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): August 13, 2013

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 August 13, 2013, Brocade Communications Systems, Inc. (the “Company”) issued a press release regarding financial results for the third quarter ended July 27, 2013. 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 fourth 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 August 13, 2013, regarding financial results of Brocade Communications Systems, Inc. for the third quarter ended July 27, 2013.

99.2 Slides with accompanying prepared remarks of Brocade Communications Systems, Inc., dated August 13, 2013, regarding financial results of the third quarter ended July 27, 2013 and forward-looking statements, including statements relating to the Company’s estimated financial results of the fourth 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:	August 13, 2013	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 Fiscal Q3 2013 Results

SAN JOSE, Calif., August 13, 2013 — Brocade^® (NASDAQ: BRCD) today reported financial results for its third fiscal quarter ended July 27, 2013. Brocade reported third quarter revenue of $536.6 million, down 3% year-over-year and down slightly quarter-over-quarter. The company reported GAAP diluted earnings per share (EPS) of $0.26, which includes the A10 Networks litigation settlement, up from $0.09 per diluted share in Q3 2012. Non-GAAP diluted EPS was $0.19, up from $0.14 per diluted share in Q3 2012.

“In Q3, Brocade exceeded our guidance for revenue, non-GAAP operating margin, non-GAAP EPS, and cash flow,” said Lloyd Carney, CEO of Brocade. “The storage market is recovering more quickly than we had anticipated entering our third quarter and, coupled with continued strong adoption of Gen 5 Fibre Channel, contributed to good Storage Area Networking (SAN) revenue results. In IP Networking, our Federal sales were disappointing while Brocade VDX^TM switch revenue showed continued strong growth in Q3, underscoring our leadership in Ethernet fabrics. We are making great progress toward our spending-reduction goal, and are already seeing the benefits in our financial results and cash flow.”

Summary of Q3 2013 results:

• SAN business revenue, including products and services, was $369.2 million, down 2% year-over-year and 1% sequentially. In a continuing soft storage market that began in Q2 2013, end-user demand showed improvement in the third fiscal quarter. The quarter-over-quarter SAN revenue performance was better than expected. Gen 5 (16 Gbps) Fibre Channel products represented approximately 64% of director and switch revenue in the quarter, higher than the 29% reported in Q3 2012 and 52% in Q2 2013.

• IP Networking business revenue, including products and services, was $167.3 million, down 6% year-over-year and up 2% quarter-over-quarter. The year-over-year decline was due to lower sales into the U.S. federal government as some expected orders moved out of the third fiscal quarter in a challenging budget environment. Estimated Federal revenue was $19.9 million in the quarter, down 42% year-over-year and 5% quarter-over-quarter. Non-Federal IP Networking revenue, including data center, enterprise and service provider customers, was $147.4 million in the third quarter, up 3% year-over-year and 3% quarter-over-quarter.

• GAAP gross margin was 63.0% and non-GAAP gross margin was 65.6% in Q3 2013, compared with 61.3% and 63.7% respectively, in Q3 2012. The year-over-year improvement in gross margin was due in part to a more favorable product mix within the IP Networking segment and lower spending. Gross margin improved quarter-over-quarter, primarily due to lower spending.

• GAAP operating margin was 13.9% and non-GAAP operating margin was 21.6% in Q3 2013, compared with 12.6% and 19.5% respectively, in Q3 2012. The year-over-year improvement in operating margin was due to the higher gross margin noted above and lower operating expenses as the Company made progress on reducing spending in non-strategic areas. Non-GAAP operating expenses of $235.8 million were down 4% year-over-year and 5% quarter-over-quarter. Using Q1 2013 as a baseline, the Company has now reduced quarterly spending by more than $15 million, or more than $60 million on an annualized basis, and is on track to realize $100 million of annualized savings by February 2014. Operating margin also increased quarter-over-quarter due to higher gross margin and lower operating expenses.

Page 1 of 12

• Operating cash flow was $102.2 million in Q3 2013, down 10% year-over-year and 15% quarter-over-quarter in a seasonally softer quarter for cash generation. The lower operating cash flow year-over-year and quarter-over-quarter, respectively, was due to the payment of employee incentive compensation earned through the first half of fiscal 2013 in Q3 2013, while no payment was made in Q3 2012 or Q2 2013.

• During Q3 2013, the Company recognized a gain of $76.8 million in Other Income related to the litigation settlement with A10 Networks, which increased GAAP EPS by $0.13 in the quarter. The settlement includes a $5.0 million cash payment received during Q3 2013, $70.0 million in notes receivable that are payable on or before January 2014, and the value of licensing rights granted to Brocade.

• GAAP diluted EPS was $0.26 in Q3 2013, up 179% year-over-year, and non-GAAP diluted EPS of $0.19 was up 32% year-over-year. The company recorded a tax benefit of approximately $0.02 per share resulting from the final resolution of various tax audits and assessments during the quarter.

• Average diluted shares outstanding for Q3 2013 were 461.3 million shares, down 2% year-over-year and 1% quarter-over-quarter. The company repurchased 17.9 million shares for $101.2 million at an average price of $5.64 during Q3 2013. Subsequent to the end of Q3 2013, the company has repurchased an additional 7.8 million shares for $52.6 million and has approximately $308 million remaining in the Board-authorized share repurchase program as of August 12, 2013.

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

Other Q3 2013 product, customer and partner announcements are available at http://newsroom.brocade.com/.

Brocade (www.brocade.com)

130 Holger Way, San Jose, CA. 95134

T. 408.333.8000 F. 408.333.8101

Financial Highlights and Additional Financial Information

	Q3 2013			Q2 2013			Q3 2012
Revenue	$	537	M	$	539	M	$	555	M
GAAP net income	$	119	M		$47	M	$	43	M
Non-GAAP net income	$	87	M	$	78	M	$	67	M
GAAP EPS — diluted	$	0.26		$	0.10		$	0.09
Non-GAAP EPS — diluted	$	0.19		$	0.17		$	0.14
GAAP gross margin	63.0		%	62.0		%	61.3		%
Non-GAAP gross margin	65.6		%	65.1		%	63.7		%
GAAP operating income	$	74	M	$	57	M	$	70	M
Non-GAAP operating income	$	116	M	$	103	M	$	108	M
GAAP operating margin	13.9		%	10.6		%	12.6		%
Non-GAAP operating margin	21.6		%	19.0		%	19.5		%
Adjusted EBITDA (1)	$	213	M	$	120	M	$	131	M
Effective GAAP tax provision (benefit) rate	16.3		%	(0.4		)%	25.7		%
Effective Non-GAAP tax provision rate	18.2		%	15.9		%	30.1		%
Cash provided by operations	$	102	M	$	120	M	$	113	M
Storage Area Networking (SAN) port shipments	1.0		M	1.0		M	1.1		M

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

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

Page 2 of 12

Financial Highlights and Additional Financial Information (Continued)

	Q3 2013		Q2 2013		Q3 2012
As a % of total revenues:
OEM revenues	66	%	66	%	67	%
Channel/Direct revenues	34	%	34	%	33	%
10% or greater customer revenues	47	%	45	%	55	%
Domestic revenues	61	%	58	%	64	%
International revenues	39	%	42	%	36	%
SAN product revenues	59	%	59	%	58	%
IP Networking product revenues	25	%	25	%	26	%
Global Services revenue	16	%	16	%	16	%
SAN business revenues (2)	69	%	69	%	68	%
IP Networking business revenues (2)	31	%	31	%	32	%
Estimates as a % of IP Networking business revenues:
Enterprise, excluding Federal	55	%	49	%	52	%
Federal	12	%	13	%	19	%
Service Provider	33	%	38	%	29	%

	Q3 2013			Q2 2013			Q3 2012
Cash, cash equivalents and short-term investments	$	790	M	$	764	M	$	581	M
Deferred revenues	$	300	M	$	302	M	$	280	M
Capital expenditures	$	10	M	$	13	M	$	18	M
Total debt, net of discount	$	599	M	$	599	M	$	630	M
Days sales outstanding	37 days			40 days			38 days
Employees at end of period	4,565			4,648			4,597

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

Page 3 of 12

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, but are not limited to: (i) legal provision or recovery associated with certain pre-acquisition litigation, (ii) call premium cost and original issue discount and debt issuance costs of debt related to lenders that did not participate in refinancing, (iii) settlement gain associated with certain pre-acquisition related litigation and (iv) specific non-cash and non-recurring tax benefits or detriments.

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 also 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 12

Cautionary Statement

This press release contains statements that are forward-looking in nature, including statements regarding Brocade’s strategy, business prospects, organizational and business alignment, profitability, expense management, cash flow, and market conditions. 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 data center, federal government and service provider sectors, 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 “Item 1A. Risk Factors” in Brocade's Quarterly Report on Form 10-Q for the fiscal quarter ended April 27, 2013 and in Brocade’s Annual Report on Form 10-K for the fiscal year ended October 27, 2012. 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) networking solutions help the world’s leading organizations transition smoothly to a world where applications and information reside anywhere. (www.brocade.com)

ADX, AnyIO, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, ICX, MLX, MyBrocade, OpenScript, VCS, VDX, and Vyatta are registered trademarks, and HyperEdge, The Effortless Network, and The On-Demand Data Center 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.

© 2013 Brocade Communications Systems, Inc. All Rights Reserved.

Page 5 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended						Nine Months Ended
	July 27, 2013			July 28, 2012			July 27, 2013			July 28, 2012
	(In thousands, except per share amounts)
Net revenues
Product	$	447,993		$	467,281		$	1,401,986		$	1,399,687
Service	88,558			88,051			262,078			259,726
Total net revenues	536,551			555,332			1,664,064			1,659,413
Cost of revenues
Product	160,441			173,637			499,415			513,221
Service	37,908			41,217			118,410			123,863
Total cost of revenues	198,349			214,854			617,825			637,084
Gross margin	338,202			340,478			1,046,239			1,022,329
Operating expenses:
Research and development	92,969			90,530			289,088			272,780
Sales and marketing	139,220			146,378			433,547			457,921
General and administrative	18,526			18,612			57,640			55,752
Amortization of intangible assets	13,124			14,737			41,131			44,467
Total operating expenses	263,839			270,257			821,406			830,920
Income from operations	74,363			70,221			224,833			191,409
Interest expense	(9,247		)	(12,029		)	(46,047		)	(37,804		)
Interest and other income (loss), net	76,684			103			76,781			(1,345		)
Income before income tax	141,800			58,295			255,567			152,260
Income tax expense	23,104			14,995			111,177			11,080
Net income	$	118,696		$	43,300		$	144,390		$	141,180
Net income per share — basic	$	0.26		$	0.09		$	0.32		$	0.31
Net income per share — diluted	$	0.26		$	0.09		$	0.31		$	0.30
Shares used in per share calculation — basic	449,446			457,147			452,474			455,727
Shares used in per share calculation — diluted	461,344			469,571			464,861			471,719

Page 6 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended						Nine Months Ended
	July 27, 2013			July 28, 2012			July 27, 2013			July 28, 2012
	(In thousands)
Net income	$	118,696		$	43,300		$	144,390		$	141,180
Other comprehensive loss, net of tax:
Unrealized gains (losses) on cash flow hedges:
Change in unrealized gains and losses	(1,000		)	(3,518		)	(2,998		)	(7,800		)
Net (gains) losses reclassified into earnings	(10		)	2,099			(214		)	5,022
Net unrealized gains (losses) on cash flow hedges	(1,010		)	(1,419		)	(3,212		)	(2,778		)
Foreign currency translation adjustments	(1,470		)	(2,951		)	(3,612		)	(4,427		)
Total other comprehensive loss	$	(2,480	)	$	(4,370	)	(6,824		)	(7,205		)
Total comprehensive income	$	116,216		$	38,930		$	137,566		$	133,975

Page 7 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 27, 2013			October 27, 2012
	(In thousands, except par value)
Assets
Current assets:
Cash and cash equivalents	$	790,093		$	713,226
Accounts receivable, net of allowances for doubtful accounts of $638 and $833 at July 27, 2013, and October 27, 2012, respectively	218,462			233,139
Inventories	50,601			68,179
Deferred tax assets	44,405			91,539
Prepaid expenses and other current assets	121,026			49,496
Total current assets	1,224,587			1,155,579
Property and equipment, net	487,944			518,940
Goodwill	1,646,639			1,624,089
Intangible assets, net	63,032			109,265
Non-current deferred tax assets	68,138			136,175
Other assets	31,391			37,213
Total assets	$	3,521,731		$	3,581,261
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	95,936		$	117,350
Accrued employee compensation	116,089			182,597
Deferred revenue	224,628			216,283
Current portion of long-term debt	2,367			1,977
Other accrued liabilities	63,618			92,261
Total current liabilities	502,638			610,468
Long-term debt, net of current portion	596,524			599,203
Non-current deferred revenue	75,845			76,907
Non-current income tax liability	36,495			55,387
Other non-current liabilities	3,000			3,476
Total liabilities	1,214,502			1,345,441
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: 447,344 and 456,913 shares at July 27, 2013, and October 27, 2012, respectively	447			457
Additional paid-in capital	1,943,043			2,009,190
Accumulated other comprehensive loss	(16,688		)	(9,864		)
Retained earnings	380,427			236,037
Total stockholders’ equity	2,307,229			2,235,820
Total liabilities and stockholders’ equity	$	3,521,731		$	3,581,261

Page 8 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	July 27, 2013			July 28, 2012
	(In thousands)
Cash flows from operating activities:
Net income	$	118,696		$	43,300
Adjustments to reconcile net income to net cash provided by operating activities:
Excess tax benefits from stock-based compensation	(1,469		)	(6		)
Depreciation and amortization	45,647			47,159
Loss on disposal of property and equipment	984			108
Amortization of debt issuance costs and original issue discount	272			1,141
Net gains on investments	—			(11		)
Provision for doubtful accounts receivable and sales allowances	2,337			3,669
Non-cash compensation expense	18,769			13,069
Changes in assets and liabilities:
Accounts receivable	18,511			(16,986		)
Inventories	2,310			5,280
Prepaid expenses and other assets	(67,303		)	2,375
Deferred tax assets	22			(11		)
Accounts payable	(7,052		)	15,165
Accrued employee compensation	(28,294		)	(3,089		)
Deferred revenue	(1,974		)	1,720
Other accrued liabilities	699			176
Net cash provided by operating activities	102,155			113,059
Cash flows from investing activities:
Purchases of property and equipment	(10,381		)	(17,736		)
Net cash used in investing activities	(10,381		)	(17,736		)
Cash flows from financing activities:
Payment of principal related to the term loan	—			(40,000		)
Payment of debt issuance costs related to senior unsecured notes	(443		)	—
Payment of principal related to capital leases	(561		)	(469		)
Common stock repurchases	(101,181		)	(45,087		)
Proceeds from issuance of common stock	35,959			29,211
Excess tax benefits from stock-based compensation	1,469			6
Net cash used in financing activities	(64,757		)	(56,339		)
Effect of exchange rate fluctuations on cash and cash equivalents	(1,222		)	(2,697		)
Net increase in cash and cash equivalents	25,795			36,287
Cash and cash equivalents, beginning of period	764,298			544,339
Cash and cash equivalents, end of period	$	790,093		$	580,626

Page 9 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	July 27, 2013			July 28, 2012
	(In thousands)
Cash flows from operating activities:
Net income	$	144,390		$	141,180
Adjustments to reconcile net income to net cash provided by operating activities:
Excess tax benefits from stock-based compensation	(6,909		)	(1,338		)
Non-cash tax charges	78,206			—
Depreciation and amortization	139,005			144,683
Loss on disposal of property and equipment	4,030			404
Amortization of debt issuance costs and original issue discount	937			3,767
Original issue discount and debt issuance costs related to lenders that did not participate in refinancing	5,360			—
Net gains on investments	—			(35		)
Provision for doubtful accounts receivable and sales allowances	6,897			9,533
Non-cash compensation expense	57,091			58,746
Changes in assets and liabilities:
Accounts receivable	7,950			8,454
Inventories	18,915			(2,099		)
Prepaid expenses and other assets	(69,017		)	2,675
Deferred tax assets	344			181
Accounts payable	(21,744		)	8,476
Accrued employee compensation	(82,457		)	5,554
Deferred revenue	5,950			9,377
Other accrued liabilities	(7,688		)	(9,180		)
Net cash provided by operating activities	281,260			380,378
Cash flows from investing activities:
Proceeds from sale of subsidiary	—			35
Purchases of property and equipment	(41,949		)	(56,005		)
Net cash paid in connection with acquisition	(44,629		)	—
Net cash used in investing activities	(86,578		)	(55,970		)
Cash flows from financing activities:
Proceeds from senior unsecured notes	296,250			—
Payment of principal related to senior secured notes	(300,000		)	—
Payment of principal related to the term loan	—			(160,000		)
Payment of debt issuance costs related to senior unsecured notes	(992		)	—
Payment of principal related to capital leases	(1,536		)	(1,389		)
Common stock repurchases	(187,360		)	(70,153		)
Proceeds from issuance of common stock	71,858			76,472
Excess tax benefits from stock-based compensation	6,909			1,338
Net cash used in financing activities	(114,871		)	(153,732		)
Effect of exchange rate fluctuations on cash and cash equivalents	(2,944		)	(4,252		)
Net increase in cash and cash equivalents	76,867			166,424
Cash and cash equivalents, beginning of period	713,226			414,202
Cash and cash equivalents, end of period	$	790,093		$	580,626

Page 10 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(Unaudited)

	Three Months Ended
	July 27, 2013			July 28, 2012
	(In thousands, except per share amounts)
Net income on a GAAP basis	$	118,696		$	43,300
Adjustments:
Stock-based compensation expense included in cost of revenues	3,858			3,074
Amortization of intangible assets expense included in cost of revenues	9,650			10,713
Legal recovery associated with certain pre-acquisition litigation	—			(414		)
Total gross margin adjustments	13,508			13,373
Stock-based compensation expense included in research and development	4,020			3,110
Stock-based compensation expense included in sales and marketing	7,164			4,483
Stock-based compensation expense included in general and administrative	3,727			2,402
Amortization of intangible assets expense included in operating expenses	13,124			14,737
Total operating expense adjustments	28,035			24,732
Total operating income adjustments	41,543			38,105
Gain on A10 litigation settlement, net	(76,816		)	—
Income tax effect of non-tax adjustments	3,716			(14,012		)
Non-GAAP net income	$	87,139		$	67,393
Non-GAAP net income per share — basic	$	0.19		$	0.15
Non-GAAP net income per share — diluted	$	0.19		$	0.14
Shares used in non-GAAP per share calculation — basic	449,446			457,147
Shares used in non-GAAP per share calculation — diluted	461,344			469,571

Page 11 of 12

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(Unaudited)

	Nine Months Ended
	July 27, 2013			July 28, 2012
	(In thousands, except per share amounts)
Net income on a GAAP basis	$	144,390		$	141,180
Adjustments:
Stock-based compensation expense included in cost of revenues	11,345			12,045
Amortization of intangible assets expense included in cost of revenues	30,081			35,516
Legal provision (recovery) associated with certain pre-acquisition litigation	3,460			(465		)
Total gross margin adjustments	44,886			47,096
Stock-based compensation expense included in research and development	13,205			13,741
Stock-based compensation expense included in sales and marketing	23,321			24,946
Stock-based compensation expense included in general and administrative	9,220			8,014
Amortization of intangible assets expense included in operating expenses	41,131			44,467
Total operating expense adjustments	86,877			91,168
Total operating income adjustments	131,763			138,264
Call premium cost and original issue discount and debt issuance costs related to lenders that did not participate in refinancing	15,299			—
Gain on A10 litigation settlement, net	(76,816		)	—
Tax provision impact from passage of California Proposition 39 - Single Sales Factor apportionment	78,206			—
Income tax effect of non-tax adjustments	(29,385		)	(47,015		)
Non-GAAP net income	$	263,457		$	232,429
Non-GAAP net income per share — basic	$	0.58		$	0.51
Non-GAAP net income per share — diluted	$	0.57		$	0.49
Shares used in non-GAAP per share calculation — basic	452,474			455,727
Shares used in non-GAAP per share calculation — diluted	464,861			471,719

Page 12 of 12

EX-99.2

Q3 FY 2013 Earnings

Prepared Comments and Slides

August 13, 2013

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 Q3 FY 2013 Earnings    8/13/2013

Prepared comments provided by Rob Eggers, Investor Relations

Thank you for your interest in Brocade's Q3 Fiscal 2013 earnings presentation, which includes prepared remarks, safe harbor, slides, and a press release detailing fiscal third quarter 2013 results. The press release, along with these prepared comments and slides, has been furnished to the SEC on Form 8-K and has been made available on the Brocade Investor Relations website atwww.brcd.com. The press release will be issued subsequently via Marketwired.

© 2013 Brocade Communications Systems, Inc.     Page 2 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

© 2013 Brocade Communications Systems, Inc.     Page 3 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Today’s prepared comments include remarks by Lloyd Carney, Brocade CEO, regarding the company’s quarterly results, its 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 August 13 at www.brcd.comand will be archived on the Brocade Investor Relations website.

© 2013 Brocade Communications Systems, Inc.     Page 4 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Prepared comments provided by Lloyd Carney, CEO

© 2013 Brocade Communications Systems, Inc.     Page 5 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

This was a solid quarter for Brocade. Revenue came in above our guidance range and we exceeded our expectations for non-GAAP operating margin, non-GAAP EPS, and cash flow. Revenue in the third quarter was $537 million, down 3% from Q3 12 and down slightly sequentially.

The storage market is recovering more quickly than we had expected, following a challenging second quarter. This improving storage environment, coupled with continued strong adoption of Gen 5 Fibre Channel, resulted in SAN product revenue in the quarter that surpassed our expectations. The storage market continues to be softer than it was a year ago, but we are receiving positive indications from our partners that end-user demand is improving.

Although IP Networking product revenue was up slightly sequentially, it was short of our expectations for the quarter. Our Federal sales were disappointing, as certain deals did not close as a result of the challenging federal environment. On the positive side, Brocade VDX switch revenue grew nicely in the quarter and we continue to be on track to reach our goal of an annualized run-rate of $100 million revenue in Q4 13. We continue to believe that Ethernet fabrics represent an exciting opportunity for Brocade and a significant differentiator of our product portfolio for data center networking. We have also seen a significant increase in customer wins, network function virtualization evaluations, and trial activities with our software networking solutions.

From an expense management perspective, we are making great progress towards our goal of reducing annual spending by $100 million by February 2014. Our company-wide effort has resulted in annualized savings of more than $60 million since Q1 13. The lower spending and improved operating margin performance contributed to Q3 GAAP EPS of $0.26, up $0.17 Yr./Yr., and non-GAAP EPS of $0.19 in the quarter, up $0.05 Yr./Yr., which exceeded expectations.

In addition, we have recognized a $76.8 million gain during the quarter related to a settlement with A10 Networks of a long-standing lawsuit. This one-time gain has been excluded from our non-GAAP results in the quarter.

Finally, we repurchased more than $100 million in common stock, or approximately 18 million shares, during the third quarter. This was the largest repurchase of stock for Brocade within a single quarter since Q4 11 and demonstrates both strong cash flow and a commitment to returning cash to our shareholders.

© 2013 Brocade Communications Systems, Inc.     Page 6 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Turning to business highlights in storage area networking, SAN product revenue was $314 million in Q3, down 2% Yr./Yr. and down 2% Qtr./Qtr. We are seeing a rebound occurring in the broader storage market and believe that the recovery will strengthen for the remainder of this calendar year. In addition to our better-than-expected SAN revenue, OEM inventory was lower exiting the quarter, which is an indicator of improving end-user demand.

We continue to view the long-term SAN market fundamentals as intact, in spite of a continuing soft storage market in the near term. Storage capacity expansion is a major pain point for IT organizations as they manage the ever-increasing growth of data. In fact, IDC estimates that demand for storage capacity is expected to grow at a CAGR of 38% over the next 5 years. In response to this and other market conditions, we are seeing rapid industry adoption of our Gen 5 (16 Gbps) Fibre Channel, which now represents 64% of total SAN director and switch revenue. Fibre Channel technology offers significant advantages in terms of performance and reliability, particularly with the continuing migration to high-density server virtualization and cloud computing. Our innovative Fibre Channel solutions solidify our substantial lead over competitive offerings in this market. Our development is underway for Gen 6 (32 Gbps+) and customer interest for this technology is high.

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Brocade Q3 FY 2013 Earnings    8/13/2013

IP Networking product revenue was $134 million, down 8% Yr./Yr. and up 1% Qtr./Qtr. A key factor in the lower year-over-year revenue was lower-than-expected Federal sales, which were down approximately $14M Yr./Yr. While we believe that many of the federal deals in our sales funnel have funding, federal agencies have been slower in spending their budgets this year. We anticipate that we will see higher sales in the fourth fiscal quarter, which coincides with the U.S. government fiscal year end. Further, we are expanding our public sector reach by continuing to diversify our sales into a broader set of federal programs in defense, intelligence and civilian agencies. We were pleased to announce that the Brocade MLX and MLXe 100 Gigabit Ethernet networking solutions were approved for the U.S. Department of Defense Unified Communications Product List this past quarter. These are the first 100 Gigabit Ethernet solutions to receive this certification, opening up new opportunities for Brocade in the federal market.

Moving to the data center IP business, Brocade VDX switch revenue showed continued strong growth in Q3, increasing by over 80% year-over-year. With an annualized run-rate of over $80 million revenue in Q3, we are on pace to reach our goal of $100 million run-rate in Q4 13. To date we have shipped more than 400,000 Brocade VDX switch ports to our customers, helping to establish Brocade as a leader in this exciting new market.

Ethernet fabrics provide an ideal network architecture to fully leverage the benefits that software can offer in highly-virtualized and cloud-enabled environments. Brocade continues to be a leader in software-defined networking (SDN) with significant investment in our technology and product portfolio. As proof of the benefits of our advanced software capabilities, during the third quarter the Brocade vRouter was launched in the Rackspace Open Cloud, enabling Rackspace customers to deploy easy-to-configure advanced virtual networking and virtual firewall capabilities. The Brocade vRouter is also available in the Amazon Web Services (AWS) GovCloud. These new AWS cloud services are designed to help U.S. government agencies and contractors move more sensitive workloads to the cloud.

© 2013 Brocade Communications Systems, Inc.     Page 8 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

As we have stated, our strategy is to first focus on data center networking. Within this space, we are prioritizing markets in which we can be most successful and where we can hold a leading market share position of meaningful size. Specifically, we will continue to invest in maintaining our considerable installed base in SAN, and growing our footprint in data center IP and emerging technologies, such as software networking. We will also make targeted investments in campus networking where price-performance and ease of use are the value drivers for this market. We believe that this strategy will best leverage our core competencies, product strengths, and competitive positioning. According to IDC, Brocade holds the number two position in worldwide market share in data center networking. Our investments in technologies, such as Ethernet fabrics, 40/100 GbE, SAN innovations, and SDN, will provide additional opportunities for market share gains.

Beyond market share, Brocade is also tied for the number two position in Infonetics' recent Enterprise Networking and Communication vendor scorecard. This ranking takes into consideration a diverse set of factors, such as market share, innovation, financial stability, product reliability, and service and support. Our positioning speaks to the overall strength of our business on many of the key fronts that will ensure our growth and success in the years to come.

On the operational front, we are focusing on improving our profitability and maximizing our return on investment. We will continue our on-going efforts to reduce our annualized spending by $100 million. To date, we have cut expenses across our organization in non-strategic areas and have put additional processes in place to ensure we are spending at the right level to support the company's strategic initiatives. For example, we have eliminated some broader marketing programs and events, aligned the product roadmap to our focused strategy, reduced capital expenditures, and have placed increased scrutiny on headcount replacements. As such, we achieved nearly $15 million savings in operating expenses in Q3 and have reduced by more than $2 million in spending above the line that has benefited both our product and services gross margins. Using Q1 13 as a baseline, this has resulted in annualized savings of more than $60 million and contributed to year-over-year growth in EPS in Q3.

We remain committed to a regular share-repurchase program with the goal of reducing the number of shares outstanding. During the quarter we repurchased more than $100 million of common stock bringing our total to $187 million of stock through Q3 of this fiscal year. This demonstrates both strong cash flow and a commitment to returning cash to our shareholders. At the end of Q3 13 we had $361 million remaining of the Board-authorized share-repurchase program.

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Brocade Q3 FY 2013 Earnings    8/13/2013

In closing, Q3 was a solid quarter in which we exceeded our guidance for revenue, profitability, and cash flow. The storage market is showing encouraging signs of recovery and our progress in Ethernet fabrics is on track with our goal. We are making great strides on our spending-reduction initiatives and I am encouraged by both the amount of savings as well as how quickly we have been able to realize these benefits in our financial results.

At our Analyst and Technology Day event on September 25, we will provide additional details about our progress and take you through an updated financial model, as well as our market opportunity assessment. I encourage you to attend in person or participate virtually, and look forward to speaking with you soon.

© 2013 Brocade Communications Systems, Inc.     Page 10 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Prepared comments provided by Dan Fairfax, CFO

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Brocade Q3 FY 2013 Earnings    8/13/2013

In Q3 13 Brocade reported revenue of $537 million, a decrease of 3% Yr./Yr. and slightly down sequentially. As we look at our business by reporting segment, Q3 SAN product revenue was $314 million, a decrease of 2% Yr./Yr. primarily due to order-rate softness in the storage array market that impacted some of our OEM partners in first half calendar 2013. SAN product revenue was down 2% sequentially, which is typical in our seasonally softer third quarter. SAN product revenue represented 59% of total revenue, unchanged quarter-over-quarter and slightly higher than 58% reported in Q3 12.

Revenue from our IP Networking products was $134 million, down 8% Yr./Yr. and up 1% sequentially. The year-over-year decline was due to lower Federal revenue. At the beginning of the quarter, we had anticipated more federal deals to close and ship, as is typical in our fiscal third quarter. But within the current challenging federal environment and sequester, orders for some funded projects were delayed and did not close during the quarter. Non-Federal revenue was 3% higher both year-over-year and quarter-over-quarter. IP Networking product revenue represented 25% of total revenue in Q3, flat from Q2 13 and down slightly from 26% in Q3 12.

Q3 Global Services revenue was $89 million, up slightly year-over-year and sequentially. Our Global Services revenue represented 16% of total Q3 revenue, relatively unchanged quarter-over-quarter and year-over-year.

Non-GAAP gross margin was 65.6% in Q3, up 190 basis points from Q3 12 and up 50 basis points from Q2 13. The year-over-year improvement in gross margin was due primarily to a more favorable mix within our Ethernet product sales, a higher percentage of SAN products in our overall revenue, and lower spending. Non-GAAP operating margin was 21.6% in Q3, up 210 basis points from Q3 12 and up 260 basis points Qtr./Qtr., due to improved gross margins and lower spending.

GAAP diluted EPS was $0.26 and non-GAAP diluted EPS was $0.19 in the quarter, up from $0.09 and $0.14 in Q3 12 respectively. During the quarter, we agreed to a litigation settlement with A10 Networks that resulted in a one-time gain of $76.8 million. We have excluded that gain from our non-GAAP results. We also saw a benefit in our Q3 tax rate from the favorable results from closing various tax audits and assessments, which increased our EPS by approximately $0.02 in the quarter. The resulting effective GAAP tax rate was 16.3% and the effective non-GAAP tax rate was 18.2% in Q3.

We generated $102 million in operating cash flow during Q3, down 10% Yr./Yr. and down 15% Qtr./Qtr. Weighted average diluted shares outstanding in Q3 was 461 million and the company repurchased 18 million shares for $101 million at an average price of $5.64 during the quarter.

© 2013 Brocade Communications Systems, Inc.     Page 12 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Turning to our total SAN business, including hardware and SAN-based support and services, Q3 revenue was $369.2 million, down 2% from Q3 12 and 1% sequentially.

During the quarter, our OEM partners saw some improvement in their storage business, driven by strengthening end-user demand that occurred earlier than we had anticipated. The sequential decline in SAN revenue for Q3 is in line with typical seasonality for the quarter. We saw the expansion of our Gen 5 (16 Gbps) Fibre Channel product revenue as more of our customers continued to upgrade their networking infrastructure. In Q3, our Gen 5 products represented 64% of director and switch revenue compared with 52% in Q2 13 and 29% in Q3 12. The sequential increase in Gen 5 revenue contribution was due in part to the ramp of the new Brocade 6520 96-port switch.

SAN product revenue was $314.1 million in the quarter, down 2% Yr./Yr. and 2% sequentially. In looking at the SAN product families, director revenue was down 8% Yr./Yr. and 11% sequentially, while switch revenue was up 7% Yr./Yr. and 5% Qtr./Qtr. Our Server product group, including embedded switches and server adapter products, posted revenue of $42.6 million, down 14% Yr./Yr. and up 9% Qtr./Qtr. The Server product group is correlated to bladed server chassis sold through our OEM partners.

SAN-based support and services revenue was $55.2 million in the quarter, down slightly Yr./Yr. and relatively flat quarter-over-quarter.

© 2013 Brocade Communications Systems, Inc.     Page 13 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Moving on to our total IP Networking business, including hardware and support, Q3 revenue was $167.3 million, down 6% Yr./Yr. and up 2% sequentially.

Q3 IP Networking product revenue was $133.9 million, down 8% Yr./Yr. and up 1% Qtr./Qtr. As we look at the product splits for IP Networking in the quarter, we saw good quarter-over-quarter performance for our Ethernet switch products. Ethernet switch products, which include products for the data center and campus LAN environments, generated $78.3 million in revenue, up 20% Qtr./Qtr. This was primarily due to higher Brocade VDX switch revenue as well as increased sales of Brocade ICX switches into non-Federal accounts in the Americas. Ethernet switch revenue was down 10% Yr./Yr., as a result of lower Federal revenue. Estimated Federal revenue was $19.9 million in the quarter, down 42% Yr./Yr. and down 5% Qtr./Qtr.

Routing revenue of $42.3 million was down 13% Yr./Yr. and 26% sequentially. The decrease in routing revenue was driven by lower orders from service providers as well as enterprise customers. Other IP Networking revenue of $13.4 million was up 29% Yr./Yr. and 30% Qtr./Qtr. on increased Brocade ADX application delivery switches and converged network adapter sales. IP Networking-based support and services revenue was $33.4 million in the quarter, up 5% Yr./Yr. and 5% sequentially.

As we mentioned last quarter, our IP Networking strategy is to be more focused on opportunities in the data center and public sector, including federal. In the future, we will provide some color of this view of the business using our sales funnel to give insight into how we are performing in these key customers and verticals. Historically, our data center customers, including all verticals, have represented approximately 40-50% of our IP Networking business in our sales funnel. The rest of the customer split would include service provider transport customers as well as enterprise campus accounts. As we look at the business from a vertical perspective, the public sector, which includes federal, other government entities including state and local, as well as education, has represented approximately 25-35% of our business. Other verticals, such as services, communications, banking, health care, and others would represent the rest of the business from this perspective. We will spend some time at our upcoming Analyst Day talking about the opportunities for these customers and verticals, our recent performance, and plans for the next two to three years.

From a geographic viewpoint for IP Networking, the U.S. (excluding federal), APAC and Japan regions each grew at least 7% Yr./Yr., while the EMEA region was down 6%. On a sequential basis, the U.S. region was up 20% and the EMEA, APAC, and Japan regions were each lower.

© 2013 Brocade Communications Systems, Inc.     Page 14 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

In Q3, three of our customers (EMC, HP, and IBM) each contributed at least 10% of the total company revenue. Our 10% customers collectively contributed 47% of revenue in Q3, up slightly from 45% in Q2 13 and down from 55% in Q3 12 when HDS was also a 10% customer. All other OEMs represented 19% of revenue in Q3, down from 21% from Q2 13 and up from 12% in Q3 12 when HDS was a 10% customer. Channel and direct routes to market contributed 34% of revenue in Q3, flat from Q2 13 and up from 33% in Q3 12.

The mix of business based on ship-to location was 61% domestic and 39% international in the quarter, a lower domestic split compared with 64% in Q3 12, reflecting lower IP Networking revenue sold into the U.S. federal market during Q3 13. Overall revenues in the Americas (including Canada/South America) as well as Japan were lower year-over-year, while EMEA and APAC were both higher. 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.

© 2013 Brocade Communications Systems, Inc.     Page 15 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Q3 non-GAAP company gross margin of 65.6% exceeded our guidance range for the quarter due in part to higher revenues, a more favorable product mix to SAN, and lower spending.

Q3 non-GAAP product gross margin was 66.7%, near the high-end our two-year target model range of 65% to 67% and higher than the 65.5% reported in Q3 12, due to higher IP Networking margins and a favorable overall revenue mix. Product gross margins were essentially flat quarter-over-quarter. Q3 non-GAAP SAN product gross margin was in the mid-70's, slightly higher compared with Q2 2013 and slightly lower compared with Q3 12 on lower revenues. Q3 non-GAAP IP Networking product gross margin was over 50%, down slightly quarter-over-quarter and up more than 400 basis points compared with Q3 12 due to a favorable product mix and lower COGS overhead spending.

Non-GAAP Global Services gross margin was a record 59.6% in Q3, up 360 basis points quarter-over-quarter and up 510 basis points year-over-year based on lower spending and higher revenue.

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Brocade Q3 FY 2013 Earnings    8/13/2013

Q3 non-GAAP gross margin was 65.6%, above our two-year target model range of 63% to 64%, driven by a favorable product mix and lower spending.

On a non-GAAP basis, total operating expenses were $235.8 million, or 43.9% of revenues in Q3, slightly above our two-year target model range of 42.0% to 43.5%. Total operating expenses were lower on an absolute dollar basis compared with Q2 13 as we are beginning to realize some of the savings identified as part of our spending reduction plan. As we measure our performance to our goal of removing $100 million annualized spending, we have now realized annualized spending reductions of more than $60 million using Q1 13 as a baseline. We are pleased with our performance to date and will provide more detail about our plans at the September Analyst Day. Ending headcount was 4,565 in Q3, down 83 compared with the prior quarter.

Non-GAAP operating margin was 21.6% in Q3, an increase of 210 basis points compared with Q3 2012 and 260 basis points higher compared with Q2 13. The Q3 non-GAAP operating margin was near the high-end of the two-year target model range of 19.5% to 22.0%, as a result of improved margins and spending actions.

© 2013 Brocade Communications Systems, Inc.     Page 17 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Operating cash flow was $102 million in Q3, down 10% Yr./Yr. and down 15% sequentially in a typically softer quarter for cash flow due to payments of employee earned incentives and interest on our debt. We saw improved shipment linearity in the quarter, which resulted in DSOs of 37 days, better than our long-term DSO model of 40 to 45 days, and slightly better than 38 days in Q3 12. Total capital expenditures in the quarter were $10 million, below our historical capital spending range due to the timing of some projects that moved outside of the quarter as well as increased focus on capital outlays.

Our cash, equivalents, and short-term investments were $790 million, up $26 million from Q2 2013 and up $209 million from Q3 12. This is our highest cash position in nearly 5 years.

As I mentioned earlier, we repurchased 17.9 million shares of common stock during Q3 and had $361 million remaining in the Board authorized share repurchase program exiting the quarter. Subsequent to the end of Q3 2013, the company has repurchased an additional $7.8 million shares for $52.6 million.

Finally, we recognized a one-time gain of $76.8 million during the quarter, which has been excluded from our non-GAAP results, related to the settlement with A10 Networks of a long-standing lawsuit. We received an initial $5.0 million payment from A10 Networks in Q3 and a $70.0 million note that is due to Brocade prior to the end of January 2014. The remaining $1.8 million gain is related to the value of certain licensing rights granted to Brocade as part of the settlement.

© 2013 Brocade Communications Systems, Inc.     Page 18 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Looking forward to Q4 13, we considered a number of factors, including the following, in setting our outlook:

• The current macro environment and economy continue to show uncertainty in the near-term, specifically in the storage market, the U.S. federal government, and in Europe.

• For Q4, we expect SAN revenue to be up 1% to 4% quarter-over-quarter as the current demand for storage is improving but remains softer than last year.

• We expect our Q4 IP Networking revenue to be up 5% to 12% quarter-over-quarter driven by improved U.S. federal order flow as well as continued growth of IP Networking revenue from new products, including Ethernet fabrics.

• We expect non-GAAP operating expenses to be flat to slightly higher quarter-over-quarter, reflecting higher seasonal spending in our Q4, partially offset by some additional savings from our spending initiatives.

• At the end of Q3, OEM inventory was just over 1.5 weeks of supply based on SAN business revenue, lower than OEM inventory levels exiting Q2 13 and Q3 12. While we expect OEM inventory levels to be between one to two weeks exiting Q4, inventory levels may fluctuate due to both seasonality and large end-user order patterns at the OEMs.

• From a tax rate perspective, we assume a structural non-GAAP tax rate of 26% to 28% for Q4. Discrete events can impact our tax rate from time to time.

• Our guidance reflects the share repurchases already completed in Q4.

• Cash from operations will be up sequentially due to the timing of interest payments on our notes and employee bonuses that are paid in Q3 and Q1.

• Based on the company's performance in Q3 and the outlook for Q4, we expect full-year FY13 gross margin to be more than 65%, above the two-year target model range of 63% to 64%, and FY13 operating margin to be at the high end of the two-year target model range of 19.5% to 22.0%.

© 2013 Brocade Communications Systems, Inc.     Page 19 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

Prepared comments provided by Rob Eggers, Investor Relations

That concludes Brocade’s prepared comments. At 2:30 p.m. Pacific Time on August 13, Brocade will host a webcast conference call at www.brcd.com.

Thank you for your interest in Brocade.

© 2013 Brocade Communications Systems, Inc.     Page 20 of 24

Brocade Q3 FY 2013 Earnings    8/13/2013

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Brocade Q3 FY 2013 Earnings    8/13/2013

Additional Financial Information:

	Q3 12		Q2 13		Q3 13
GAAP gross margin	61.3	%	62.0	%	63.0	%
Non-GAAP gross margin	63.7	%	65.1	%	65.6	%
GAAP product gross margin	62.8	%	63.6	%	64.2	%
Non-GAAP product gross margin	65.5	%	66.9	%	66.7	%
GAAP services gross margin	53.2	%	54.0	%	57.2	%
Non-GAAP services gross margin	54.5	%	56.0	%	59.6	%
GAAP operating margin	12.6	%	10.6	%	13.9	%
Non-GAAP operating margin	19.5	%	19.0	%	21.6	%

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Brocade Q3 FY 2013 Earnings    8/13/2013

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Brocade Q3 FY 2013 Earnings    8/13/2013

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