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): May 19, 2011

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 May 19, 2011, Brocade Communications Systems, Inc. (the “Company”) issued a press release regarding financial results for the second quarter ended April 30, 2011. 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 third quarter of fiscal year 2011. 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 May 19, 2011, regarding financial results of Brocade Communications Systems, Inc. for the second quarter ended April 30, 2011.
99.2	Slides with accompanying prepared remarks of Brocade Communications Systems, Inc., dated May 19, 2011, regarding financial results of the second quarter ended April 30, 2011 and forward-looking statements, including statements relating to the Company’s estimated financial results of the third quarter of fiscal year 2011.

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.
Dated: May 19, 2011	By:	/s/ Richard Deranleau
		Richard Deranleau 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 Q2 FY2011 Results

Revenues grow nearly 10% year-over-year driven by Storage and Enterprise/

Service Provider Ethernet businesses

SAN JOSE, Calif., May 19, 2011 — Brocade^® (NASDAQ: BRCD) today reported financial results for its second fiscal quarter ended April 30, 2011. Brocade recorded quarterly revenues of $550 million, representing an increase of 9.8% year-over-year and resulting in diluted earnings per share (EPS) of $0.06 on a GAAP basis and $0.13 on a non-GAAP basis.

In the quarter, Brocade saw product revenue growth of 17% year-over-year in its storage networking business driven by strong revenues across the product portfolio that included over 20% growth for both backbone/director and Server product revenues. Brocade also saw its Enterprise and Service Provider Ethernet businesses revenue grow 24% year-over-year led by its EMEA, Americas and Asia Pacific geographies. Overall Ethernet business revenue was up 1% year-over-year as lower Federal Ethernet revenue offset the growth in Enterprise and Service Provider businesses. Brocade exceeded its expectations for non-GAAP EPS and non-GAAP operating margin in the quarter.

“Brocade executed well in Q2 delivering nearly 10 percent growth year-over-year in revenue driven by strong performances in our Ethernet business among enterprises and service providers and stronger-than-expected performance in our SAN business,” said Michael Klayko, CEO of Brocade. “We are excited about our opportunities going forward as there is no doubt that the networking industry is in the beginning stages of a new innovation cycle driven by the IT imperatives of virtualization and cloud computing. We believe that Brocade has established a clear leadership position by out-innovating the rest of the industry and delivering purpose-built solutions to customers well-ahead of the competition.”

In addition to this press release, Brocade management has posted prepared comments and slides on its Fiscal Q2 results and Fiscal Q3 outlook at www.brcd.com. Brocade will host a live webcast conference call to answer questions from investors and analysts today at 2:30 p.m. Pacific time. Questions may also be submitted in advance to ir@brocade.com.

Other Q2 product, customer and partner announcements are available at http://newsroom.brocade.com/.

Financial Highlights and Additional Financial Information

	Q2 2011			Q1 2011			Q2 2010
Revenue	$	550M		$	546M		$	501M
GAAP net income	$	28M		$	27M		$	22M
Non-GAAP net income	$	63M		$	61M		$	63M
GAAP EPS – diluted	$	0.06		$	0.06		$	0.05
Non-GAAP EPS – diluted	$	0.13		$	0.12		$	0.13
Non-GAAP gross margin (1)		63.5	%		62.0	%		62.7	%
Non-GAAP operating margin		18.2	%		17.1	%		20.5	%
Adjusted EBITDA (2)	$	123M		$	114M		$	116M
Cash provided by operations	$	114M		$	118M		$	68M

• Q2 effective GAAP tax rate was (2.3)% and non-GAAP effective tax rate was 20.7%.

• Q2 total Storage Area Networking (SAN) port shipments were approximately 1.2 million.

Brocade

130 Holger Way, San Jose, CA. 95134

T. 408.333.8000 F. 408.333.8101

www.brocade.com

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.

	Q2 2011			Q1 2011			Q2 2010
As a % of total revenues
OEM revenues		64	%		66	%		63	%
Channel/Direct revenues		36	%		34	%		37	%
10% or greater customer revenues		53	%		47	%		44	%
Domestic revenues		62	%		59	%		65	%
International revenues		38	%		41	%		35	%
Data Storage Revenues		60	%		61	%		56	%
Ethernet Products Revenues		23	%		23	%		26	%
Global Services Revenue		17	%		16	%		18	%
Ethernet Business Revenues (3)		29	%		28	%		31	%
As a % of Ethernet Business Revenues (3):
Enterprise, excluding Federal		61	%		61	%		47	%
Federal		12	%		13	%		28	%
Service Provider		27	%		26	%		25	%
	Q2 2011			Q1 2011			Q2 2010
Cash, cash equivalents and investments	$	466M		$	416M		$	290M
Deferred revenues	$	272M		$	265M		$	247M
Capital expenditures	$	27M		$	23M		$	62M
Total debt, net of discount	$	836M		$	892M		$	981M
Days sales outstanding		50 days			46 days			54 days
Employees at end of period		4,762			4,721			4,245

1) Q2 2010 is as adjusted due to the reclassification of system engineer costs from cost of revenues to sales and marketing expenses.

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

3) Ethernet Business revenues include product and support revenues.

Page 2 of 10

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) legal fees associated with certain pre-acquisition litigation, (ii) legal fees associated with indemnification obligations and other related costs, net, (iii) acquisition and integration costs, (iv) loss on sale of property, and (v) interest expense related to adoption of new standard relating to convertible debt instruments.

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 3 of 10

Cautionary Statement

This press release contains statements that are forward-looking in nature, including statements regarding the networking industry, Brocade’s Ethernet fabric solutions and competitor offerings, and business in the Federal sector. 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, Brocade’s ability to capitalize on new Brocade sales and marketing initiatives, including expanded go-to-market activities in our Ethernet business, customer adoption of Brocade’s Ethernet fabric solutions, changes in IT spending levels in one or more of our target markets including the government sector, 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 January 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 GS: BRCD) develops extraordinary networking solutions that enable today’s complex, data-intensive businesses to optimize information connectivity and maximize the business value of their data. For more information, visit www.brocade.com.

# # #

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) Brocade, the B-wing symbol, BigIron, DCFM, DCX, Fabric OS, FastIron, IronView, NetIron, SAN Health, ServerIron, TurboIron, and Wingspan are registered trademarks, and Brocade Assurance, Brocade NET Health, Brocade One, Extraordinary Networks, MyBrocade, VCS, and VDX are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned are or may be trademarks or service marks of their respective owners.

^© 2011 Brocade Communications Systems, Inc. All Rights Reserved.

Page 4 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	Apr 30, 2011			May 1, 2010			Apr 30, 2011			May 1, 2010
Net revenues
Product	$	459,028		$	409,885		$	916,318		$	858,970
Service		90,869			91,098			179,596			181,505
Total net revenues		549,897			500,983			1,095,914			1,040,475
Cost of revenues (1)
Product (1)		171,075			161,042			348,691			326,819
Service (1)		48,680			44,451			95,937			89,028
Total cost of revenues		219,755			205,493			444,628			415,847
Gross margin		330,142			295,490			651,286			624,628
Operating expenses:
Research and development		91,941			89,351			183,349			179,433
Sales and marketing (1)		156,979			132,019			309,646			254,079
General and administrative		18,469			15,941			36,559			32,180
Legal fees associated with indemnification obligations and other related costs, net		—			277			124			578
Amortization of intangible assets		15,023			16,190			31,213			33,242
Acquisition and integration costs		—			—			—			204
Total operating expenses		282,412			253,778			560,891			499,716
Income from operations		47,730			41,712			90,395			124,912
Interest and other income (loss), net		27			(903	)		376			(831	)
Interest expense		(20,745	)		(19,522	)		(42,291	)		(41,595	)
Gain (loss) on sale of investments and property, net		(11	)		253			(17	)		(8,575	)
Income before income tax provision (benefit)		27,001			21,540			48,463			73,911
Income tax provision (benefit)		(612	)		(840	)		(6,329	)		436
Net income	$	27,613		$	22,380		$	54,792		$	73,475
Net income per share – basic	$	0.06		$	0.05		$	0.12		$	0.17
Net income per share – diluted	$	0.06		$	0.05		$	0.11		$	0.15
Shares used in per share calculation – basic		473,209			442,816			469,158			440,948
Shares used in per share calculation – diluted		501,511			479,166			496,338			481,714

(1) The three and six months ended May 1, 2010 is as adjusted due to the reclassification of system engineer costs from cost of revenues to sales and marketing expenses.

Page 5 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

GAAP CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

	Apr 30, 2011			Oct 30, 2010
Assets
Current assets:
Cash and cash equivalents	$	463,562		$	333,984
Short-term investments		2,027			1,998
Total cash, cash equivalents and short-term investments		465,589			335,982
Accounts receivable, net		302,784			329,564
Inventories		93,163			76,808
Deferred tax assets		67,145			67,080
Prepaid expenses and other current assets		68,390			65,017
Total current assets		997,071			874,451
Property and equipment, net		539,300			539,117
Goodwill		1,638,931			1,644,950
Intangible assets, net		283,854			344,000
Non-current deferred tax assets		222,994			203,454
Other assets		47,787			48,203
Total assets	$	3,729,937		$	3,654,175
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	138,530		$	147,130
Accrued employee compensation		117,480			91,688
Deferred revenue		205,187			185,623
Current liabilities associated with facilities lease losses		4,566			5,992
Current portion of capital lease obligations		1,813			1,761
Current portion of term loan		34,542			28,779
Other accrued liabilities		101,357			108,310
Total current liabilities		603,475			569,283
Non-current capital lease obligations, net of current portion		5,862			6,782
Term loan, net of current portion		197,767			297,118
Senior Secured Notes		595,584			595,373
Non-current liabilities associated with facilities lease losses		2,557			3,984
Non-current deferred revenue		66,848			65,242
Non-current income tax liability		64,377			61,421
Other non-current liabilities		9,165			8,671
Total liabilities		1,545,635			1,607,874
Stockholders’ equity:
Common stock		477			461
Additional paid-in capital		2,130,417			2,047,563
Accumulated other comprehensive loss		(2,488	)		(2,827	)
Retained earnings		55,896			1,104
Total stockholders’ equity		2,184,302			2,046,301
Total liabilities and stockholders’ equity	$	3,729,937		$	3,654,175

Page 6 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended Apr 30, 2011 and May 1, 2010

(in thousands)

(unaudited)

	Three Months Ended
	Apr 30, 2011			May 1, 2010
Cash flows from operating activities:
Net income	$	27,613		$	22,380
Adjustments to reconcile net income to net cash provided by operating activities:
Excess tax benefits or detriments from stock-based compensation		877			(63	)
Depreciation and amortization		51,712			46,600
Loss on disposal of property and equipment		1,734			645
Amortization of debt issuance costs and original issue discount		4,466			5,121
Net (gains) losses on investments		6			(385	)
Provision for doubtful accounts receivable and sales allowances		2,643			2,823
Non-cash compensation expense		22,530			30,146
Capitalization of interest cost		—			(3,720	)
Changes in assets and liabilities:
Restricted Cash		—			12,500
Accounts receivable		(27,576	)		(23,691	)
Inventories		(7,345	)		(4,067	)
Prepaid expenses and other assets		(3,889	)		5,576
Deferred tax assets		(24	)		—
Accounts payable		8,329			(28,909	)
Accrued employee compensation		29,130			18,675
Deferred revenue		6,552			10,339
Other accrued liabilities		(1,899	)		(23,235	)
Liabilities associated with facilities lease losses		(1,154	)		(3,013	)
Net cash provided by operating activities		113,705			67,722
Cash flows from investing activities:
Purchases of short-term investments		(13	)		—
Proceeds from maturities and sale of short-term investments		1			1,787
Purchases of property and equipment		(27,180	)		(62,070	)
Net cash used in investing activities		(27,192	)		(60,283	)
Cash flows from financing activities:
Payment of debt issuance fees related to the Senior Secured Notes		—			(3,002	)
Payment of principal related to the revolving credit facility		—			(14,050	)
Payment of principal related to convertible subordinate debt		—			(172,500	)
Payment of principal related to the term loan		(58,892	)		(15,699	)
Common stock repurchases		—			(20,003	)
Payment of principal related to capital leases		(437	)		—
Proceeds from issuance of common stock, net		21,911			9,788
Excess tax benefits or detriments from stock-based compensation		(877	)		63
Net cash used in financing activities		(38,295	)		(215,403	)
Effect of exchange rate fluctuations on cash and cash equivalents		1,161			(1,386	)
Net increase (decrease) in cash and cash equivalents		49,379			(209,350	)
Cash and cash equivalents, beginning of period		414,183			496,583
Cash and cash equivalents, end of period	$	463,562		$	287,233

Page 7 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended Apr 30, 2011 and May 1, 2010

(in thousands)

(unaudited)

	Six Months Ended
	Apr 30, 2011			May 1, 2010
Cash flows from operating activities:
Net income	$	54,792		$	73,475
Adjustments to reconcile net income to net cash provided by operating activities:
Excess tax benefits or detriments from stock-based compensation		877			(63	)
Depreciation and amortization		104,234			97,613
Loss on disposal of property and equipment		1,910			9,459
Amortization of debt issuance costs and original issue discount		9,195			11,784
Net gains on investments		(10	)		(217	)
Provision for doubtful accounts receivable and sales allowances		5,071			5,867
Non-cash compensation expense		42,436			51,668
Capitalization of interest cost		—			(7,035	)
Changes in assets and liabilities:
Restricted Cash		—			12,502
Accounts receivable		22,236			(5,588	)
Inventories		(17,664	)		(4,668	)
Prepaid expenses and other assets		(6,907	)		10,557
Deferred tax assets		(30	)		—
Accounts payable		(10,253	)		(68,644	)
Accrued employee compensation		19,714			(48,480	)
Deferred revenue		21,169			11,274
Other accrued liabilities		(11,975	)		(7,199	)
Liabilities associated with facilities lease losses		(2,854	)		(5,476	)
Net cash provided by operating activities		231,941			136,829
Cash flows from investing activities:
Purchases of short-term investments		(38	)		(24	)
Proceeds from maturities and sale of short-term investments		20			1,788
Proceeds from sale of property		—			30,185
Purchases of property and equipment		(50,575	)		(109,387	)
Net cash used in investing activities		(50,593	)		(77,438	)
Cash flows from financing activities:
Payment of debt issuance fees related to the Senior Secured Notes		—			(3,002	)
Payment of principal related to the revolving credit facility		—			(14,050	)
Payment of principal related to convertible subordinate debt		—			(172,500	)
Payment of principal related to the term loan		(98,640	)		(522,244	)
Common stock repurchases		—			(20,003	)
Payment of principal related to capital leases		(868	)		—
Proceeds from Senior Secured Notes		—			587,968
Proceeds from issuance of common stock, net		47,388			39,819
Excess tax benefits or detriments from stock-based compensation		(877	)		63
Net cash used in financing activities		(52,997	)		(103,949	)
Effect of exchange rate fluctuations on cash and cash equivalents		1,227			(2,402	)
Net increase (decrease) in cash and cash equivalents		129,578			(46,960	)
Cash and cash equivalents, beginning of period		333,984			334,193
Cash and cash equivalents, end of period	$	463,562		$	287,233

Page 8 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended
	Apr 30, 2011			May 1, 2010
Net income on a GAAP basis	$	27,613		$	22,380
Adjustments:
Stock-based compensation expense included in cost of revenues		4,167			4,136
Amortization of intangible assets expense included in cost of revenues		14,466			14,467
Legal fees associated with certain pre-acquisition litigation		216			17
Total gross margin adjustments		18,849			18,620
Legal fees associated with indemnification obligations and other related costs, net		—			277
Stock-based compensation expense included in research and development		5,111			8,933
Stock-based compensation expense included in sales and marketing		9,619			13,144
Stock-based compensation expense included in general and administrative		3,633			3,933
Amortization of intangible assets expense included in operating expenses		15,023			16,190
Total operating expense adjustments		33,386			42,477
Total operating income adjustments		52,235			61,097
Loss on sale of property		—			(47	)
Interest expense related to adoption of new standards relating to convertible debt instruments		—			348
Income tax effect of adjustments		(17,037	)		(21,044	)
Non-GAAP net income	$	62,811		$	62,734
Non-GAAP net income per share – basic	$	0.13		$	0.14
Non-GAAP net income per share – diluted	$	0.13		$	0.13
Shares used in non-GAAP per share calculation – basic		473,209			442,816
Shares used in non-GAAP per share calculation – diluted		501,511			481,290

See explanation of non-GAAP information included herein.

Page 9 of 10

BROCADE COMMUNICATIONS SYSTEMS, INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(in thousands, except per share amounts)

(unaudited)

	Six Months Ended
	Apr 30, 2011			May 1, 2010
Net income on a GAAP basis	$	54,792		$	73,475
Adjustments:
Stock-based compensation expense included in cost of revenues		7,027			7,049
Amortization of intangible assets expense included in cost of revenues		28,932			32,316
Legal fees associated with certain pre-acquisition litigation		293			317
Total gross margin adjustments		36,252			39,682
Legal fees associated with indemnification obligations and other related costs, net		124			578
Stock-based compensation expense included in research and development		9,394			15,116
Stock-based compensation expense included in sales and marketing		18,411			22,843
Stock-based compensation expense included in general and administrative		7,604			6,660
Amortization of intangible assets expense included in operating expenses		31,213			33,243
Acquisition and integration costs		—			204
Total operating expense adjustments		66,746			78,644
Total operating income adjustments		102,998			118,326
Loss on sale of property		—			8,737
Interest expense related to adoption of new standards relating to convertible debt instruments		—			2,490
Income tax effect of adjustments		(34,245	)		(46,284	)
Non-GAAP net income	$	123,545		$	156,744
Non-GAAP net income per share – basic	$	0.26		$	0.36
Non-GAAP net income per share – diluted	$	0.25		$	0.32
Shares used in non-GAAP per share calculation – basic		469,158			440,948
Shares used in non-GAAP per share calculation – diluted		496,338			488,818

See explanation of non-GAAP information included herein.

Page 10 of 10

EX-99.2

Brocade Q2 FY 2011 Earnings

Q2

FY

2011

EARNINGS

May 19, 2011

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 1

Exhibit 99.2

Prepared comments provided by Rob Eggers, Investor Relations

Thank you for your interest in Brocade’s Q2 Fiscal 2011 earnings presentation, which includes prepared

remarks, slides, and a press release detailing fiscal second quarter 2011 financial results. The press release

was issued shortly after 1:00 p.m. Pacific time on May 19, 2011,

via Marketwire. The press release, along with

these prepared comments and slides, has been made available on Brocade’s Investor Relations website at

www.brcd.com

and has been furnished to the SEC on Form 8-K.

Brocade Q2 FY 2011 Earnings

Cautionary Statements and Disclosures

This

presentation

includes

forward-looking

statements

regarding

Brocade’s

financial

results,

plans

and

business

outlook

as

well

as

worldwide

SAN,

Ethernet

and

Federal

government

IT

spending,

which

are

only

predictions

and

involve

risks

and

uncertainties

such

that

actual

results

may

vary

significantly.

These

and

other

risks

are

set

forth

in

more

detail

in

our

Form

10-Q

for

the

fiscal

quarter

ended

January

29,

2011

and

our

Form

10-K

for

the

fiscal

year

ended

October

30,

2010.

These

forward-looking

statements

reflect

beliefs,

assumptions,

outlook,

estimates

and

predictions

as

of

today,

and

Brocade

expressly

assumes

no

obligation

to

update

any

such

forward-looking

statements.

In

addition,

this

presentation

includes

various

third-party

estimates

regarding

the

total

available

market

and

other

measures,

which

do

not

necessarily

reflect

the

views

of

Brocade.

Further,

Brocade

does

not

guarantee

the

accuracy

or

reliability

of

any

such

information

or

forecast.

Certain

financial

information

is

presented

on

a

non-GAAP

basis.

The

most

directly

comparable

GAAP

information

and

a

reconciliation

between

the

non-GAAP

and

GAAP

figures

are

provided

in

the

accompanying

press

release,

which

has

been

furnished

to

the

SEC

on

Form

8-K

and

posted

on

Brocade’s

website,

and

is

included

in

the

appendix

to

this

presentation.

Please see risk factors on Forms 10-K and 10-Q filed with the SEC

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 2

Brocade Q2 FY 2011 Earnings

Agenda

Prepared comments followed by live Q&A call

Richard Deranleau

CFO

Mike Klayko

CEO

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 3

Today’s prepared comments include remarks by Mike Klayko, 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 Richard Deranleau, Brocade CFO, who

will provide a financial review.

A live question-and-answer conference call will be webcast beginning at 2:30 p.m. Pacific time on

May 19 at www.brcd.com

and will be archived on the Brocade Investor Relations web site

for

approximately 12 months. Participants are invited to submit questions via e-mail at

ir@brocade.com

up to 60 minutes prior to the conference call and to ask live questions during the

call.

Brocade Q2 FY 2011 Earnings

Fiscal 2011: Q2 Earnings

Mike Klayko, CEO

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 4

Prepared comments provided by Mike Klayko, CEO

Brocade Q2 FY 2011 Earnings

Q2 Executive Summary

Q2 Results

•

$550M revenues, up ~10% Yr./Yr.

•

18.2% non-GAAP operating margin*

•

$0.13 non-GAAP EPS* (diluted)

Business Highlights

•

SAN product revenue grew 17%

Yr./Yr. driven by Director/Server

•

Enterprise/Service Provider Ethernet

businesses revenue grew 24%

Yr./Yr. led by EMEA, Americas, and

APAC

•

Non-GAAP gross margins*

expanded to 63.5%

•

Operating cash flows of $114M,

up 68% Yr./Yr.

* Non-GAAP, please see GAAP reconciliation in appendix

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 5

Brocade reported Q2 revenues of approximately $550M and non-GAAP diluted earnings per share

(EPS) of $.13, which exceeded our prior guidance of $.10 for the

quarter. Our revenues in the

quarter represented almost a 10% increase year-over-year (Yr./Yr.) and a slight increase

sequentially from our strong Q1. Highlights in the quarter included growth in our Enterprise and

Service Provider Ethernet businesses, which grew 24% Yr./Yr. collectively.

Other positive signs in the quarter included an increase in overall non-GAAP gross margins driven

by improved non-GAAP gross margins for both the Ethernet and SAN products, which

were at 51%

and 72% respectively. Richard will provide more details on gross

margins in the CFO section of the

prepared comments. Our Server products business demonstrated continued momentum by

growing nearly 21% Yr./Yr. Adoption of virtualization and migration to cloud computing are

contributing factors to the growth in our adapter and embedded switch business.

On the topics of virtualization and cloud, I would like to reiterate how excited I am about Brocade’s

unique strategy and differentiated offerings to address what we believe is a new innovation cycle

in networking that will last through this decade. We believe that Brocade has established a clear

leadership position by out-innovating the rest of the industry to deliver purpose-built, cloud-

optimized network solutions into the hands of customers beginning last year. Virtualization and

clouds are not merely buzz words; they are the tangible means to

help customers migrate to IT

architectures that enable new levels of business agility and financial efficiency. I’ll cover these

topics in greater detail in the next section.

Brocade Q2 FY 2011 Earnings

Brocade FY 2011 Playbook

1.

Differentiate through Innovation

2.

Grow the Ethernet Business

and Top Line Profitably

3.

Maintain SAN Leadership

4.

Generate More Awareness

5.

Be an Employer of Choice

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 6

Now I will provide an update on the progress we’ve made on our FY 11 Playbook, which outlines

our objectives to:

•Differentiate through Innovation

•Grow the Ethernet Business and Top Line Profitably

•Maintain SAN Leadership

•Generate More Awareness

•Be an Employer of Choice

Brocade Q2 FY 2011 Earnings

1. Differentiate through Innovation

BROCADE TECHNOLOGY DAY SUMMIT 2011

BROCADE TECHNOLOGY DAY SUMMIT 2011

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 7

Perhaps

there

was

no

better

way

to

showcase

our

innovation

progress

and

demonstrate

our

leadership

than

through

our

Technology

Day

Summit,

which

we

hosted

here

at

our

San

Jose

campus

earlier

this

month.

The

theme

for

the

event

was

how

Brocade

is

enabling

IT

transformation through

cloud-

optimized

networks

for

all

cloud

segments—private,

public,

and

hybrid.

Fundamentally,

we

believe

that

the

simplicity,

uptime,

and

capabilities

of

any

network

will

ultimately

define

application

performance

and

user

experience

in

the

cloud.

We

also

believe

that

our

15-year

heritage

in

storage

networking,

our

leadership

in

creating

and

defining

the

Ethernet

fabric

category,

as

well

as

our

laser

focus

on

all

things

networking,

uniquely

position

Brocade

as

the

company

best

capable

of

helping

customers

migrate

smoothly

to

a

world

where

information

and

applications

reside

and

can

be

accessed

anywhere—in

other

words,

the

cloud.

Brocade Q2 FY 2011 Earnings

Brocade Private Cloud Innovations

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 8

As part of the Technology Day Summit, we made several significant announcements for the three

cloud areas. I’ll briefly recap those starting with private cloud innovation, which was highlighted by

Brocade again leading the Fibre Channel industry to the next technology transition by introducing

the industry’s first and complete 16 Gbps Fibre Channel portfolio. This includes new SAN

backbones/switches, enhancements to the unified management platform to address virtualization

and cloud computing needs, and the next generation of server connectivity enabled through a new

product category we’ve defined as Fabric Adapters. In addition, we also outlined a rich roadmap for

our Ethernet fabric offerings that are designed to enhance these

solutions in terms of scale,

distance, performance, and versatility. 

Brocade Q2 FY 2011 Earnings

Brocade Public Cloud Innovations

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 9

In terms of public cloud innovation, we demonstrated how Brocade

is leading the Service Provider

business model transformation through public cloud-optimized offerings by delivering new

hardware and software solutions. Specifically, we announced the general availability of the world’s

most powerful and dense 10 and 100 Gigabit Ethernet blades for Brocade MLX and Brocade MLXe

Series routers at industry-leading price points to enable massive scalability for highly virtualized

public clouds. We also introduced significant software advancements across our router line

designed to enable seamless IPv4–to–IPv6 interoperability and new MPLS capabilities, which are

all critical in helping Service Providers fundamentally change their businesses and make them

more profitable through public clouds.

Brocade Q2 FY 2011 Earnings

Brocade Hybrid Cloud Innovations

•

Ethernet fabrics

•

Fibre Channel

fabrics

•

Multiprotocol

Fabric Adapters

•

High-performance

app delivery

•

Virtual Compute

Blocks

•

Universal Distance

Extension

•

Cloud ID

•

Open management

frameworks

•

Unified education,

support, and

services

AVAILABLE

TODAY

ROADMAP

CloudPlex

™

Architecture Roadmap

Dave Stevens, CTO, at the Brocade Technology Day Summit

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 10

Finally, in the area of hybrid cloud innovation, we outlined a vision for the “Virtual Enterprise”

enabled through the Brocade CloudPlex™

architecture. This open, extensible architectural

framework will help customers build the next generation of distributed and virtualized data centers

in a simple, evolutionary way. We believe that the CloudPlex architecture is unique in that it is both

the foundation for integrated compute blocks and also designed to embrace a customer’s existing

multivendor infrastructure to unify all of the assets into a single compute and storage domain.

As we discussed, Brocade is already delivering on several of the

components of the CloudPlex

architecture with others being completed on our development roadmap.

Brocade Q2 FY 2011 Earnings

2. Grow the Ethernet Business

•

24% Yr./Yr. revenue

growth in

Enterprise/Service

Provider Ethernet

businesses

•

51% Ethernet product

non-GAAP gross margins*

•

Demonstrating progress

toward key business

initiatives

Increasing profitability through key initiatives

* Non-GAAP, please see GAAP reconciliation in appendix

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 11

Drilling down in our Ethernet business further, I am pleased to announce that we grew revenue in

our products and services Yr./Yr. and sequentially, led by the growth in our Enterprise and Service

Provider businesses.

Our Federal Ethernet business did not recover in Q2 as expected due to key deals being deferred

largely because of budgetary delays. However, as we experienced last fiscal year, we expect the

Federal business to rebound in future quarters as these transactions close.

The revenue growth compounded with the improvements in gross margins validate that we’re

making progress on the key business initiatives we outlined in 2010.

Brocade Q2 FY 2011 Earnings

De Persgroep

Deploying Europe’s first Ethernet fabric switching solution

72 Brocade VDX 6720 Ethernet fabric switches

deployed across a fabric-based architecture

created a single logical chassis with a single

distributed control plane across multiple

racks of servers.

•Improved performance and reliability

•Reduced capital and operating costs

•Simplified virtual machine migration

“As

we

look

to

accelerate

our

virtualization

strategy,

Brocade’s

approach

provides

virtual

machines

a

greater

sphere

of

mobility

and

gives

us

a

blueprint

for

future

growth.

”

Wim

Vanhoof,

ICT

Infrastructure

Manager,

De

Persgroep

Brocade VDX 6720–24 Switch

Brocade VDX 6720–60 Switch

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 12

Customer demand drove excellent momentum across our entire Ethernet solutions portfolio. For

example, we recently announced an Ethernet fabric win at De Persgroep, one of Europe’s largest

media companies that delivers news to 9.4 million daily readers and online visitors. De Persgroep

deployed the Brocade VDX 6720 switches to manage and simplify its IT environment that includes

more than 1,000 servers, 3,500 users, and 325 terabytes of data to manage significant data traffic

growth—which has already grown 650% in just the last four years. De Persgroep presented at our

Technology Day Summit and discussed its Ethernet fabric deployment and the reasons for selecting

Brocade. These included the fact that Brocade Ethernet fabrics delivered improved performance and

reliability while reducing management and operating cost—and we were able to deliver this today.   

Brocade Q2 FY 2011 Earnings

Hurricane Electric

Hurricane Electric remains ahead

of the IPv6 curve with Brocade

World’s largest IPv6 Internet backbone future-

readies its business to support massive

bandwidth demands and device growth by

implementing Brocade IPv6 routers and switches.

“With an infrastructure of our magnitude, we absolutely required a

simple, yet powerful and scalable routing infrastructure to support

massive routing table space, IPv6, 10 GbE and a base to support

for 100 GbE in the future. We rely on Brocade to provide us the

right balance of performance, future IPv6 routing table scalability

and total cost of ownership to ensure a solid network

investment.

”

Martin Levy, Director of IPv6 Strategy, Hurricane Electric

Brocade MLXe

with 100 GbE

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 13

Another example is our win at Hurricane Electric, which now operates the largest IPv6 Internet

backbone in the world using Brocade networking technology. As of

January 2011, Hurricane

Electric became the first Internet backbone worldwide to connect

to 1200 IPv6 networks. IPv6 is an

important issue for network administrators as experts warn that IPv4 addressing capacity has

reached its limit, which will eventually require a transition to

the newer technology. However, as we

discussed at our Technology Day Summit, we have outlined a smooth transition strategy that will

ensure years of IPv4–to–Pv6 interoperability enabled through software enhancements to Brocade

IP routers and application delivery switches.

Brocade Q2 FY 2011 Earnings

Partner Traction and Momentum

Avnet CEO Roy Vallee discusses Avnet’s

unique long-term partnership with Brocade.

Avnet CEO Roy Vallee discusses Avnet’s

unique long-term partnership with Brocade.

Robin Johnson, CIO of Dell, discusses the

implementation of Dell PowerConnect

Brocade IP technology that has yielded a

40% OpEx reduction.

Robin Johnson, CIO of Dell, discusses the

implementation of Dell PowerConnect

Brocade IP technology that has yielded a

40% OpEx reduction.

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 14

Partnerships are also critical to the overall success of our Ethernet business and in this area we

had several significant updates in Q2. Most recently, Dell announced the general availability of

several Brocade Ethernet switches—referred to as the Dell PowerConnect B-Series—as part of a

larger networking, server, and storage portfolio update aimed at

data center deployments in

enterprise and small-to-medium customers. And in fact, Dell not only partners with us to

sell these

solutions, they are also a Brocade customer, deploying Brocade solutions in their own IT

environments. In Q2, Brocade also announced a new OEM relationship with LG-Ericsson that will

enable both companies to jointly pursue business opportunities in the high-growth Korean

information and communications technology market. Specifically, LG-Ericsson has launched a

number of Brocade networking solutions under its “iPECS”

brand and made them available in

Korea starting in April.

Turning now to our channel partners, our recent strategic focus has been to provide them the

necessary tools and training to enable them to take full advantage of virtualization and cloud

computing opportunities. Brocade has launched a number of education initiatives and certifications

designed to increase channel partner expertise in data center network and Ethernet fabric

solutions. We are also working with key distributors in this area on joint programs such as the

“Avnet Accelerator,”

a collaborative effort between Brocade and Avnet to enable resellers to design

and implement advanced data center solutions for customers who face mounting challenges

associated with virtualization and application proliferation.

Brocade Q2 FY 2011 Earnings

3. Maintain SAN Leadership

First to market with 16 Gbps Fibre Channel

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 15

Moving onto the SAN business, Q2 was a strong quarter with revenue for products and

support/services

growing

nearly

14%

Yr./Yr.

We

were

particularly

pleased

with

the

broad-based

demand across our OEM and channel partners, which was driven by strength in sales of SAN

backbones/directors as well as Server products. We are also excited about the impact that our

new, cloud-optimized 16 Gbps Fibre Channel portfolio will have in the marketplace as it is ideal

for highly virtualized and cloud environments.

Brocade Q2 FY 2011 Earnings

“Over the years, Brocade networking solutions

have become an integral component in

improving the scalability, efficiency and agility

of our customers’

Hitachi storage

environments for mission-critical data and

applications. We are excited about Brocade’s

next generation Fibre Channel solutions, which

promise to help our customers to more easily

on-board our industry-leading storage solutions

and achieve improved performance,

centralized management and faster

connectivity between

data centers.

”

Sean Moser, Vice President, Storage Software

Product Management, Hitachi Data Systems

OEM Highlights

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 16

In terms of OEM updates, a clear Q2 highlight was the fact that Hitachi Data Systems (HDS),

has

now

joined

EMC,

HP,

and

IBM

as

a

“10%

Customer,”

meaning

that

each

company

accounted for at least 10% of Brocade’s total revenue in the quarter. These partners will be

critical in helping us transition the SAN industry to the next-generation technology—16 Gbps

Fibre Channel. Recent industry research validates that Fibre Channel continues to be the

foundation for virtualized storage and private cloud/VDI implementations, with Forrester

Research documenting that 76% of customers surveyed said they are using Fibre Channel as

the preferred storage networking technology for virtualization, far exceeding other technologies.

Forrester’s data is consistent with similar market research over the last three years from other

firms

including

Gartner,

TheInfoPro,

and

the

Enterprise

Strategy

Group.

With availability of our 16 Gbps Fibre Channel portfolio expected to begin later this calendar

year, Brocade again expects to enjoy a significant time-to-market advantage, which we 

experienced

through

previous

transitions,

namely

from

2

to

4

and

4

to

8

Gbps

Fibre

Channel

technologies.

Brocade Q2 FY 2011 Earnings

4. Generate More Awareness

Brocade launches new global campaign

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 17

In addition to investments in new products, technologies, and more direct engagements with

customers, Brocade continues to invest in raising our company’s global brand awareness. At the

Technology Day Summit, we introduced a new corporate campaign called “The Data Center Is

Here”

with

“Here”

representing

any

place

computing

or

information

storage

exists,

inside

or

outside the data center. “The Data Center Is Here”

also carries another message in that

Brocade is the only company delivering Ethernet fabrics to the market today—it’s here. And we

believe that we are gaining credibility with large customers because of our heritage and first-to-

market advantage in fabrics and the data center solutions.

Brocade Q2 FY 2011 Earnings

APAC Leadership Summit 2011

Executive Roadshow

Momentum and strategic investment in this critical market

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 18

We

are

also

generating

more

awareness

by

meeting

with

customers,

partners,

and

other

key

influencers in key regions. In Q2, Brocade held our APAC Executive Roadshow where our

senior executive team fanned out across eight countries to meet with nearly one thousand

customers and media/analysts. One of our core messages was to reiterate how important Asia

Pacific is to Brocade’s overall business. Reflective of that is the doubling of our headcount in the

region over the last several quarters. During this roadshow, we also launched a broad-reaching

technology/ product evaluation program designed to enable eligible customers to quickly deploy

Ethernet fabrics as the foundation for highly virtualized data centers.

Brocade Q2 FY 2011 Earnings

The eighth annual Best Places

to Work awards recognized

Brocade as a top employer in

the Bay Area

5. Be an Employer of Choice

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 19

Finally, we are also increasing our company profile by continuing to be recognized as a top destination for

talented employees. In Q2 we were recognized by the San Francisco Business Times/Silicon Valley Business

Journal as one of the “Best Companies to Work for in the Bay Area.”

This is the third consecutive year we

received this honor, and it follows the recognition earlier this

year by Fortune Magazine as Brocade being one of

the “100 Best Companies to Work For”

in the United States.

Brocade Q2 FY 2011 Earnings

Q2 2011 Summary

•

24% growth Yr./Yr. for

Enterprise/Service Provider

Ethernet businesses revenue

•

17% growth Yr./Yr. for Storage

product revenue

•

Continue to be an award-winning

employer of choice

•

Clear leadership and first-to-market

advantage in a new cycle of

networking innovation

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 20

Brocade executed well in Q2 delivering solid results in our overall Ethernet business and stronger-

than-expected performance in our SAN business. The improvements in Ethernet and SAN product non-

GAAP gross margins were clearly a highlight of the quarter, which helped us achieve overall gross

margins and operating margins above our guidance. We believe that the networking industry is in the

beginning stages of a new innovation cycle driven by the IT imperatives of virtualization and cloud

computing. Brocade has established a clear leadership position and first-to-market advantage by

delivering award-winning Ethernet fabric solutions to customers well ahead of the

competition. We are

also leading the storage networking industry through the transition to 16 Gbps Fibre Channel to

ensure that customers have options in determining the networking

technologies that best suit their

data center and IT requirements. In summary, there are new opportunities emerging in the networking

industry that we have not seen in the previous decade and we believe Brocade has the right strategy,

technologies, and offerings to capitalize on this new and exciting era of innovation.

Brocade Q2 FY 2011 Earnings

Q2 FY 2011 Financials

Richard Deranleau, CFO

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 21

Prepared comments provided by Richard Deranleau, CFO

Brocade Q2 FY 2011 Earnings

Financial Highlights

* Non-GAAP, please see GAAP reconciliation in appendix

Growing top line profitably and reducing term debt

Q2 11

Revenues

Overall revenue/growth

$550M / +9.8% Yr./Yr.

Storage product revenue growth

+17% Yr./Yr.

Enterprise/Service Provider Ethernet business revenue growth

+24% Yr./Yr.

Profitability

Non-GAAP EPS* (diluted)

$0.13

GAAP EPS (diluted)

$0.06

Generating cash/reducing debt

Operating cash flow

$114M

Total debt payments

$59M

Term loan balance

$252M

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 22

In

Q2,

Brocade

generated

revenues

of

$549.9M,

which

were

up

9.8%

Yr./Yr.

and

up

slightly

Qtr./Qtr.

from

a

strong Q1, in line with the guidance we shared with you on our last earnings call. Storage product revenues

were up over 17% Yr./Yr. driven by double-digit growth in backbones/directors, switches, embedded switches,

and server adapters. Storage revenues were slightly lower sequentially, but performing better than historical

seasonality, with lower backbone/director revenue partially offset by higher switch revenue. Ethernet business

revenues were up 1.4% Yr./Yr. and up 3.7% Qtr./Qtr. with Enterprise and Service Provider Ethernet segments

showing good progress again in the quarter.

Non-GAAP earnings per share on a diluted basis were $0.13 for Q2, driven by stronger gross margins and

slower growth in operating expenses. Q2 results included approximately one-half cent benefit from a lower-

than-expected tax rate resulting primarily from the settlement of an IRS audit for FY07 and FY08. Excluding

this benefit, our non-GAAP EPS for Q2 would have been $0.12, which is higher than the guidance we

provided of $0.10 for the quarter.

We

generated

strong

operating

cash

flow

of

$113.7M

in

Q2,

better

than

our

outlook,

which

we

used

to

pay

down our term loan and build our cash balance. In Q2 we repaid $58.9M of our senior secured debt of which

$50.0M was in excess of the mandatory amount due, bringing our acquisition term debt down to $252M. Total

Q2 diluted shares were 501.5M shares and within our expected range when we provided our outlook for the

quarter.

Brocade Q2 FY 2011 Earnings

Key Financial Metrics

* Non-GAAP, please see GAAP reconciliation in appendix

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Revenue

$501M

$504M

$550M

$546M

$550M

Sequential growth

(7.1)%

.5%

9.3%

(0.8)%

.7%

Year-over-year growth

(1.1)%

2.1%

5.5%

1.2%

9.8%

Non-GAAP gross margin*

62.7%

60.4%

62.3%

62.0%

63.5%

Non-GAAP operating margin*

20.5%

17.3%

20.4%

17.1%

18.2%

Non-GAAP EPS*—diluted

$0.13

$0.13

$0.14

$0.12

$0.13

GAAP EPS—diluted

$0.05

$0.05

$0.05

$0.06

$0.06

Continuing to manage the business to our 2-year target model

5/19/2011

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Page 23

Turning first to the top line, Q2 revenues were $549.9M in a quarter where we saw our Storage business

outperform expected seasonal patterns. We added a fourth 10% customer this quarter in HDS, achieving a

record revenue quarter with this partner. Storage product revenues were up 17% Yr./Yr. driven by higher

backbone/director and Server product sales, which were up 22% and 21%, respectively, compared to Q2 10.

Switches were also up 12% compared to the same period last year.

Ethernet

business

revenues

were

up

3.7%

sequentially

and

up

1.4%

Yr./Yr.

We

saw

strong

Yr./Yr.

revenue

growth in our Enterprise and Service Provider Ethernet businesses of 24% offset by continued weakness in

Federal Ethernet revenue. At the beginning of the quarter, we assumed Federal spending would be improving

in our Q2. However, the ultimate budget delays and the deferral of key deals negatively impacted our Federal

business in the quarter. On a geographic basis, we saw better-than-expected performances in EMEA,

continued strength in APAC, and improvement in non-Federal Americas.

Global Services revenues were up 2.4% sequentially driven by higher professional services and Ethernet

support revenue.

Non-GAAP Gross Margins of 63.5% were better than our guidance range of 61.5% to 62.0% for the quarter

driven by stronger-than-expected Storage performance and improving Ethernet gross margins. Non-GAAP

gross margins in the quarter were above our 2-year target model range of 61% to 63%.

Q2 non-GAAP operating expenses as a percentage of revenue were 45.3%, slightly higher quarter-over-

quarter but lower than the guidance of 45.5% to 46.0% for the quarter. Non-GAAP operating margins were

18.2%,

above

the

guidance

of

15.5%

to

16.0%

for

the

quarter,

and

comfortably

within

our

2-year

target

model

range of 17% to 20%. The sequential improvement in operating margins was driven by the higher gross

margins.

The Q2 11 effective non-GAAP tax rate was 20.7% and effective GAAP tax benefit was (2.3%). The Non-

GAAP tax rate in Q2 reflects a one-time benefit from the settlement of IRS audits that resulted in a benefit of

approximately

3

points

to

the

rate

and

contributed

approximately

one-half

cent

to

non-GAAP

EPS.

Brocade Q2 FY 2011 Earnings

Revenue: SAN, Ethernet, and Global Services

Stable mix across business segments

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 24

Turning to revenues by business unit, our Storage product revenue was $330.4M in the quarter,

a

slight

decrease

sequentially,

better

than

seasonal

trends,

and

an

increase

of

17%

from

Q2

10.

Storage

product revenue represented 60% of total revenues in Q2, versus 61% in Q1.

Our Ethernet product revenue was $128.7M in the quarter, an increase of 2.0% from the previous quarter and

essentially flat from Q2 10. Ethernet product revenue represented 23% of total revenue, unchanged from Q1.

Our Global Services revenue was $90.9M in the quarter and represented 17% of revenues,

up from 16% in Q1. Global Services revenue was up 2.4% sequentially driven primarily by higher professional

services and Ethernet support revenue and was essentially flat versus Q2 10.

Brocade Q2 FY 2011 Earnings

Total Ethernet Business Revenue

$156.7

$149.5

$170.5

$153.2

$158.9

Total  +1.4%

Support  +5.6%

Products  +0.4%

Q2 Yr./Yr. Compares

5/19/2011

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Page 25

Looking at our Ethernet business, including hardware and Ethernet-based support and services,

Q2 revenues were $158.9M up 1.4% Yr./Yr. and up 3.7% from Q1 11.

From a product segment view, stackables continued to grow as a percentage of Ethernet revenues and

represented

43%

of

revenues

in

Q2,

a

slight

improvement

compared

to

42%

in

Q1.

We

are

also

pleased

with

our Brocade ADX Layer 4–7 product revenue in Q2, which grew nearly 30% Yr./Yr.

Brocade Q2 FY 2011 Earnings

Total Ethernet Business Revenue

By customer segment

Note: Service Provider segment consists of end users that are identified as a service provider through SIC codes or other analysis on a quarterly basis

Strong Yr./Yr. growth across Enterprise and Service Provider

$156.7

$149.5

$170.5

$153.2

$158.9

Total  +1%

Federal  -58%

Enterprise

Service Provider

Q2 Yr./Yr. Compares

$124.6

Federal

FY 10 budget

approved

Dec. ‘09

Federal

FY 11 budget

approved

Apr. ‘11

24%

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 26

As we drill down into the Ethernet business details, we are pleased with the Yr./Yr. growth in our Service

Provider and Enterprise segments in Q2. Revenue from Enterprise and Service Provider businesses

collectively were up 24% Yr./Yr. and up nearly 6% sequentially, showing strength across our product portfolio

and customer base. Revenue from enterprise customers, excluding Federal, was up 4.7% sequentially, grew

32.5% Yr./Yr., and represented 61% of our total Ethernet business in Q2. Revenue from our Service Provider

business grew 8.4% Yr./Yr., and represented 27% of our total Ethernet business in Q2. We saw good growth

in our new accounts with both initial sales in the quarter as well as repeat business.

Our Federal Ethernet business was $18.5M, down 9.3% from Q1 and down 58% Yr./Yr. from a strong Q2 10,

reflecting continued softness in Federal spending and the deferral of several key deals due to the timing of the

Federal budget approval. As you may recall, in Q2 10 we experienced a significant improvement in Federal

revenue Qtr./Qtr. after the Federal budget was signed in December 2009. This makes the current Yr./Yr.

comparable more challenging as the current Federal fiscal year’s budget was not approved until April.   

Brocade Q2 FY 2011 Earnings

Total SAN Business Revenue

Strong Yr./Yr. growth in SAN business

$344.3

$354.0

$379.9

$392.8

$391.0

Total  +14%

Support -3%

Products  +17%

Q2 Yr./Yr. Compares

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 27

Looking at our SAN business, including hardware and SAN-based support and services, Q2 revenue of

$391.0M was down slightly from Q1 and up 13.6% from Q2 10.

Demand for Brocade’s leading SAN products was strong, resulting in SAN product revenue of $330.4M in the

quarter. The increase year-over-year was driven by revenue growth across all of our product families, led by

backbone/director and Server products.

Our Server product group, including embedded switches and Server

adapter products (HBAs and Mezzanine

Cards), posted revenues of $48.4M, up 20.9% Yr./Yr. and down slightly from our record in Q1. Embedded

switches revenues were up 15.5% Yr./Yr. while our Server adapter

product (HBAs and Mezzanine Cards)

revenues were up over 110% Yr./Yr.

As we look at our multiprotocol and converged networking products including the Brocade 8000, FCoE blades

for our flagship Brocade DCX storage chassis, Brocade VDX switches and CNAs, total converged product

revenue growth was more than 100% Yr./Yr. We feel that our product portfolio, including the recently

announced Brocade 1860 Fabric Adapters, continues to demonstrate

our leadership in multiprotocol and

cloud-optimized networks.

Brocade Q2 FY 2011 Earnings

Revenue: 10% Customers,

Other OEM, Channel/Direct

HDS joins 10% Customers in Q2 2011

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 28

In Q2, Brocade had four customers that each contributed revenue greater than 10%: EMC, HDS, HP, and

IBM. Collectively, our four greater-than-10% customers contributed 53% of revenues in Q2, up from 47% in

Q1, when we had three 10% customers, and up from 44% in the quarter a year ago, when again we had three

10% customers. Other OEMs represented 11% of revenues in Q2 versus 19% in Q1, when the figure

included HDS. Channel and Direct were 36% of revenues in Q2, an increase from 34% in Q1, reflecting a mix

shift from the OEMs to the channel/direct business sequentially.

Brocade Q2 FY 2011 Earnings

Segment Revenues and

Gross Margin Snapshot

Q1 11 vs. Q2 11 revenue mix and non-GAAP gross margin*

* Non-GAAP, please see GAAP reconciliation in appendix

Q1 11

Q2 11

Revenues by Segment ($M)

Non-GAAP Gross Margin*

by Segment

Gross margin expansion across all segments

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 29

Non-GAAP gross margins of 63.5% were above our guidance range of 61.5% to 62.0% for the quarter, driven

primarily by the strong Storage performance and improving Ethernet margins. Company non-GAAP gross

margins were up 150 basis points from Q1.

Q2

Storage

non-GAAP

gross

margins

were

72.3%,

up

from

71.4%

in

Q1,

reflecting

a

favorable

customer

mix,

including a shift to direct and channel revenue. The impact of higher Storage gross margins on the overall

non-GAAP gross margins was approximately +50 basis points in the quarter.

Q2 Ethernet non-GAAP gross margins were 51.0%, up from 46.7% in Q1 and are at the highest level since

Q2 10. The higher Ethernet gross margins reflect good progress on the initiatives to improve gross margins

we laid out at our September 2010 Analyst Day. The impact of higher Ethernet gross margins on overall non-

GAAP gross margins was approximately +100 basis points in Q2.

Global Services non-GAAP gross margins were 49.0% in Q2, up versus 48.7% in Q1, primarily due to higher

professional services and support revenue.

Brocade Q2 FY 2011 Earnings

Ethernet Non-GAAP Gross Margin* Progress

Comparison to Q3 10 and 2-year target model

* Non-GAAP, please see GAAP reconciliation in appendix

** Pricing/other includes all pricing and mix impact

Q3 10

Q2 11

Executing on Ethernet gross margin initiatives

Pricing/

Other **

Volumes

Inventory

Mgmt.

+3%

+1–4%

+2.3%

+2.7%

+2–4%

+0.7%

+1–2%

+0.9%

2-Yr. Target Model

Gross margin initiatives est.

Actual

Product 

Costs

54–59%

5/19/2011

Page 30

©

2011 Brocade Communications Systems, Inc.

In looking at our Ethernet gross margins, we are pleased with the progress we have made since we laid out our plans at our

2010 Analyst Day last September. We had identified several areas of focus to improve our Ethernet gross margins from our Q3

10 levels to reach our 2-year target model of 54% to 59%. In the 3 quarters since we set that goal, we have made very good

progress, including improving the management of inventory [+2.3 pts], generating higher volumes to improve fixed cost

absorption [+0.7 pts], lowering product costs including new product offerings [+2.7 pts], and managing the business to a more

stable pricing environment/mix/other [+0.9 pts]. 

We continue to be focused on these Ethernet gross margin initiatives outlined above and plan to drive improvements going

forward to be within our target of 54% to 59% by Q4 this year.

Brocade Q2 FY 2011 Earnings

Operating Performance vs. 2-Year Target

Model

* Non-GAAP, please see GAAP reconciliation in appendix

Overachievement on gross margin improved operating margin

Non-GAAP Operating

Margins*

Non-GAAP Operating Expenses*

as a Percentage of Revenues

2-year target model:

43–44%

2-year target model:

17–20%

Non-GAAP Gross Margin*

2-year target model:

61–63%

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 31

Since we introduced our 2-year target model at the September 2010 Analyst Day, we have been able to manage the business to

the target model ranges for both non-GAAP gross margin and 

non-GAAP operating margin for each quarter in a challenging business environment. 

On a non-GAAP basis, total operating expenses were 45.3% of revenues in Q2 versus 44.9% in Q1. The dollar increase in

operating expenses sequentially reflects the investment in our sales organization and marketing spend made during the first

half of FY11. With the investment in sales largely completed, we would expect to manage our spending to within our 2-year

target model going forward. 

Non-GAAP operating margins were 18.2% in Q2, an improvement over Q1 driven by the overachievement of gross margins

compared to our model and guidance. Our 2-year target model for operating margins is 17% to 20%, and we are pleased that we

have been able to operate within that model, delivering 17.6% operating margin in the first half.

Brocade Q2 FY 2011 Earnings

Balance Sheet and Cash Flow Highlights

as of April 30, 2011

Strong cash flows drive healthy balance sheet

* Adjusted EBITDA is as defined in the term debt credit agreement

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Cash from operations

$67.7M

$55.3M

$106.4M

$118.2M

$113.7M

Capital expenditures

$62M

$47M

$46M

$23M

$27M

Free cash flow

$6M

$9M

$61M

$95M

$87M

Debt payments

$202.2M

$30.6M

$30.2M

$39.7M

$58.9M

Cash, equivalents, and

short term investments

$290M

$296M

$336M

$416M

$466M

Senior secured debt

$1.01B

$0.99B

$0.96B

$0.92B

$0.86B

Adjusted EBITDA*

$116.4M

$101.5M

$127.7M

$114.5M

$122.5M

Stock repurchase

$20M

$5M

$0

$0

$0

Senior secured leverage ratio

1.95x

1.97x

1.92x

2.00x

1.84x

Covenant

2.5x

2.5x

2.5x

2.5x

2.5x

Fixed charge coverage ratio

1.8x

1.7x

1.7x

1.8x

2.3x

Covenant

1.25x

1.25x

1.25x

1.5x

1.5x

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 32

Cash from operations was $113.7M in Q2, down slightly quarter-over-quarter and better than our previous guidance. Total

capital expenditures in the quarter were $27M, lower than our outlook. Free cash flow was nearly $87M in the quarter, down

slightly Qtr./Qtr.

Cash and equivalents grew to $466M, up $50M from $416M in Q1. In Q2, we reduced our term debt principal by $58.9M,

including $50.0M in excess of the mandatory payment.

As we stated during our Analyst Day last year, we continue to focus on increasing operating cash flow and our priorities for cash

will be focused on paying down our term debt first, continuing to build our cash reserves, and repurchasing stock on an

opportunistic basis and subject to debt covenants.

Adjusted EBITDA in the quarter was $122.5M, which was an improvement from the Q1 level of $114.5M. The Senior Secured

Leverage Ratio of 1.84x and the Fixed Charge Coverage Ratio of 2.28x are both within the covenant requirements of our term

credit agreement.

Brocade Q2 FY 2011 Earnings

Net Debt: Defined as Total Debt Less Total Cash

Decreased by $679M from Q1 09 to Q2 11

More than

63% reduction

in 2+ years

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 33

Net Debt has declined from $1,073M at the end of Q1 09 to $394M at the end of Q2 11.

This represents a $679M or 63% reduction over the last two plus years, demonstrating

Brocade’s ability to generate cash and reduce our long-term debt. Our term debt loan

balance is now down to $252M.

Brocade Q2 FY 2011 Earnings

Q3 2011 Planning Assumptions

IT market conditions

•

Caution around macro economic conditions (Japan, China, Europe)

•

Federal budget closure will improve Federal IT spending

•

SAN TAM expected to grow 4–6% in FY 11

•

Expect to grow faster than market in Ethernet

Margins/pricing

•

Overall non-GAAP gross margins within 2-year target, but lower Qtr./Qtr.

due to mix

•

Small pricing declines in SAN and Ethernet

Taxes

•

Outlook tax rate does not include discrete items

OEM inventories

•

Expect to come down Qtr./Qtr. with 16 Gbps launch

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 34

Now, as we look to Q3 11, here are some assumptions to consider in developing your financial models:

We continue to monitor the stability and health of international markets, specifically Japan, China, and Europe.  We are cautious

about the current global and country-specific dynamics, such as the effects from the Japanese earthquake and tsunami,

inflationary risks in China, and the continuing sovereign debt risk in Europe, all of which may impact our business and that of

our partners. As a result of this uncertain macro environment and using a balanced viewpoint, we are issuing revenue guidance

with a wider range than previous quarters.

We expect our Federal Ethernet business to return to more normal levels starting in Q3 as we close several deals that were

deferred primarily due to the timing of the Federal budget approval.

We believe that the SAN total available market will grow 4% to 6% annually in FY11, consistent with what we outlined at Analyst

Day. Our Storage product revenues were up 4.1% during the first half of FY11 compared to the first half of FY10. For Q3 11, we

anticipate that Brocade SAN revenue will be up 3% to 5% Yr./Yr.

Exiting Q2, OEM inventory was approximately 2.5 weeks. As the OEMs launch their 16 Gbps offerings, we plan to work with them

to reduce 8 Gbps inventories over the second half of 2011, to help ensure a smooth transition to 16 Gbps.

We expect to grow faster than the Ethernet market in Q3. We anticipate that our new Brocade VDX and VCS technology solutions

will continue to ramp and will have a larger contribution to revenue/gross margin in FY12 as we continue to see this market

evolve and see a longer selling cycle with Ethernet fabrics.

We expect company non-GAAP gross margins to be within our 2-year target model in Q3 as the product revenue mix moves to

more Ethernet products and Storage non-GAAP gross margins return to Q4 10/Q1 11 levels, reflecting a more historical

customer/product mix.

We expect quarterly ASP declines in our SAN and Ethernet businesses to be in the low-single digits in Q3.

From a tax rate perspective, we do not forecast discrete events due to the inherent uncertainty of their timing, but expect no

change to our structural rate for planning purposes.

Brocade Q2 FY 2011 Earnings

Q3 2011 Financial Outlook

As of May 19, 2011

* Non-GAAP estimates assume exclusion of the same category of items excluded from Q1 11 non-GAAP results

Q3 11

Revenue range (up 7%–11% Yr./Yr.)

$540M–560M

Non-GAAP gross margin*

62.0%–62.5%

Non-GAAP operating expenses*

45.0%–45.5%

Non-GAAP operating margin*

16.5%–17.5%

Other income/other expense

($21M)

Non-GAAP tax rate*

~25%

Fully diluted shares outstanding

512M–517M

Non-GAAP EPS*

$0.10–$0.11

Operating cash flow

$60M–$75M

Capital expenditures

$30M–$33M

Free cash flow

$30M–$42M

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 35

Given these planning assumptions, in Q3 11 we expect: 

•

Overall revenue to be $540M to $560M, down 2% to up 2% Qtr./Qtr. and up 7% to 11% Yr./Yr.

•

Non-GAAP gross margins to be 62.0% to 62.5%

•

Non-GAAP operating expenses to be 45.0% to 45.5%

•

Non-GAAP operating margins to be 16.5% to 17.5%

•

Other income/expense net to be approximately ($21M)

•

Non-GAAP tax rate to be approximately 25%

•

Diluted shares outstanding to be in a range of 512M to 517M shares

•

Non-GAAP EPS to be 10 cents to 11 cents

•

Operating cash flow of $60M to $75M

•

Capital expenditures of $30M to $33M

•

Free cash flow of $30M to $42M, in a seasonally weak cash flow quarter

Brocade Q2 FY 2011 Earnings

Financial Summary

Richard Deranleau, CFO

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 36

We are looking forward to answering your questions in the Q&A session of our conference call.

Brocade Q2 FY 2011 Earnings

Jason Nolet

VP Data Center

and Enterprise

Networking

Live Q&A Call

May 19, 2011, 2:30PM Pacific Time

Richard

Deranleau

CFO

John McHugh

CMO

Ian Whiting

SVP WW Sales

Mike Klayko

CEO

Dave Stevens

CTO

5/19/2011

©

2011 Brocade Communications Systems, Inc.

Page 37

Prepared comments provided by Rob Eggers, Investor Relations

That concludes Brocade’s prepared comments. At 2:30 p.m. Pacific Time on May 19 Brocade will host a webcast conference call

at www.brcd.com primarily devoted to answering questions submitted via e-mail to ir@brocade.com and taken live from

participants via telephone.

Thank you for your interest in Brocade.

Brocade Q2 FY 2011 Earnings

Appendix and Reconciliations

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 38

Brocade Q2 FY 2011 Earnings

Quarterly Net Income

GAAP/Non-GAAP Reconciliation

(In Thousands)

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Net income on a GAAP basis

22,380

21,961

23,416

27,179

27,613

Adjustments:

Legal fees associated with indemnification obligations

and other related expenses, net

277

(74)

(666)

124

–

Stock-based compensation expense

30,146

24,682

25,275

19,906

22,530

Amortization of intangible assets

30,657

30,657

30,657

30,656

29,489

Loss on sale of property

(47)

–

–

–

–

Restructuring costs and facilities lease loss

–

–

1,059

–

–

Legal fees associated with certain pre-acquisition litigation

17

13

243

77

216

Provision for certain pre-acquisition litigation

–

1,604

–

–

–

Interest due to adoption of new standard

348

–

–

–

–

Income tax effect of adjustments

(21,044)

(15,217)

(13,975)

(17,208)

(17,037)

Non-GAAP net income

62,734

63,626

66,009

60,734

62,811

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 39

Brocade Q2 FY 2011 Earnings

Adjusted EBITDA and Sr. Secured Leverage Ratio

As defined in the term credit agreement

Consolidated Senior Secured Leverage Ratio

Q2 FY 10

Q3 FY 10

Q4 FY 10

Q1 FY 11

Q2 FY 11

$ Thousand

Actual

Actual

Actual

Actual

Actual

Consolidated Net Income

$22,380

$21,961

$23,416

$27,179

$27,613

plus

(i) Consolidated Interest Charges

$19,522

$22,061

$22,202

$21,546

$20,745

(ii) Provision for Federal, state, local and foreign income taxes payable

$0

$0

$5,988

$0

$0

(iii) Depreciation and amortization expense

$46,600

$50,493

$51,532

$52,522

$51,712

(iv) Fees, costs and expenses incurred on or prior to the Acquisition Closing

Date in connection with the Acquisition and the financing thereof

$0

$0

$0

$0

$0

(v) Any cash restructuring charges and integration costs in connection with the

Acquisition, in an aggregate amount not to exceed $75,000,000

$0

$0

$0

$0

$0

(vi) Non-cash restructuring charges incurred in connection with the

Transaction, all as approved by Arrangers

$1,084

$1,006

$930

$848

$779

(vii) Other non-recurring expenses reducing such Consolidated Net Income

which do not represent a cash item in such period or any future period

(in each case of or by the Borrower and its Subsidiaries for such Measurement

Period)

($47)

$0

$574

$175

$1,735

(viii) Any non-cash charges for stock compensation expense in compliance with

FAS 123R and amortization of the fair value of unvested options under the

Acquired Business’

employee stock option plan assumed by the Borrower

$30,146

$24,682

$25,275

$19,906

$22,530

(ix)

Legal fees and expenses relating to the Borrower’s indemnification

obligations for the benefit of its former officers and directors

in connection

with its historical stock option litigation

724

376

$22

$15

$0

minus

(i)

Federal, state, local and foreign income tax credits

($840)

($15,096)

$0

$5,717

$611

(ii)

All non-cash items increasing Consolidated Net Income (in each case of or

by the Borrower and its Subsidiaries for such Measurement Period)

($3,127)

($4,026)

($2,212)

$1,995

$1,992

Consolidated EBITDA

$116,442

$101,457

$127,727

$114,479

$122,511

4 Quarter Trailing Consolidated EBITDA

$520,429

$502,567

$500,309

$460,105

$466,174

Consolidated Senior Secured Debt

$1,015,957

$989,803

$959,491

$919,312

$859,983

Consolidated Senior Secured Leverage Ratio (x)

1.95

1.97

1.92

2.00

1.84

5/19/2011

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Page 40

Brocade Q2 FY 2011 Earnings

Q2 2011 Cash and Debt Covenant

Adjusted EBITDA* Performance

(In Millions)

Reducing Debt Position

(In Millions)

Within Debt Covenant

Increasing Cash Balance**

(In Millions)

* Adjusted EBITDA is as defined in the term debt credit agreement              ** Cash, equivalents and short term investments

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 41

Brocade Q2 FY 2011 Earnings

Domestic and International

Reported Revenue

Reported revenue on a ship-to basis

5/19/2011

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2011 Brocade Communications Systems, Inc.

Page 42

Brocade Q2 FY 2011 Earnings

Segment Revenue Detail

Product segment as a percent of revenue

* Reallocation of SAN common hardware altered historic SAN percentages

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

SAN Business

*

Directors

40%

37%

39%

44%

42%

Switches

46%

49%

46%

41%

43%

Server

14%

14%

15%

15%

15%

Ethernet Business

Chassis

64%

65%

63%

58%

57%

Stackables

36%

35%

37%

42%

43%

5/19/2011

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2011 Brocade Communications Systems, Inc.

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Brocade Q2 FY 2011 Earnings

Thank You

www.brcd.com

5/19/2011

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2011 Brocade Communications Systems, Inc.

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