SAN JOSE, CA--(Marketwired - Aug 24, 2017) - Brocade^® (NASDAQ: BRCD) today reported financial results for its third fiscal quarter, ended July 29, 2017. Brocade reported third quarter revenue of $549 million, down 7% year-over-year and down 1% quarter-over-quarter. The Company reported a GAAP diluted loss per share of $0.05, down from GAAP diluted earnings per share (EPS) of $0.02 in Q3 2016 and down from a GAAP diluted loss per share of $0.03 in Q2 2017. The year-over-year and sequential decline in GAAP diluted EPS was due in part to lower revenue, estimated losses related to completed and pending divestitures of certain software product lines, higher acquisition and divestiture-related expenses, and restructuring expenses associated with a voluntary separation plan for certain eligible employees implemented in Q3 2017. Non-GAAP diluted EPS was $0.16 for Q3 2017, down from non-GAAP diluted EPS of $0.21 in Q3 2016 and up from non-GAAP diluted EPS of $0.10 in Q2 2017. The year-over-year decline in non-GAAP diluted EPS was primarily due to lower revenue, while the sequential improvement was primarily due to lower operating expenses resulting from lower headcount.

In light of the pending acquisition of Brocade by Broadcom Limited, Brocade will not provide fiscal Q4 2017 guidance and will not hold a conference call to discuss these financial results.

Key Financial Metrics:

		Q3 2017				Q2 2017				Q3 2016				Q3 2017 vs. Q2 2017			Q3 2017 vs. Q3 2016
Revenue		$	549 M			$	553 M			$	591 M			(1	%)		(7	%)
GAAP earnings (loss) per share--diluted		$	(0.05	)		$	(0.03	)		$	0.02			74	%		(296	%)
Non-GAAP EPS--diluted		$	0.16			$	0.10			$	0.21			58	%		(23	%)
GAAP gross margin			63.9	%			62.0	%			60.4	%		1.9 pts			3.5 pts
Non-GAAP gross margin			66.8	%			65.3	%			66.5	%		1.5 pts			0.3 pts
GAAP operating margin			(3.6	)%			(1.1	%)			3.5	%		(2.5) pts			(7.1) pts
Non-GAAP operating margin			16.2	%			11.1	%			19.5	%		5.1 pts			(3.3) pts

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

Highlights:

• SAN product revenue of $276 million was down 2% year-over-year. The decline was primarily the result of lower fixed-configuration and embedded switch sales, which declined 6% and 7%, respectively, partially offset by higher director sales, which increased 5% year-over-year. The year-over-year revenue performance was impacted by competition from alternative storage networking technologies and architectures, and customer uncertainty surrounding the pending acquisition of Brocade by Broadcom. Sequentially, SAN product revenue decreased 2%, consistent with historical seasonal revenue trends, with an 11% decline in director sales being partially offset by increased fixed-configuration and embedded switch sales of 3% and 14%, respectively.
  
  
  
  
• IP Networking product revenue of $174 million, including $85 million of product revenue from Ruckus Wireless, was down 17% year-over-year. The decrease was primarily due to lower wired switch and router revenue partially offset by higher wireless revenue associated with the May 27, 2016 acquisition of Ruckus Wireless. The year-over-year increase in wireless revenue was primarily due to including only approximately two months of wireless revenue in the prior-year period. Sequentially, IP Networking product revenue was flat as higher wireless revenue was offset by lower wired switch and router revenue. The year-over-year and sequential declines in wired switch and router revenue were due, in part, to Broadcom's planned divestiture of Brocade's IP Networking business.
  
  
  
  

Board Declares Dividend:

• The Brocade Board of Directors has declared a regular fourth fiscal quarter cash dividend of $0.055 per share of the Company's common stock. The dividend payment will be made on October 3, 2017, to stockholders of record at the close of market on September 11, 2017.
  
  
  
  

Other Q3 2017 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 2017				Q2 2017				Q3 2016
Routes to market as a % of total net revenues:
	OEM revenues			55	%			55	%			54	%
	Channel/Direct revenues			45	%			45	%			46	%
	10% or greater customer revenues			37	%			27	%			23	%
Geographic split as a % of total net revenues (1):
	Domestic revenues			52	%			50	%			52	%
	International revenues			48	%			50	%			48	%
Segment split as a % of total net revenues:
	SAN product revenues			50	%			51	%			48	%
	IP Networking product revenues			32	%			31	%			35	%
	Global Services revenues			18	%			18	%			17	%
	SAN business revenues (2)			60	%			60	%			57	%
	IP Networking business revenues (2)			40	%			40	%			43	%
Additional information:			Q3 2017				Q2 2017				Q3 2016
	GAAP net income (loss) attributable to Brocade		$	(20M	)		$	(11M	)		$	10M
	Non-GAAP net income attributable to Brocade		$	69M			$	43M			$	92M
	GAAP operating income (loss)		$	(20M	)		$	(6M	)		$	21M
	Non-GAAP operating income		$	89M			$	61M			$	115M
	GAAP effective tax rate			41.1	%			44.2	%			(20.8	%)
	Non-GAAP effective tax rate			14.1	%			16.1	%			14.2	%
	Cash and cash equivalents		$	1,179M			$	1,300 M			$	1,153M
	Capital expenditures		$	9M			$	8M			$	17M
	Cash provided by (used in) operations		$	(61M	)		$	108M			$	28M
	Days sales outstanding			48 days				43 days				43 days
	Employees at end of period			4,979				5,524				5,948
	SAN port shipments			0.8M				0.8M				0.9M
	Share repurchases		$	--			$	--			$	661M
	Loss on sale and held for sale software product lines (3)		$	24M			$	--			$	--

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

(1)		Revenues are attributed to geographic areas based on known product delivery location. Since some OEM partners take delivery of Brocade products domestically and then ship internationally to their end users, the percentage of international revenues based on end-user location would likely be higher.
(2)		SAN and IP Networking business revenues include hardware and software product, support, and services revenues.
(3)		During the third quarter of fiscal year 2017, the Company committed to divest certain portions of its IP Networking business. The Company completed the divestiture of its virtual router product line, and signed purchase agreements to divest its virtual application delivery controller ("vADC") and virtual evolved packet core ("vEPC") product lines, which, in aggregate, resulted in an estimated loss of $24.3 million. The vADC and vEPC divestitures were not completed in the third quarter of fiscal year 2017, so the assets and liabilities associated with those divestitures were classified as held for sale on the Condensed Consolidated Balance Sheet as of July 29, 2017, at fair value less costs to sell through the date of sale, as summarized in the following table (in thousands):

	July 29, 2017
Total current assets held for sale	$	26,279
Total current liabilities held for sale	$	8,421

Non-GAAP Financial Measures

To supplement financial information presented on a GAAP basis, Brocade provides information presented on a non-GAAP basis. These non-GAAP financial measures include non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP operating income, non-GAAP tax rate, non-GAAP net income, and non-GAAP EPS. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, financial information presented on a GAAP basis. 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. The most directly comparable GAAP information and a reconciliation between the GAAP and non-GAAP amounts is provided in the tables at the end of this press release.

Management believes that the 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 relative to its competitors. These non-GAAP financial measures also help with the determination of Brocade's baseline performance before gains, losses or charges that are considered by management to be outside of ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations 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 relative to its competitors;
  
  
  
  
• the ability to better identify trends in Brocade's underlying business and to perform related trend analyses; and
  
  
  
  
• a better understanding of how management plans and measures Brocade's underlying business.
  
  
  
  

In determining non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP operating income, non-GAAP tax rate, non-GAAP net income and non-GAAP EPS, management excludes certain gains or losses and benefits or costs that are the result of events that 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) impact to cost of revenues from purchase accounting adjustments to inventory; (ii) acquisition, divestiture, and integration costs; (iii) the losses recognized or expected to be recognized in connection with certain software product line divestitures that were completed or became subject to binding divestiture agreements during the third fiscal quarter of 2017; (iv) restructuring charges; (v) certain costs associated with settlement of a Delaware Chancery Court appraisal proceeding commenced by a dissenting former stockholder of Ruckus Wireless, Inc.; and (vi) asset impairment charges associated with certain equity investments in non-publicly traded companies.

Management also excludes the following non-cash charges in determining these non-GAAP financial measures: (i) stock-based compensation expense; (ii) amortization of purchased intangible assets; and (iii) non-cash interest expense related to the convertible debt.

Management believes that the exclusion of stock-based compensation allows for more accurate comparisons of Brocade's operating results to Brocade's peer companies. This is due to the varying use of valuation methodologies and subjective assumptions and the variety of award types. In addition, the exclusion of the expense associated with the amortization of acquisition-related intangible assets is appropriate because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and the exclusion of amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses. In connection with the convertible debt, under the relevant accounting guidance, a non-cash interest expense is recognized for the convertible debt as an imputed interest expense for the conversion feature. Management believes excluding the non-cash interest expense related to the convertible debt from its non-GAAP financial measures is useful for investors because the expense does not represent a cash outflow in the respective reporting periods and is not indicative of ongoing operating performance.

Finally, management believes that it is appropriate to exclude the tax effects of the items noted above and (i) tax charges and benefits related to unusual or infrequent intercompany transactions; (ii) tax charges or benefits that are a result of the implementation of restructuring plans; and (iii) tax charges resulting from the integration of intellectual property assets from acquisitions. Management believes that the exclusion of these items from its non-GAAP tax provision provides a more meaningful measure of Brocade's operational performance of non-GAAP net income and non-GAAP EPS.

Limitations: These non-GAAP financial measures have limitations because they do not include all items of income and expense that impact the company. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies. Management compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. Management also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure, and management encourages investors to review carefully those reconciliations.

Forward-Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Brocade's financial results, goals, plans, strategy, business outlook and prospects. These statements are based on current expectations as of the date of this press release and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; the impact on Brocade of conditions in the market for Storage Area Networking products; Brocade's ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade's ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade's international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments. The risks, uncertainties and assumptions also include, but are not limited to: the risk that the proposed acquisition by Broadcom may not be completed in a timely manner or at all, which may adversely affect Brocade's business and the price of the common stock of Brocade; the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the receipt of certain governmental and regulatory approvals; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the effect of the announcement or pendency of the proposed transaction on Brocade's business relationships, operating results and business generally; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed transaction; risks related to diverting management's attention from Brocade's ongoing business operations; the outcome of legal proceedings that have been and may in the future be instituted against Brocade related to the merger agreement or the proposed transaction; and unexpected costs, charges or expenses resulting from the proposed transaction. Certain of these and other risks are set forth in more detail in Brocade's Form 10-Q for the fiscal quarter ended April 29, 2017, and in Brocade's Annual Report on Form 10-K for the fiscal year ended October 29, 2016. 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 turn their networks into platforms for business innovation. With solutions spanning public and private data centers to the network edge, Brocade is leading the industry in its transition to the New IP network infrastructures required for today's world of digital business. (www.brocade.com)

Brocade and the B-wing symbol are registered trademarks of Brocade Communications Systems, Inc., in the United States and many other countries. Other brands, products, or service names mentioned herein may be trademarks of Brocade or others. Additional information about Brocade's trademarks is available at: http://www.brocade.com/en/legal/brocade-Legal-intellectual-property/brocade-legal-trademarks.html.

© 2017 Brocade Communications Systems, Inc. All Rights Reserved.

BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
				Three Months Ended								Nine Months Ended
				July 29, 2017				July 30, 2016				July 29, 2017				July 30, 2016
				(In thousands, except per share amounts)
Net revenues:
	Product			$	449,549			$	490,995			$	1,385,273			$	1,400,355
	Service				99,717				99,726				298,209				287,956
		Total net revenues			549,266				590,721				1,683,482				1,688,311
Cost of revenues:
	Product				154,760				188,492				486,153				464,797
	Service				43,361				45,330				136,301				127,489
		Total cost of revenues			198,121				233,822				622,454				592,286
Gross margin					351,145				356,899				1,061,028				1,096,025
Operating expenses:
	Research and development				117,116				114,996				360,164				297,516
	Sales and marketing				153,712				167,983				506,228				468,743
	General and administrative				27,614				32,960				92,127				78,180
	Settlement with dissenting stockholder of Ruckus Wireless, Inc.				8,528				--				8,528				--
	Amortization of intangible assets				5,822				5,498				20,998				7,302
	Acquisition, divestiture, and integration costs				13,246				14,868				49,519				20,625
	Restructuring charges (benefits)				17,801				--				17,801				(566	)
	Impairment of equity investments				2,870				--				2,870				--
	Loss on sale and held for sale software product lines				24,315				--				24,315				--
		Total operating expenses			371,024				336,305				1,082,550				871,800
Income (loss) from operations					(19,879	)			20,594				(21,522	)			224,225
Interest expense					(15,875	)			(13,462	)			(47,317	)			(33,282	)
Interest and other income, net					2,580				1,557				5,136				3,317
Income (loss) before income tax					(33,174	)			8,689				(63,703	)			194,260
Income tax expense (benefit)					(13,622	)			(1,806	)			(27,275	)			47,034
Net income (loss)				$	(19,552	)		$	10,495			$	(36,428	)		$	147,226
Less: Net loss attributable to noncontrolling interest				$	(46	)		$	--			$	(274	)		$	--
Net income (loss) attributable to Brocade Communications Systems, Inc.				$	(19,506	)		$	10,495			$	(36,154	)		$	147,226
Net income (loss) per share--basic attributable to Brocade Communications Systems, Inc. stockholders				$	(0.05	)		$	0.02			$	(0.09	)		$	0.36
Net income (loss) per share--diluted attributable to Brocade Communications Systems, Inc. stockholders				$	(0.05	)		$	0.02			$	(0.09	)		$	0.35
Shares used in per share calculation--basic					411,898				426,671				408,494				411,709
Shares used in per share calculation--diluted					411,898				434,416				408,494				419,416
Cash dividends declared per share				$	0.055			$	0.055			$	0.165			$	0.145

BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
				Three Months Ended								Nine Months Ended
				July 29, 2017				July 30, 2016				July 29, 2017				July 30, 2016
				(In thousands)
Net income (loss)				$	(19,552	)		$	10,495			$	(36,428	)		$	147,226
Other comprehensive income and loss, net of tax:
	Unrealized gains (losses) on cash flow hedges:
		Change in unrealized gains and losses			209				(700	)			376				(1,035	)
		Net gains and losses reclassified into earnings			363				482				799				1,831
	Net unrealized gains (losses) on cash flow hedges				572				(218	)			1,175				796
	Foreign currency translation adjustments				1,972				(1,628	)			2,635				(1,760	)
Total other comprehensive income (loss)					2,544				(1,846	)			3,810				(964	)
Total comprehensive income (loss)				$	(17,008	)		$	8,649			$	(32,618	)		$	146,262
Less: Net loss attributable to noncontrolling interest					(46	)			--				(274	)			--
Less: Total other comprehensive income (loss) attributable to noncontrolling interest					40				--				(32	)			--
Total comprehensive income (loss) attributable to Brocade Communications Systems, Inc.				$	(17,002	)		$	8,649			$	(32,312	)		$	146,262

BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
				July 29, 2017				October 29, 2016
				(In thousands, except par value)
ASSETS
Current assets:
	Cash and cash equivalents			$	1,179,369			$	1,257,075
	Accounts receivable, net of allowances for doubtful accounts of $1,818, and $1,736 as of July 29, 2017, and October 29, 2016, respectively				291,989				284,344
	Inventories				70,511				69,355
	Prepaid expenses and other current assets				87,128				62,236
	Current assets held for sale				26,279				--
		Total current assets			1,655,276				1,673,010
Property and equipment, net					416,181				455,326
Goodwill					2,255,326				2,295,184
Core/developed technology intangible assets, net					193,959				248,938
Other intangible assets, net					159,041				200,840
Non-current deferred tax assets					40,057				12,736
Other assets					41,591				53,777
		Total assets		$	4,761,431			$	4,939,811
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	97,074			$	128,685
	Accrued employee compensation				144,622				154,165
	Deferred revenue				198,704				221,940
	Current portion of long-term debt				76,725				76,692
	Other accrued liabilities				69,517				113,170
	Current liabilities held for sale				8,421				--
		Total current liabilities			595,063				694,652
Long-term debt, net of current portion					1,457,602				1,502,063
Non-current deferred revenue					85,055				90,051
Non-current income tax liability					92,582				102,100
Other non-current liabilities					4,330				5,370
		Total liabilities			2,234,632				2,394,236
Commitments and contingencies
Stockholders' equity:
Brocade 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: 413,745 and 401,748 shares as of July 29, 2017, and October 29, 2016, respectively			414				402
	Additional paid-in capital				1,596,008				1,514,730
	Accumulated other comprehensive loss				(23,603	)			(27,413	)
	Retained earnings				951,592				1,055,194
		Total Brocade stockholders' equity			2,524,411				2,542,913
Noncontrolling interest					2,388				2,662
		Total stockholders' equity		$	2,526,799			$	2,545,575
		Total liabilities and stockholders' equity		$	4,761,431			$	4,939,811

BROCADE COMMUNICATIONS SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
					Nine Months Ended
					July 29,  2017				July 30,  2016
					(In thousands)
Cash flows from operating activities:
	Net income (loss)				$	(36,428	)		$	147,226
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Excess tax benefits from stock-based compensation				--				(1,778	)
		Depreciation and amortization				118,365				80,979
		Loss on disposal of property and equipment				3,506				458
		Loss on sale and held for sale software product lines				24,315				--
		Net gain on sale of investments				--				(122	)
		Amortization of debt issuance costs and debt discount				15,571				13,493
		Provision (recovery) for doubtful accounts receivable and sales allowances				8,914				(1,946	)
		Non-cash purchase accounting adjustments to inventory				5,853				20,775
		Non-cash stock-based compensation expense				94,471				88,805
		Impairment of equity investments				2,870				--
	Changes in assets and liabilities, net of acquisitions and divestitures:
		Accounts receivable				(16,558	)			988
		Inventories				(6,044	)			5,601
		Prepaid expenses and other assets				(16,029	)			(9,725	)
		Deferred tax assets				63				(109	)
		Accounts payable				(27,370	)			5,519
		Accrued employee compensation				(56,803	)			(57,520	)
		Deferred revenue				(20,900	)			5,359
		Other accrued liabilities				(48,799	)			(43,874	)
		Restructuring liabilities				(365	)			(1,223	)
			Net cash provided by operating activities			44,632				252,906
Cash flows from investing activities:
	Purchases of non-marketable equity and debt investments					--				(2,000	)
	Proceeds from maturities and sale of short-term investments					--				150,323
	Purchases of property and equipment					(28,618	)			(59,810	)
	Net cash paid in connection with acquisitions					--				(564,888	)
	Proceeds from collection of note receivable					250				250
	Net proceeds from sale of software product line					31,769				--
			Net cash provided by (used in) investing activities			3,401				(476,125	)
Cash flows from financing activities:
	Payment of principal related to the term loan					(60,000	)			--
	Payment of debt issuance costs					--				(891	)
	Payment of principal related to capital leases					--				(282	)
	Payment of accrued merger consideration to dissenting stockholder of Ruckus Wireless, Inc.					(41,280	)			--
	Common stock repurchases					--				(841,562	)
	Proceeds from issuance of common stock					41,283				49,195
	Payment of cash dividends to stockholders					(67,448	)			(61,706	)
	Proceeds from term loan					--				787,255
	Proceeds from noncontrolling interest					--				2,550
	Excess tax benefits from stock-based compensation					--				1,778
			Net cash used in financing activities			(127,445	)			(63,663	)
	Effect of exchange rate fluctuations on cash and cash equivalents					1,706				(926	)
	Net decrease in cash and cash equivalents					(77,706	)			(287,808	)
	Cash and cash equivalents, beginning of period					1,257,075				1,440,882
	Cash and cash equivalents, end of period				$	1,179,369			$	1,153,074

BROCADE COMMUNICATIONS SYSTEMS, INC. RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES (Unaudited)
				Three Months Ended
				July 29,  2017				April 29,  2017				July 30,  2016
				(In thousands, except per share amounts)
Non-GAAP adjustments
	Stock-based compensation expense included in cost of revenues			$	3,233			$	3,234			$	5,965
	Amortization of intangible assets expense included in cost of revenues				10,612				12,679				8,922
	Purchase accounting adjustments to inventory				1,932				2,384				20,775
		Total gross margin impact from non-GAAP adjustments			15,777				18,297				35,662
	Stock-based compensation expense included in research and development				6,340				6,631				9,206
	Stock-based compensation expense included in sales and marketing				8,503				9,779				17,756
	Stock-based compensation expense included in general and administrative				5,709				6,645				11,716
	Settlement with dissenting stockholder of Ruckus Wireless, Inc.				8,528				--				--
	Amortization of intangible assets expense included in operating expenses				5,822				7,582				5,498
	Acquisition, divestiture, and integration costs				13,246				18,236				14,868
	Restructuring charges				17,801				--				--
	Impairment of equity investments				2,870				--				--
	Loss on sale and held for sale software product lines				24,315				--				--
		Total operating income impact from non-GAAP adjustments			108,911				67,170				94,706
	Convertible debt interest				4,068				4,018				3,871
	Effects of certain intercompany transactions on the tax provision				--				--				7,436
	Income tax effect of non-GAAP adjustments				(24,875	)			(17,029	)			(24,506	)
		Total net income impact from non-GAAP adjustments		$	88,104			$	54,159			$	81,507
Gross margin reconciliation
	GAAP gross margin			$	351,145			$	342,760			$	356,899
	Total gross margin impact from non-GAAP adjustments				15,777				18,297				35,662
		Non-GAAP gross margin		$	366,922			$	361,057			$	392,561
	GAAP gross margin, as a percentage of total net revenues				63.9	%			62.0	%			60.4	%
	Non-GAAP gross margin, as a percentage of total net revenues				66.8	%			65.3	%			66.5	%
Operating income reconciliation
	GAAP operating income (loss)			$	(19,879	)		$	(5,934	)		$	20,594
	Total operating income impact from non-GAAP adjustments				108,911				67,170				94,706
		Non-GAAP operating income		$	89,032			$	61,236			$	115,300
	GAAP operating income (loss), as a percentage of total net revenues				(3.6	)%			(1.1	)%			3.5	%
	Non-GAAP operating income, as a percentage of total net revenues				16.2	%			11.1	%			19.5	%
Net income (loss) and net income (loss) per share attributable to Brocade reconciliation
	Net income (loss) attributable to Brocade on a GAAP basis			$	(19,506	)		$	(10,967	)		$	10,495
	Total net income impact from non-GAAP adjustments				88,104				54,159				81,507
		Non-GAAP net income attributable to Brocade		$	68,598			$	43,192			$	92,002
	GAAP net income (loss) per share--basic attributable to Brocade			$	(0.05	)		$	(0.03	)		$	0.02
	Total impact on net income (loss) per share--basic from non-GAAP adjustments				0.22				0.14				0.20
		Non-GAAP net income per share--basic attributable to Brocade		$	0.17			$	0.11			$	0.22
	GAAP net income (loss) per share--diluted attributable to Brocade			$	(0.05	)		$	(0.03	)		$	0.02
	Total impact on net income (loss) per share--diluted from non-GAAP adjustments				0.21				0.13				0.19
		Non-GAAP net income per share--diluted attributable to Brocade		$	0.16			$	0.10			$	0.21
	Shares used in GAAP and non-GAAP per share calculation--basic				411,898				408,589				426,671
	Shares used in GAAP per share calculation--diluted				411,898				408,589				434,416
	Shares used in non-GAAP per share calculation--diluted				421,381				419,614				434,416
Effective tax rate reconciliation
	GAAP income (loss) before income tax				(33,174	)			(19,785	)			8,689
	Total operating income impact from non-GAAP adjustments				108,911				67,170				94,706
	Convertible debt interest				4,068				4,018				3,871
		Non-GAAP income before income tax			79,805				51,403				107,266
	GAAP income tax benefit				(13,622	)			(8,753	)			(1,806	)
	Effects of certain intercompany transactions on the tax provision				--				--				(7,436	)
	Income tax effect of non-GAAP adjustments				24,875				17,029				24,506
		Non-GAAP income tax expense			11,253				8,276				15,264
	GAAP income (loss) before income tax				(33,174	)			(19,785	)			8,689
	GAAP income tax benefit				(13,622	)			(8,753	)			(1,806	)
	GAAP effective tax rate				41.1	%			44.2	%			(20.8	)%
	Non-GAAP income before income tax				79,805				51,403				107,266
	Non-GAAP income tax expense				11,253				8,276				15,264
	Non-GAAP effective tax rate				14.1	%			16.1	%			14.2	%