Brocade Announces Earnings

SAN JOSE, Calif. -- Brocade(R) (Nasdaq: BRCD), the leader in networked storage solutions that help enterprises connect and manage their information, today reported financial results for its third quarter of fiscal year 2007 (Q3 07), which ended July 28, 2007. Revenues for Q3 07 were $327.5 million, slightly above the Company's preliminary results reported on August 8, 2007. Revenues for the quarter decreased 5% from $345.3 million reported in the second quarter of fiscal year 2007 (Q2 07) and increased 73% from $188.9 million reported in the third quarter of fiscal year 2006 (Q3 06). Results for Q3 07 and Q2 07 reflect the acquisition of McDATA, which closed on January 29, 2007. The Company's third fiscal quarter is typically one of two seasonally weaker periods.

Commenting on the Company's third quarter results, CEO Michael Klayko said, "Overall, we are very pleased with both our results and execution in our third fiscal quarter. In just two quarters, we have met or exceeded the vast majority of our target business metrics related to the acquisition of McDATA, and have strengthened our combined profitability and business fundamentals. We believe we are well positioned competitively and our leadership position is unchanged."

Reporting on a GAAP basis, net income for Q3 07 was $10.7 million, or $0.03 per share basic and diluted. This reflects an increase from GAAP net income of $0.8 million, or $0.00 per share basic and diluted in Q2 07, and a decrease of 56% from GAAP net income of $24.5 million, or $0.09 per share basic and diluted in Q3 06, which was prior to the McDATA acquisition. The increase from Q2 07 to Q3 07 primarily reflects higher gross margin, lower operating expenses and a lower provision for income taxes on a GAAP basis.

Non-GAAP net income for Q3 07 was $49.5 million, or $0.13 per share basic and $0.12 per share diluted. This reflects an increase of 6% from non-GAAP net income of $46.6 million, or $0.12 per share basic and $0.11 per share diluted in Q2 07, and an increase of 60% from non-GAAP net income of $31.0 million, or $0.11 per share basic and diluted in Q3 06. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Brocade Communications Systems Inc.