-year.

• Q4 2012 IP Networking business revenue, including products and services, was $184 million, down 3% year-over-year and up 4% quarter-over-quarter. Ethernet switch revenue was up 5% year-over-year and 1% quarter-over-quarter, while routing revenue was down 10% year-over-year and up 9% quarter-over-quarter. From a customer standpoint, Federal and Service Provider revenues were both up sequentially, while Enterprise revenue was lower. Fiscal 2012 IP Networking business revenue was $659 million, down slightly year-over-year.

• Q4 2012 GAAP gross margin was 62.4% and non-GAAP gross margin was 64.8%, compared with 59.5% and 62.9% in Q4 2011, respectively. The year-over-year improvement in gross margin was due to higher revenue, favorable product mix, and lower fixed costs. Fiscal 2012 GAAP and non-GAAP gross margin improved to 61.8% and 64.5%, respectively, compared with 59.8% and 62.5% in fiscal 2011, due to higher revenue and favorable product mix.

• GAAP operating margin was 14.9% and non-GAAP operating margin was 22.5% in Q4 2012, compared with 9.9% and 21.0% in Q4 2011, respectively. Operating margin expanded both year-over-year and quarter-over-quarter on higher revenue and improved gross margin. Fiscal 2012 GAAP operating margin was 12.4% and non-GAAP operating margin was 20.5%, compared with 8.3% and 17.6% in fiscal 2011, respectively. The improvement in operating margin for the full year was a result of higher gross margin and lower operating expenses as a percentage of revenue.

Page 1 of 11

• Fiscal 2012 GAAP EPS of $0.41 was up 310% year-over-year on net income of $195 million, up more than 280% year-over-year. Fiscal 2012 non-GAAP EPS of $0.66 was up 33% year-over-year on non-GAAP net income of $311 million, up 26% year-over-year.

• Average diluted shares outstanding for Q4 2012 were lower by 11.7 million from Q4 2011, principally from share repurchases during the past year, including 11.2 million shares ($60 million) repurchased during Q4 2012.

• Operating cash flow was $210 million in Q4 2012 and $591 million in fiscal 2012, both records. During the quarter, the Company paid the remaining $30 million of its term loan and ended the year with a cash balance of $713 million and cash, net of debt, of $108 million.

Brocade management will host a conference call today at 2:30 p.m. PT (5:30 p.m. ET) to discuss fiscal fourth quarter and full year results, as well as a fiscal first quarter 2013 outlook. To access the webcast please go to www.brcd.com/events.cfm. A replay of the conference call and the prepared comments and slides will be available at www.brcd.com.

Other Q4 2012 product, customer, and partner announcements are available at http://newsroom.brocade.com/.

Page 2 of 11

Financial Highlights and Additional Financial Information

	Q4 2012			Q3 2012			Q4 2011
Revenue	$	578	M	$	555	M	$	550	M
GAAP net income (loss)	$	54	M	$	43	M		($4M)
Non-GAAP net income	$	78	M	$	67	M	$	79	M
GAAP net income (loss) per share — diluted	$	0.11		$	0.09		$	(0.01	)
Non-GAAP EPS — diluted	$	0.17		$	0.14		$	0.16
GAAP gross margin	62.4		%	61.3		%	59.5		%
Non-GAAP gross margin	64.8		%	63.7		%	62.9		%
GAAP operating income	$	86	M	$	70	M	$	55	M
Non-GAAP operating income	$	130	M	$	108	M	$	116	M
GAAP operating margin	14.9		%	12.6		%	9.9		%
Non-GAAP operating margin	22.5		%	19.5		%	21.0		%
Adjusted EBITDA (1)	$	153	M	$	131	M	$	138	M
Cash provided by operations	$	210	M	$	113	M	$	206	M

•Q4 2012 effective GAAP tax rate was 25.1% and effective non-GAAP tax rate was 32.4%.

•Q4 2012 total SAN port shipments were approximately 1.13 million.

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

	Q4 2012		Q3 2012		Q4 2011
As a % of total revenues
OEM revenues	65	%	67	%	62	%
Channel/Direct revenues	35	%	33	%	38	%
10% or greater customer revenues	46	%	55	%	41	%
Domestic revenues	63	%	64	%	62	%
International revenues	37	%	36	%	38	%
SAN product revenues	59	%	58	%	55	%
IP Networking product revenues	26	%	26	%	29	%
Global Services revenue	15	%	16	%	16	%
SAN business revenues (2)	68	%	68	%	66	%
IP Networking business revenues (2)	32	%	32	%	34	%
Estimates as a % of IP Networking business revenues:
Enterprise, excluding Federal	45	%	52	%	57	%
Federal	24	%	19	%	18	%
Service Provider	31	%	29	%	25	%

	Q4 2012			Q3 2012			Q4 2011
Cash, cash equivalents and short-term investments	$	713	M	$	581	M	$	415	M
Deferred revenues	$	293	M	$	280	M	$	270	M
Capital expenditures	$	17	M	$	18	M	$	20	M
Total debt, net of discount	$	601	M	$	630	M	$	789	M
Days sales outstanding	37 days			38 days			41 days
Employees at end of period	4,536			4,597			4,546

1) Adjusted EBITDA is as defined in the Term Debt Credit Agreement.

2) SAN and IP Networking business revenues include product and global services revenues.

Page 3 of 11

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. In evaluating Brocade's performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP.

Management believes that 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 to its competitors' operating results. Management also believes these non-GAAP financial measures help indicate Brocade's baseline performance before gains, losses or charges that are considered by management to be outside ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations performance and the allocation of resources. Management believes these non-GAAP financial measures, when read in conjunction with 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 against industry and competitor companies;

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

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

• an easier way to compare Brocade's most recent results of operations against investor and analyst financial models.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or arise outside the ordinary course of 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: (i) provision or benefit from certain pre-acquisition litigation (ii) legal fees associated with certain pre-acquisition litigation, (iii) legal fees associated with indemnification obligations and other related costs, net, (iv) acquisition and integration costs, (v) loss on sale of property, (vi) interest expense related to the adoption of new standards relating to convertible debt instruments, (vii) original issue discount and debt issuance costs of debt related to lenders that did not participate in refinancing, and (viii) loss on sale of a subsidiary.

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

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

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

Page 4 of 11

Cautionary Statement

This press release contains statements that are forward-looking in nature, including statements regarding Brocade’s future financial performance. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, changes in IT spending levels in one or more of our target markets, including the government sector, Brocade’s ability to capitalize on new Brocade sales and marketing initiatives, including expanded go-to-market activities in our IP Networking business, customer acceptance of Brocade’s Ethernet fabric solutions, Brocade’s ability to continue to successfully innovate new products and services on a timely basis and achieve widespread market acceptance, and the effect of increasing market competition and changes in the industry. Certain of these and other risks are set forth in more detail in our Form 10-Q for the fiscal quarter ended July 28, 2012 and in “Item 1A. Risk Factors” in Brocade’s Annual Report on Form 10-K for the fiscal year ended October 29, 2011. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.

About Brocade

Brocade (NASDAQ: BRCD) is the pure-play networking company that innovates to make high-performance networks easier to deploy, manage, and scale in the most demanding environments.

ADX, Brocade, Brocade Assurance, Brocade One, the B-wing symbol, DCX, Fabric OS, ICX, MLX, MyBrocade, SAN Health, VCS, and VDX are registered trademarks, and AnyIO, HyperEdge, NET Health, OpenScript, and The Effortless Network are 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 their respective owners.

© 2012 Brocade Communications Systems, Inc. All Rights Reserved.

Page 5 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						For the Year Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(In thousands, except per share amounts)
Net revenues
Product	$	491,169		$	460,993		$	1,890,856		$	1,789,814
Service	87,188			89,479			346,914			357,628
Total net revenues	578,357			550,472			2,237,770			2,147,442
Cost of revenues
Product	176,635			179,184			689,856			677,196
Service	41,032			43,773			164,895			186,712
Total cost of revenues	217,667			222,957			854,751			863,908
Gross margin	360,690			327,515			1,383,019			1,283,534
Operating expenses:
Research and development	90,310			83,733			363,090			354,401
Sales and marketing	150,581			145,523			608,502			608,513
General and administrative	18,831			16,330			74,583			69,506
Amortization of intangible assets	14,737			14,476			59,204			60,713
Restructuring, integration and indemnification costs (recoveries)	(89		)	—			(89		)	125
Loss on sale of subsidiary	—			12,756			—			12,756
Total operating expenses	274,370			272,818			1,105,290			1,106,014
Income from operations	86,320			54,697			277,729			177,520
Interest expense	(14,684		)	(13,481		)	(52,488		)	(97,838		)
Interest and other income (expense), net	531			(81		)	(814		)	(378		)
Gain (loss) on sale of investments and property, net	(26		)	(13		)	(26		)	124
Income before income tax	72,141			41,122			224,401			79,428
Income tax expense	18,140			45,446			29,220			28,818
Net income (loss)	$	54,001		$	(4,324	)	$	195,181		$	50,610
Net income (loss) per share — basic	$	0.12		$	(0.01	)	$	0.43		$	0.11
Net income (loss) per share — diluted	$	0.11		$	(0.01	)	$	0.41		$	0.10
Shares used in per share calculation — basic	459,333			474,975			456,629			474,259
Shares used in per share calculation — diluted	474,213			474,975			472,343			497,030

Page 6 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	October 27, 2012			October 29, 2011
	(In thousands, except par value)
Assets
Current assets:
Cash and cash equivalents	$	713,226		$	414,202
Short-term investments	—			774
Total cash, cash equivalents and short-term investments	713,226			414,976
Accounts receivable, net of allowances for doubtful accounts of $827 and $1,388 at October 27, 2012 and October 29, 2011, respectively	233,139			249,141
Inventories	68,179			74,172
Deferred tax assets	91,539			53,604
Prepaid expenses and other current assets	49,496			52,308
Total current assets	1,155,579			844,201
Property and equipment, net	518,940			532,384
Goodwill	1,624,089			1,630,967
Intangible assets, net	109,265			214,697
Non-current deferred tax assets	136,175			210,028
Other assets	37,213			42,031
Total assets	$	3,581,261		$	3,474,308
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	117,350		$	109,471
Accrued employee compensation	182,597			118,298
Deferred revenue	216,283			201,421
Current liabilities associated with facilities lease losses	976			1,456
Current portion of long-term debt	1,977			40,539
Other accrued liabilities	91,285			94,802
Total current liabilities	610,468			565,987
Long-term debt, net of current portion	599,203			748,904
Non-current liabilities associated with facilities lease losses	1,606			2,496
Non-current deferred revenue	76,907			69,024
Non-current income tax liability	47,370			63,593
Other non-current liabilities	9,887			10,166
Total liabilities	1,345,441			1,460,170
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: 456,913 and 448,022 shares at October 27, 2012 and October 29, 2011, respectively	457			448
Additional paid-in capital	2,009,190			1,984,830
Accumulated other comprehensive loss	(9,864		)	(11,996		)
Retained earnings	236,037			40,856
Total stockholders’ equity	2,235,820			2,014,138
Total liabilities and stockholders’ equity	$	3,581,261		$	3,474,308

Page 7 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	October 27, 2012			October 29, 2011
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	54,001		$	(4,324	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Excess tax benefits from stock-based compensation	(3,803		)	(393		)
Depreciation and amortization	47,535			50,899
Loss on disposal of property and equipment	479			279
Loss on sale of subsidiary	—			12,756
Amortization of debt issuance costs and original issue discount	4,021			1,259
Net (gains) losses on investments	(144		)	8
Provision for doubtful accounts receivable and sales allowances	1,768			1,286
Non-cash compensation expense	18,423			19,671
Changes in assets and liabilities:
Accounts receivable	(3,753		)	39,759
Inventories	6,755			4,258
Prepaid expenses and other assets	1,312			2,381
Deferred tax assets	1,075			(2,181		)
Accounts payable	(756		)	(7,043		)
Accrued employee compensation	42,125			22,400
Deferred revenue	13,367			6,280
Other accrued liabilities	28,315			59,755
Liabilities associated with facilities lease losses	(228		)	(817		)
Net cash provided by operating activities	210,492			206,233
Cash flows from investing activities:
Proceeds from maturities and sale of short-term investments	952			—
Purchases of property and equipment	(16,792		)	(20,136		)
Proceeds from sale of subsidiary	—			3,905
Net cash used in investing activities	(15,840		)	(16,231		)
Cash flows from financing activities:
Payment of principal related to the term loan	(30,000		)	(50,001		)
Payment of fees related to the term loan	—			(77		)
Proceeds from term loan	—			1
Payment of principal related to capital leases	(477		)	(450		)
Common stock repurchases	(60,056		)	(200,654		)
Proceeds from issuance of common stock	22,319			3,819
Excess tax benefits from stock-based compensation	3,803			393
Net cash used in financing activities	(64,411		)	(246,969		)
Effect of exchange rate fluctuations on cash and cash equivalents	2,359			(1,390		)
Net increase (decrease) in cash and cash equivalents	132,600			(58,357		)
Cash and cash equivalents, beginning of period	580,626			472,559
Cash and cash equivalents, end of period	$	713,226		$	414,202

Page 8 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Year Ended
	October 27, 2012			October 29, 2011
	(In thousands)
Cash flows from operating activities:
Net income	$	195,181		$	50,610
Adjustments to reconcile net income to net cash provided by operating activities:
Excess tax benefits from stock-based compensation	(5,141		)	(312		)
Depreciation and amortization	192,218			206,352
Loss on disposal of property and equipment	883			2,325
Loss on sale of subsidiary	—			12,756
Amortization of debt issuance costs and original issue discount	7,788			13,183
Write-off of debt issuance costs and original issue discount on debt extinguishment	—			25,465
Net gains on investments	(179		)	(340		)
Provision for doubtful accounts receivable and sales allowances	11,301			9,343
Non-cash compensation expense	77,169			83,076
Changes in assets and liabilities:
Accounts receivable	4,701			53,561
Inventories	4,656			1,327
Prepaid expenses and other assets	3,987			(1,688		)
Deferred tax assets	1,256			(2,158		)
Accounts payable	7,720			(38,917		)
Accrued employee compensation	47,679			216
Deferred revenue	22,744			19,579
Other accrued liabilities	20,277			20,878
Liabilities associated with facilities lease losses	(1,370		)	(6,024		)
Net cash provided by operating activities	590,870			449,232
Cash flows from investing activities:
Purchases of short-term investments	—			(38		)
Proceeds from maturities and sale of short-term investments	952			1,604
Purchases of property and equipment	(72,797		)	(96,797		)
Proceeds from sale of subsidiary	35			3,905
Net cash used in investing activities	(71,810		)	(91,326		)
Cash flows from financing activities:
Payment of principal related to the term loan	(190,000		)	(359,898		)
Payment of fees related to the term loan	—			(1,167		)
Proceeds from term loan	—			198,950
Payment of principal related to capital leases	(1,866		)	(1,761		)
Common stock repurchases	(130,209		)	(210,698		)
Proceeds from issuance of common stock	98,791			97,152
Excess tax benefits from stock-based compensation	5,141			312
Net cash used in financing activities	(218,143		)	(277,110		)
Effect of exchange rate fluctuations on cash and cash equivalents	(1,893		)	(578		)
Net increase in cash and cash equivalents	299,024			80,218
Cash and cash equivalents, beginning of year	414,202			333,984
Cash and cash equivalents, end of year	$	713,226		$	414,202

Page 9 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(Unaudited)

	Three Months Ended
	October 27, 2012			October 29, 2011
	(In thousands, except per share amounts)
Net income (loss) on a GAAP basis	$	54,001		$	(4,324	)
Adjustments:
Stock-based compensation expense included in cost of revenues	3,388			4,345
Amortization of intangible assets expense included in cost of revenues	10,713			14,090
Legal fees associated with certain pre-acquisition litigation	—			59
Total gross margin adjustments	14,101			18,494
Legal fees recovery associated with indemnification obligations and other related costs, net	(89		)	—
Stock-based compensation expense included in research and development	4,211			3,984
Stock-based compensation expense included in sales and marketing	8,311			8,987
Stock-based compensation expense included in general and administrative	2,513			2,355
Amortization of intangible assets expense included in operating expenses	14,737			14,476
Loss on sale of subsidiary	—			12,756
Total operating expense adjustments	29,683			42,558
Total operating income adjustments	43,784			61,052
Income tax effect of adjustments	(19,443		)	22,018
Non-GAAP net income	$	78,342		$	78,746
Non-GAAP net income per share — basic	$	0.17		$	0.17
Non-GAAP net income per share — diluted	$	0.17		$	0.16
Shares used in non-GAAP per share calculation — basic	459,333			474,975
Shares used in non-GAAP per share calculation — diluted	474,213			485,895

Page 10 of 11

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(Unaudited)

	For the Year Ended
	October 27, 2012			October 29, 2011
	(In thousands, except per share amounts)
Net income on a GAAP basis	$	195,181		$	50,610
Adjustments:
Stock-based compensation expense included in cost of revenues	15,433			15,606
Amortization of intangible assets expense included in cost of revenues	46,229			57,489
Benefit from certain pre-acquisition litigation	—			(14,335		)
Legal fees (recovery) associated with certain pre-acquisition litigation	(465		)	443
Total gross margin adjustments	61,197			59,203
Legal fees (recovery) associated with indemnification obligations and other related costs, net	(89		)	125
Stock-based compensation expense included in research and development	17,952			18,959
Stock-based compensation expense included in sales and marketing	33,257			36,068
Stock-based compensation expense included in general and administrative	10,527			12,442
Amortization of intangible assets expense included in operating expenses	59,204			60,713
Loss on sale of subsidiary	—			12,756
Total operating expense adjustments	120,851			141,063
Total operating income adjustments	182,048			200,266
Debt issuance costs and original issue discount of debt related to lenders that did not participate in refinancing	—			25,465
Income tax effect of adjustments	(66,458		)	(29,886		)
Non-GAAP net income	$	310,771		$	246,455
Non-GAAP net income per share — basic	$	0.68		$	0.52
Non-GAAP net income per share — diluted	$	0.66		$	0.50
Shares used in non-GAAP per share calculation — basic	456,629			474,259
Shares used in non-GAAP per share calculation — diluted	472,343			497,030

Page 11 of 11

EX-99.2

BROCADE

Q4 FY 2012

Earnings

Prepared Comments and Slides

November 19, 2012

Rob Eggers

Vice President, Investor Relations

Phone: 408-333-8797

reggers@brocade.com

John Noh

Senior Director, Public Relations

Phone: 408-333-5108

jnoh@brocade.com

NASDAQ: BRCD

Brocade Q4 FY 2012 Earnings    11/19/2012

Prepared comments provided by Rob Eggers, Investor Relations

Thank you for your interest in Brocade's Q4 Fiscal 2012 earnings presentation, which includes prepared remarks, slides, and a press release detailing fiscal fourth quarter and full year 2012 results. The press release was issued shortly after 1:00 p.m. PT on November 19, 2012 via Marketwire. The press release, along with these prepared comments and slides, has been furnished to the SEC on Form 8-K and will be made available on the Brocade Investor Relations website atwww.brcd.com.

© 2012 Brocade Communications Systems, Inc.     Page 2 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

© 2012 Brocade Communications Systems, Inc.     Page 3 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Today’s prepared comments include remarks by Mike Klayko, Brocade CEO, regarding the company’s quarterly results, strategy, and a review of operations, as well as industry trends and market/technology drivers related to its business; and by Dan Fairfax, Brocade CFO, who will provide a financial review.

A management discussion and live question and answer conference call will be webcast at 2:30 p.m. PT on November 19 at www.brcd.comand will be archived on the Brocade Investor Relations website.

© 2012 Brocade Communications Systems, Inc.     Page 4 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Prepared comments provided by Mike Klayko, CEO

© 2012 Brocade Communications Systems, Inc.     Page 5 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Fiscal Q4 was another great quarter for Brocade and a very strong ending for fiscal year 2012. Fueled by a highly innovative product portfolio, strong customer traction, and continued solid execution, we exceeded both our revenue and profitability guidance for the quarter. We achieved record revenue of $578 million, an increase of 5% from the prior year, driven by growth in our SAN products and Ethernet switch products, led by our award-winning Ethernet fabric portfolio.

Further, both our non-GAAP gross margin and our non-GAAP operating margin increased in the fourth quarter, outperforming our target model. As such, we are very pleased to report non-GAAP earnings per share in the fourth quarter of $0.17, an increase of one cent from the prior year, representing our fifth consecutive quarter of year-over-year EPS growth.

Looking at our cash flow, we also drove outstanding results here. We generated a record $210 million in operating cash flow, putting Brocade in a positive net cash position exiting the quarter, a full year ahead of our earlier expectation.

© 2012 Brocade Communications Systems, Inc.     Page 6 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

For the year, we achieved record revenue of more than $2.2 billion with non-GAAP earnings per share of $0.66, a 33% increase year-over-year. We saw significant improvements in both gross margin and operating margin, exceeding our FY12 target model, while achieving record net income in the year. With our record operating cash flow of $591 million, we eliminated the remaining balance of our term debt, repurchased more than $130 million of common stock, and increased our cash balance by more than 70% this year.

© 2012 Brocade Communications Systems, Inc.     Page 7 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Our strong business model has also enabled us to make strategic investments in our core businesses as well as emerging technologies. For example, our continued investment into data center fabrics has positioned us as a leader in the industry with a competitively innovative and differentiated product portfolio of both SAN and Ethernet fabric solutions. This year we launched additional products as part of our first-to-market 16 Gbps SAN portfolio and have seen a rapid adoption of this technology, with 16 Gbps products now making up nearly 35% of our SAN director and switch sales. In Ethernet fabrics, we introduced the Brocade VDX 8770 modular switch, which further enhances our portfolio of Brocade VCS fabric-enabled products and reinforces our technology leadership in redefining data center architectures. We now have more than 800 Brocade VDX customers worldwide, giving us a strong position with customers in the marketplace.

In routing and application delivery, our investments in technology innovation resulted in strong Service Provider revenues in FY12. During Q4, we announced the 24-port 10 GbE module for the Brocade MLXe routers enabling our customers to build the industry's highest density core router in a single platform. In FY12 we also launched our comprehensive vision and strategy for software-defined networking (SDN) that sets the stage for continued ground-breaking technology and product innovation. We have taken a leading industry position in key areas of SDN, including support for OpenFlow on our high-end router family.

Moving to the campus LAN space, we delivered a significant refresh of our campus portfolio this year, introducing true innovation in a market that has been in need of architectural transformation for more than a decade. We are seeing great results with the sales of our Brocade ICX switches through our channel partners. Customer and partner feedback on the innovative Brocade HyperEdge technology has been very positive as well.

In total, we are exiting FY12 with a full portfolio of world-class products and an innovative technology roadmap in strategically important areas, while driving network transformation across all customers segments. Now I will go into more detail in each of our key innovation areas.

© 2012 Brocade Communications Systems, Inc.     Page 8 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Our decision to invest in 16 Gbps Fibre Channel technology is paying off and has enabled us to make market share gains this year. SAN product revenue increased by 12% year-over-year in the fourth quarter and by 10% for the fiscal year with excellent customer adoption of our 16 Gbps products. As we look forward, we believe that the SAN market continues to represent an exciting growth opportunity for Brocade because of three key drivers: rapid migration to high-density server virtualization and cloud computing, innovation in the storage market such as the rapid adoption of flash array technology, and a major refresh cycle in our own, sizable installed base.

First, the tremendous growth of virtual machines is creating new demand for storage networking inside data centers, even as the market for physical servers slows. Fibre Channel is the ideal SAN technology in enterprise, hosting, and service provider data centers with high-density virtual machines requiring extremely low-latency, highly deterministic Fibre Channel SAN technology, according to a recent report from Gartner.

Gartner wrote, “Fibre Channel (FC) still has the lowest overhead and latency of all the mainstream protocols. Reliability and availability characteristics are inherent in the deterministic design of Fibre Channel, and multipathing is simple, mature and well-supported…”

© 2012 Brocade Communications Systems, Inc.     Page 9 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

The second driver that we see is the growing diversity of players, products, and technologies that are creating new demands for high-performance SANs. For example, as solid state drive (SSD) technology adoption increases, so will the requirements for a network that delivers the lowest possible latency and highest I/O's per second. We are also seeing ongoing product transitions in the mid-range storage market. This is creating new partnership opportunities with our large OEMs. Two such examples are the Hitachi UCP Pro solution, for which Brocade is the preferred networking provider, and the industry's first end-to-end 16 Gbps Fibre Channel solution from Dell Compellent. We expect to announce similar partnerships with other OEMs in the future.

In general, demand for storage capacity continues to accelerate. According to the latest market research, storage capacity will grow at a 37% CAGR through 2016.

© 2012 Brocade Communications Systems, Inc.     Page 10 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

The third driver of our SAN growth is the ongoing refresh of our installed base—an opportunity that we estimate to be more than $10 billion. Our differentiated 16 Gbps products with added manageability and diagnostic capabilities are helping to drive this current refresh cycle. We also anticipate customer adoption to accelerate as our OEMs bring 16 Gbps embedded switches for blade servers and 16 Gbps storage arrays to market, such as the Dell Compellent announcement we discussed earlier. We expect other OEMs to make similar announcements in the upcoming quarters. Historically, the availability of these next-generation arrays is a key driver in terms of customer adoption of the latest SAN technology.

© 2012 Brocade Communications Systems, Inc.     Page 11 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

In addition to continued innovation in SAN, we are further extending our leadership in the emerging Ethernet fabric space with each successive quarter. Brocade continues to innovate in Ethernet fabrics, announcing the Brocade VDX 8770 modular switch in Q4. This ground-breaking product enables large-scale data centers to utilize Brocade VCS fabric technology that delivers superior automation, resiliency, and efficiency to support the most advanced private and public cloud environments. We are proud to have the broadest portfolio of Ethernet fabric products that allow customers to start small and grow their fabrics over time as their demand increases.

During the quarter, we were also pleased to continue our partnership momentum here. The Hitachi UCP Pro integrated bundle that we highlighted before also includes a selection of our Ethernet fabric products. This designation underscores our proven track record for delivering networking solutions with unprecedented simplicity, automation, scalability, and reliability for the consolidation of business-critical enterprise applications.

© 2012 Brocade Communications Systems, Inc.     Page 12 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Demand for our Brocade VDX product family continues to be robust with more than 800 customers to date and an annualized run rate exceeding $50 million in revenue exiting FY12. During the fourth quarter we announced significant Ethernet fabric installations in several key customer segments, including data center hosting, large enterprises, and research institutions.

Specifically, we announced that PeakColo, a cloud-focused Infrastructure-as-a-Service provider, is leveraging Brocade VCS fabric technology through Brocade VDX 6720 switches to reduce the complexity of managing a dense cloud computing environment and to create new revenue opportunities.

We also announced that VINCI PLC, a leading U.K. construction and facilities company selected a fabric-based, unified campus networking solution from Brocade that includes deployments of Brocade VDX 6730 switches for its data center LAN and SAN needs as well as Brocade ICX switches for campus LAN.

Finally, in Q4 we announced that The King Abdulaziz City for Science and Technology based in Saudi Arabia is delivering a state-of-the-art network infrastructure including an Ethernet fabric in its data center built on Brocade VDX 6720 switches and Brocade VCS fabric technology. This network is also comprised of high-performance campus networking and load balancing solutions at each of its 16 buildings.

© 2012 Brocade Communications Systems, Inc.     Page 13 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Total fourth quarter IP Networking revenues were up 4% sequentially, driven in part by strong demand from our Federal and Service Provider customers. Our Federal performance benefited from both our refreshed campus portfolio and our sales efforts to expand our presence in this important customer segment. Service Provider revenues also experienced good growth in the quarter, as our innovative product portfolio supporting high-performance cloud computing and SDN is resonating well with customers in this market.

In total, Brocade has a strong product portfolio for Ethernet switching and IP routing that positions us well in FY13 for these target customer segments.

© 2012 Brocade Communications Systems, Inc.     Page 14 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

As we look to the future of networking, we see SDN as a disruptive force reflecting the need for networks to be much more flexible and elastic. We believe the network of tomorrow will be open, not closed. It will include software and hardware components from multiple suppliers working together. Most importantly, we believe this transition presents significant new business opportunities for Brocade in working with service providers and enterprises to deliver services faster, and to provide new value-added services for their customers.

Brocade intends to lead in this category to complement its Ethernet fabric and routing solutions. We have outlined a comprehensive SDN strategy that includes a four-pronged approach: innovation through internal R&D, strategic industry partnerships, advanced technology acquisition, and talent recruitment and development of industry leaders. I'll cover specifics of these four areas in the next two slides.

First, in the area of R&D and innovation, we believe that Ethernet fabrics are an ideal foundation for SDN deployments because of their flexible architecture and advanced automation features. Brocade has also delivered several key innovations for network virtualization, a critical component of SDN. This includes the industry's first OpenFlow-enabled 100 GbE technology for the Brocade MLXe router. In addition, Brocade introduced the first true OpenFlow “hybrid mode” technology, which allows customers to supplement their existing IP routing and forwarding policies with OpenFlow-based policies. We have also added the ability to merge physical and virtual networks by offering VXLAN gateway/termination functions on the Brocade ADX Series application delivery switches, as announced at VMworld this year.

In the area of strategic partnerships, we have announced joint efforts with industry leaders and innovators such as VMware (Nicira), BigSwitch, and NEC in the area of network virtualization and OpenFlow. We have also actively participated in defining cloud/SDN management and orchestration standards. This includes our support for the OpenStack protocol that leverages the OpenStack Quantum “plug in” on our Ethernet fabrics. We are also building OpenStack-enabled solutions for private clouds by collaborating with Piston Cloud. This partnership will help ensure that customers can orchestrate and manage Brocade VCS fabric-based network infrastructure using Piston Enterprise OpenStack software.

© 2012 Brocade Communications Systems, Inc.     Page 15 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

In the area of M&A, earlier this month we announced our acquisition of Vyatta, the developer of a next-generation, on-demand network operating system that delivers software-based routing, firewall, and VPN functionality for physical, virtual, and cloud networking environments. Vyatta pioneered and created the industry's first and only platform-independent network operating system.

The acquisition of Vyatta adds a significant software arsenal and substantial industry expertise to Brocade's SDN portfolio and is highly synergistic to our own internal development efforts. Further, we believe that this acquisition will open up new market opportunities in key customer solutions, including data center virtualization, enterprise virtual private cloud, managed services, and integrated mobile appliances.

Finally, our SDN strategy includes the recruitment and development of industry visionaries. As such, we announced the appointment of David Meyer as Service Provider business chief technology officer and chief scientist. With more than 30 years of networking experience, David is a foremost authority on SDN, Internet routing, and OpenFlow technologies. He will play an integral role in the shaping of Brocade's cloud networking, advanced routing, and application delivery strategy.

We were also pleased to report the Open Networking Foundation's (ONF) appointment of Curt Beckmann, Brocade principal architect, as the chair of the ONF's newly-formed Forwarding Abstractions Working Group, which will define the standard on how SDN and OpenFlow should be implemented in networking products. Curt's appointment reinforces Brocade's leadership in SDN and underscores the joint commitment among Brocade, the ONF, and its member companies to deliver open, standards-based implementations of SDN and OpenFlow.

© 2012 Brocade Communications Systems, Inc.     Page 16 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

In closing, through strong execution across our organization in FY12, the company launched world-class products throughout our portfolio and continued to drive technology innovation in strategically important areas such as Fibre Channel SANs, Ethernet fabrics, IP routing, campus LANs, and SDN. These products have placed us in a strong competitive position and we are achieving significant customer traction. As a result of this strong product portfolio and execution, we generated record revenue, expanded non-GAAP gross and operating margins, and drove record profitability and cash flow during the year. This has enabled us to eliminate our term debt as well as to continue a significant stock buyback program, meaningfully increasing shareholder value. Most importantly, we have in place a solid strategy and a highly focused team to continue to drive strong results in FY13 and beyond.

© 2012 Brocade Communications Systems, Inc.     Page 17 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Prepared comments provided by Dan Fairfax, CFO

© 2012 Brocade Communications Systems, Inc.     Page 18 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

In Q412 Brocade generated record revenue of $578M, an increase of 5% from Q411 and up 4% Qtr./Qtr. Total Company revenue for FY12 was $2,238M, also a record, up 4% from FY11. As we look at our business by product segment, Q4 SAN product revenue grew 12% Yr./Yr. driven by higher director and switch revenue, including the ramp of our 16 Gbps Fibre Channel portfolio. SAN product revenue was up 5% Qtr./Qtr. in a seasonally strong quarter and represented approximately 59% of total revenue, up slightly from 58% in Q3 and higher than the 55% reported in Q411. For the year, SAN product revenue was $1,356M, up 10% from FY11.

Revenue from our IP Networking products was up 4% Qtr./Qtr. and down 4% Yr./Yr. The year-over-year decline was driven by lower router revenue, partially offset by higher revenue from Ethernet switch products. IP Networking product revenue represented 26% of total revenue in Q4, unchanged from Q3 and down from 29% in Q411. For the year, IP Networking product revenue was $535M, down 3% from FY11 due to lower router sales.

Q4 Global Services revenue was $87M, down 1% Qtr./Qtr. and down 3% Yr./Yr. Our Global Services revenue represented approximately 15% of total Q4 revenue, down slightly from Q3 and Q411. Excluding the impact of the sale of our SBS consulting business at the end of FY11, our Global Services revenue increased nearly 3% Yr./Yr. For the year, Global Services revenue was $347M.

Non-GAAP gross margin was 64.8% in Q4, up 190basis points from Q411 and up 110 basis points compared with Q3, due to a more favorable product mix and higher volumes. Non-GAAP operating margin was 22.5% in Q4, up 150 basis points from Q411 and up 300 basis points sequentially.

Q4 diluted GAAP EPS was $0.11 and non-GAAP diluted EPS was $0.17 in the quarter. The effective GAAP tax rate was 25.1% and the effective non-GAAP tax rate was 32.4% in Q4. The full year GAAP net income and non-GAAP net income were both records for the company, resulting in diluted GAAP EPS of $0.41 and diluted non-GAAP EPS of $0.66 for 2012.

During Q4, we generated a record $210M in operating cash flow and paid the remaining $30M balance of our term loan. Weighted average diluted shares outstanding were 474M in Q4, slightly higher than the 470M shares reported for Q3, and reflect 11.2M shares repurchased ($60M) during the quarter.

© 2012 Brocade Communications Systems, Inc.     Page 19 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Turning to our total SAN business, including hardware and SAN-based support and services, Q4 revenue was $394.3M, up 9% Yr./Yr. and 4% sequentially. For the full year, SAN business revenue was a record $1,578.3M, up 7% from the prior year.

A number of factors, including server virtualization, deployment of cloud computing, and storage product transitions at our OEMs, contributed to the increased demand for Fibre Channel SAN products. Further, sales growth of our SAN products continues to benefit from the expansion of our 16 Gbps Fibre Channel product portfolio. In Q4 our 16 Gbps products represented nearly 35% of director and switch revenue. SAN product revenue was $338.8M in the quarter, up 12% Yr./Yr and 5% sequentially. Q4 director revenue was up 13% Yr./Yr. and 7% sequentially with approximately 50% of the director revenue coming from our 16 Gbps products. Switch revenue was up 16% Yr./Yr. and 8% Qtr./Qtr.

Our Server product group, including embedded switches and server adapter products (HBAs and mezzanine cards), posted revenue of $45.5M, down 4% Yr./Yr. and 8% sequentially. Embedded switch revenue was down 4% Yr./Yr., while our server adapter product revenue was basically flat from the prior year.

Q4 SAN-based support and services revenue was $55.4M, down slightly Qtr./Qtr. and down 5% Yr./Yr., driven primarily by the sale of our SBS services subsidiary in Q411.

© 2012 Brocade Communications Systems, Inc.     Page 20 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Moving on to our total IP Networking business, including hardware and support, Q4 revenue was $184.1M, down 3% Yr./Yr. and up 4% sequentially. IP Networking business revenue was $659.5M in FY12, down slightly compared with FY11.

Over time, as more of our IP Networking products are being sold through our two-tier distribution channel, it has become increasingly difficult to consistently identify the customer split of our end users. Because of this, we will be providing more qualitative commentary about changes to our mix of customer revenue in the future and we will begin reporting IP revenue by product category: Ethernet switch, routers, and all other (which will include our converged adapters as well as our ADX Series application delivery controllers). This change will also make our reporting more consistent with other networking companies and we believe will help investors better understand our performance.

As we look at the product categories for IP Networking in the quarter, Ethernet switch products generated $87.7M in revenue, up 5% Yr./Yr. and 1% Qtr./Qtr. We continued to see good progress with our award-winning Ethernet fabric-enabled products in Q4 with revenue growth of more than 125% Yr./Yr. During Q4, we generated revenue from our recently launched Brocade VDX 8770 and Brocade ICX 6650 switches.

IP routing revenue of $53.2M was down 10% Yr./Yr. and up 9% Qtr./Qtr. The year-over-year decline in routing revenue was due to delays of large router projects from customers in FY12 following a strong FY11, and higher discounting on some of the larger FY12 router transactions. Other revenue of $11.5M was down year-over-year on lower Brocade ADX sales. Support and services revenue was $31.8M in the quarter, up 2% Yr./Yr. and down slightly sequentially.

From an estimated customer split standpoint, Federal business revenue of $44.9M and Service Provider business revenue of $55.9M were both up sequentially, while Enterprise business revenue of $83.3M was lower in Q4. From a geographic viewpoint, APAC and Japan were up sequentially, while Americas and EMEA were lower.

© 2012 Brocade Communications Systems, Inc.     Page 21 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

For the full fiscal year, EMC, HP, and IBM were each 10% customers and contributed 47% of revenue compared with 43% of revenue in FY11. HDS was a 10% customer in Q2 and Q3, but was not a 10% customer for the full year.

In the fourth quarter, EMC, HP, and IBM each contributed at least 10% of the total company revenue. Our 10% customers collectively contributed 46% of revenue in Q4, down from 55% in Q3 when HDS was also a 10% customer, and up from 41% in Q411. Other OEMs as a group, represented 19% of revenue in Q4, up from 12% in Q3 when HDS was a 10% customer, and down from 21% in Q411. Channel and direct routes to market contributed 35% of revenue in Q4, an increase from 33% in Q3 and down from 38% in Q411.

The mix of business based on ship-to location was 63% domestic and 37% international in the quarter, slightly higher domestic split compared with 62% in Q411. For FY12, 63% of the business was domestic, up compared with 61% in FY11 driven by 8% growth in the Americas while the international geographies were down 1% year-over-year. Since some of our OEMs take delivery of our products domestically and then ship internationally to their end-users, the percentage of international revenue based on end-user location would be higher.

© 2012 Brocade Communications Systems, Inc.     Page 22 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Q4 non-GAAP company gross margin of 64.8% was above the high end of our guidance range for the quarter due in part to higher revenue and more favorable product mix than expected. Gross margin improved 190 basis points year-over-year and 110 basis points Qtr./Qtr. driven primarily by higher volumes and improved product gross margins.

Q4 product non-GAAP gross margin was 66.6%, above the high end of our 63% to 66% target model, and up from 65.5% in Q3 primarily due to a favorable product mix and higher volumes. Q4 SAN non-GAAP gross margin was in the mid-70's, up slightly compared with Q3 and Q411 driven by higher volumes. Q4 IP Networking non-GAAP gross margin was nearly 50%, the highest since Q311 and higher compared to the previous quarter due to a more favorable product mix.

Global Services non-GAAP gross margin was 54.9% in Q4, up slightly quarter-over-quarter due to lower spending, and above our target model of 51% to 54% for the year.

© 2012 Brocade Communications Systems, Inc.     Page 23 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Q4 non-GAAP gross margin was 64.8%, above the high end of our target model range of 61% to 63% for the year. During FY12, we exceeded the target model for non-GAAP gross margin each quarter resulting in full year non-GAAP gross margin of 64.5%, up 200 basis points Yr./Yr. The year-over-year improvement was due to higher product and services gross margins as well as increased volumes.

On a non-GAAP basis, total operating expenses were 42.3% of revenues in Q4, lower compared with 44.2% reported in Q3 on higher revenue and slightly lower operating expenses. Ending headcount was 4,536 in Q4, slightly lower than the prior quarter and the prior year. For FY12, non-GAAP operating expenses were 44.0% of revenue, at the low end of the target model range of 44% to 46% for the year.

Non-GAAP operating margin was 22.5% in Q4, an increase of 300 basis points compared with Q3 and the highest operating margin since Q110. The FY12 non-GAAP operating margin of 20.5% was 250 basis points above the high end of the target model range of 16% to 18%, as a result of higher gross margins as well as good expense management throughout the year.

© 2012 Brocade Communications Systems, Inc.     Page 24 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Cash generated from operations was a record $210M in Q4, up 2% Yr./Yr. and up 86% sequentially. We continued to see favorable shipment linearity in the quarter, which resulted in DSOs of 37 days, the fourth quarter in a row of DSOs fewer than 40 days. Total capital expenditures in the quarter were $17M.

Cash, equivalents, and short-term investments were $713M, up $132M from Q3 and up $298M from Q411. With the $30M principal reduction of our term debt in Q4, we have now paid off the term debt two years earlier than the contractual time frame and one year earlier than planned. We also are net-cash positive as we exit Q412. As I mentioned earlier, we repurchased $60M of common stock during Q4. Exiting the quarter, we had $548M remaining in the Board authorized share repurchase program.

Adjusted EBITDA in the quarter was $153M, up 11% compared with Q411 and up 17% Qtr/Qtr. The Senior Secured Leverage Ratio was 1.11x and the Fixed Charge Coverage Ratio was 5.48x. With the retirement of the term debt this quarter we will not be reporting these ratios on a regular basis going forward.

© 2012 Brocade Communications Systems, Inc.     Page 25 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Looking at our cash flow this year, we generated record operating cash flow of $591M. The 32% increase in operating cash flow from the prior year was driven by higher revenues, expanding operating margins, and improvements in working capital.

With the strong cash flow in FY12, we paid off the remaining $190M of term debt and used $130M of our cash to repurchase more than 24M shares during the year. Share repurchases this year more than offset the impact from stock awards. We also increased our cash balance by nearly $300M, or more than 70% year-over-year.

Over the past two years, operating cash flow has nearly doubled as we controlled spending while leveraging investments we made beginning in 2010. Our top priorities for cash going forward are to maintain a prudent balance sheet in the face of continued macro-economic uncertainty, repurchase stock opportunistically to offset the equity incentives given to employees, and explore small acquisition opportunities.

© 2012 Brocade Communications Systems, Inc.     Page 26 of 33

Brocade Q4 FY 2012 Earnings    11/19/2012

Looking forward to Q113, we considered a number of factors, including the following, in setting our outlook:

• The current macro environment and economy continue to show uncertainty, especially in Europe.

• We continue to see encouraging demand trends for our SAN products and expect Q1 SAN revenue to grow sequentially by 3% to 6%.

• We expect our Q1 IP Networking revenue to be lower Qtr./Qtr. as Federal revenue will be down, typical for our January quarter.

• We expect non-GAAP operating expenses to be approximately $250M in Q1, which includes the additional expenses of Vyatta.

• At the end of Q4, OEM inventory was slightly higher than one and one-half weeks based on SAN business revenue, unchanged from the prior quarter. We expect OEMs to hold between one week and two weeks of inventory going forward. OEM inventory levels fluctuate for a number of reasons including seasonality and large end-user order patterns at the OEMs.

• From a tax rate perspective, we assume a structural non-GAAP rate of 29% to 31% for FY13. This estimated range excludes any benefit from a Federal R&D tax credit which has not been reinstated by Congress. Discrete events can impact our tax rate from time to time. With the passage of Proposition 39, the "Single Sales Factor" tax initiative in California earlier this month, we anticipate taking a one-time, non-cash charge in Q1 of up to $78M to reduce our California deferred tax assets. This will impact our GAAP earnings in Q1, but our non-GAAP tax rate should still be 29% to 31% for the quarter. Our California state cash tax will not be affected by the change in law.

• Our guidance reflects the share repurchases already completed in Q1.

• Cash from operations will be lower Qtr./Qtr. due to seasonal payments of annual sales commissions, incentive compensation earned in FY12, as well as the semi-annual interest payments on the bonds that are made in Q1.

• Finally, based on our Q1 outlook, we expect to manage the business to the target model given at our Analyst day in September 2012.

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Prepared comments provided by Rob Eggers, Investor Relations

That concludes Brocade’s prepared comments. At 2:30 p.m. Pacific Time on November 19, Brocade will host a webcast conference call at www.brcd.com.

Thank you for your interest in Brocade.

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Brocade Q4 FY 2012 Earnings    11/19/2012

Additional Financial Information:

	Q4 11		Q3 12		Q4 12
GAAP gross margin	59.5	%	61.3	%	62.4	%
Non-GAAP gross margin	62.9	%	63.7	%	64.8	%
GAAP product gross margin	61.1	%	62.8	%	64.0	%
Non-GAAP product gross margin	64.7	%	65.5	%	66.6	%
GAAP services gross margin	51.1	%	53.2	%	52.9	%
Non-GAAP services gross margin	53.4	%	54.5	%	54.9	%
GAAP operating margin	9.9	%	12.6	%	14.9	%
Non-GAAP operating margin	21.0	%	19.5	%	22.5	%

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