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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    October 28, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-25601
  Brocade Communications Systems,
    Inc.
 (Exact name of Registrant as
    specified in its charter)
  Delaware

77-0409517(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification
    No.)   1745 Technology Drive
 San Jose, CA 95110
 (408) 333-8000
 (Address, including zip code, of
    Registrants principal executive offices and
 telephone number, including area
    code)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value

The NASDAQ Stock Market LLCPreferred Stock Purchase Rights

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
    None
   þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



BROCADE
    COMMUNICATIONS SYSTEMS, INC.FORM 10-K
  INDEX
  
  PagePART IItem 1.


Business


2Item 1A.


Risk
    Factors


10Item 1B.


Unresolved Staff
    Comments


25Item 2.


Properties


25Item 3.


Legal
    Proceedings


25Item 4.


Submission of
    Matters to a Vote of Security Holders


26PART IIItem 5.


Market For
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


26Item 6.


Selected Financial
    Data


28Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation


32Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


49Item 8.


Financial
    Statements and Supplementary Data


51Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


90Item 9A.


Controls and
    Procedures


90Item 9B.


Other
    Information


93PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


93Item 11.


Executive
    Compensation


93Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


93Item 13.


Certain
    Relationships and Related Transactions


93Item 14.


Principal
    Accountant Fees and Services


93PART IVItem 15.


Exhibits and
    Financial Statement Schedules


94Signatures


103EXHIBIT 10.103EXHIBIT 10.104EXHIBIT 10.105EXHIBIT 10.106EXHIBIT 12.1EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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PART I  Item 1.
    Business  General
    (408) 333-8000. Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330.
  Products
    and Services
     2




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end-to-end
  Storage
    Networking Solutions
  entry-level 8-port
    Intelligent
    Fabric Application Platforms
   3




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Application
    Infrastructure Solutions
  and/or
        
    Brocade Wide Area File Services, or WAFS, which allows
    organizations to better centrally manage file-based data by
    allowing fast and easy sharing of file-based data from a central
    headquarters site to remote branch offices;
    Brocade StorageX, which is an integrated suite of
    applications designed to logically aggregate distributed file
    data across heterogeneous environments, providing administrators
    with policies to better manage and automate distributed file
    data;
    Brocade File Lifecycle Manager, or FLM, which provides a
    powerful way to automatically move files across tiers of storage
    based on company or administrative policies, Tapestry FLM helps
    to meet compliance requirements, while driving lower overall
    storage costs;
    Brocade MyView, which is a resource access management
    solution that provides personalized, secure access to Windows
    file resources across the enterprise, improving data security
    and compliance practices;
    Brocade Data on Demand Manager, or DDM, which simplifies
    data migration and reduces restoration time to significantly
    improve data recovery time objectives; and
    Brocade UNC Update, which helps support non-disruptive
    storage migration by accurately reporting and updating
    interdependent references in files.  Brocade
    Services
    Industry
    Initiatives and Standards Development
   4




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Storage
    Networking Environment Interoperability
    Application
    Interoperability
    Education
    and Technical Certification Services
    Distribution
    Model
    
    Brocades OEM partners are leading storage systems and
    subsystems providers who offer Brocades products under
    their own private label or as Brocade branded solutions. Sales
    of these products through OEM partners comprise the majority of
    Brocades business. 5




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
    Other distribution partners include Brocade-authorized
    distributors, systems integrators, and VARs. These partners are
    authorized by Brocade to market, sell, and support its products
    and services. Some of these partners also sell training and
    other value-added services.    Customers
      Geographic
    Information
    Acquisitions
    and Investments
   6




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Research
    and Development
         7




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Competition
        Manufacturing
       8




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Patents,
    Intellectual Property, and Licensing
         9




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Backlog
    Employees
    Item 1A.
    Risk
    Factors  Risks
    Related to the Acquisition of McDATA Corporation
  The
    failure to successfully integrate McDATAs business and
    operations in the expected time frame may adversely affect the
    combined companys future results.
    
    revenue attrition in excess of anticipated levels;
    Brocades inability to conduct extensive integration
    planning with McDATA prior to the completion of the merger;
    failure to successfully execute on our integration plan;
    failure of customers to accept new products or to continue as
    customers of the combined company;
    failure to successfully manage relationships with original
    equipment manufacturers, or OEMs, end-users, distributors and
    suppliers;
    failure to qualify the combined companys products with OEM
    customers on a timely basis or at all;
    failure to successfully develop interoperability between the
    products of Brocade and McDATA; 10




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
    failure to leverage the increased scale of the combined company
    quickly and effectively;
    potential difficulties integrating and harmonizing financial
    reporting systems;
    the loss of key employees;
    failure to effectively coordinate sales and marketing efforts to
    communicate the capabilities of the combined company; and
    failure to combine product offerings and product lines quickly
    and effectively.    General
    customer uncertainty related to the merger could harm Brocade
    and the combined company.
    The
    required regulatory approvals may not be obtained or may contain
    materially burdensome conditions.
  Hart-Scott-Rodino
 11




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Failure
    to complete the merger could negatively impact the stock price
    and the future business and financial results of Brocade and
    McDATA.
    Integrating
    Brocade and McDATA following the merger may divert
    managements attention away from the combined
    companys operations.
    Because
    the market price of Brocade common stock will fluctuate, the
    value of the Brocade common stock issued in connection with the
    merger will not be known until the closing of the
    merger.
    Risks
    Related to Brocades Business
  Brocades
    future revenue growth depends on its ability to introduce new
    products and services on a timely basis and achieve market
    acceptance of these new products and services.
   12




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
    properly define the new products and services;
    timely develop and introduce the new products and services;
    differentiate Brocades new products and services from its
    competitors technology and product offerings; and
    address the complexities of interoperability of Brocades
    products with its OEM partners server and storage products
    and its competitors products.    Brocade
    is currently expanding its product and service offerings to
    include software applications and professional and support
    services, and Brocades operating results will suffer if
    these initiatives are not successful.
       13




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
    successfully identifying market opportunities and new
    technologies;
    developing new customer relationships both with new and existing
    customers;
    expanding Brocades relationships with its existing OEM
    partners and end-users;
    managing different sales cycles;
    hiring qualified personnel with appropriate skill sets on a
    timely basis;
    establishing effective distribution channels and alternative
    routes to market; and
    estimating the level of customer acceptance and rate of market
    adoption.      Increased
    market competition may lead to reduced sales, margins, profits
    and market share.
       14




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Brocade
    depends on OEM partners for a majority of Brocades
    revenues, and the loss of any of these OEM partners or a
    decrease in their purchases could significantly reduce
    Brocades revenues and negatively affect Brocades
    financial results.
        The
    prices of Brocades products have declined in the past, and
    Brocade expects the price of Brocades products to continue
    to decline, which could reduce Brocades revenues, gross
    margins and profitability.
   15




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The
    loss of Brocades third-party contract manufacturer would
    adversely affect Brocades ability to manufacture and sell
    Brocades products.
    Brocade
    is dependent on sole source and limited source suppliers for
    certain key components.
      Brocades
    business is subject to cyclical fluctuations and uneven sales
    patterns.
   16




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Brocade
    has been named as a party to several class action and derivative
    action lawsuits arising from Brocades internal reviews and
    related restatements of Brocades financial statements
    during 2005, and Brocade may be named in additional litigation,
    all of which could require significant management time and
    attention and result in significant legal expenses as well as
    result in an unfavorable outcome which could have a material
    adverse effect on Brocades business, financial condition,
    results of operations and cash flows.
  day-to-day
  As a
    result of Brocades internal reviews and related
    restatements, Brocade is subject to investigations by the SEC
    and Department of Justice, or DOJ, which may not be resolved
    favorably and have required, and will continue to require, a
    significant amount of management time and attention and
    accounting resources and legal expense, which could adversely
    affect Brocades business, results of operations and cash
    flows.
     17




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Brocades
    quarterly and annual revenues and operating results may
    fluctuate in future periods due to a number of factors, which
    could adversely affect the trading price of Brocades
    stock.
    
    announcements, introductions, and transitions of new products by
    Brocade and its competitors or its OEM partners;
    the timing of customer orders, product qualifications, and
    product introductions of Brocades OEM partners;
    seasonal fluctuations;
    changes, disruptions or downturns in general economic
    conditions, particularly in the information technology industry;
    declines in average selling prices for Brocades products
    as a result of competitive pricing pressures or new product
    introductions by Brocade or its competitors;
    the emergence of new competitors and new technologies in the
    storage network and data management markets;
    deferrals of customer orders in anticipation of new products,
    services, or product enhancements introduced by Brocade or its
    competitors;
    Brocades ability to timely produce products that comply
    with new environmental restrictions or related requirements of
    its OEM customers;
    Brocades ability to obtain sufficient supplies of sole- or
    limited-sourced components, including ASICs, microprocessors,
    certain connectors, certain logic chips, and programmable logic
    devices;
    increases in prices of components used in the manufacture of
    Brocades products;
    Brocades ability to attain and maintain production volumes
    and quality levels;
    variations in the mix of Brocades products sold and the
    mix of distribution channels and geographies through which they
    are sold;
    pending or threatened litigation;
    stock-based compensation expense that is affected by
    Brocades stock price;
    new legislation and regulatory developments; and
    other risk factors detailed in this section entitled Risks
    Related to Brocades Business.    The
    failure to accurately forecast demand for Brocades
    products or the failure to successfully manage the production of
    Brocades products could negatively affect the supply of
    key components for Brocades products and Brocades
    ability to manufacture and sell Brocades
    products.
  up-to-date
 18




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Brocade
    may not realize the anticipated benefits of past or future
    mergers and strategic investments, and integration of acquired
    companies or technologies may negatively impact Brocades
    business.
    
    problems integrating the purchased operations, technologies,
    personnel or products over geographically disparate locations;
    assumption of debt and contingent liabilities;
    unanticipated costs, litigation and other contingent liabilities;
    diversion of managements attention from Brocades
    daily operations and business;
    adverse effects on existing business relationships with
    suppliers and customers;
    risks associated with entering into markets in which Brocade
    have limited, or no prior experience;
    failure to successfully manage additional remote locations,
    including the additional infrastructure and resources necessary
    to support and integrate such locations;
    incurrence of significant exit charges if products acquired in
    business combinations are unsuccessful;
    incurrence of merger-related costs or amortization costs for
    acquired intangible assets that could impact Brocades
    operating results;
    potential write-down of goodwill
    and/or
    acquired intangible assets, which are subject to impairment
    testing on a regular basis, and could significantly impact
    Brocades operating results;
    inability to retain key customers, distributors, vendors and
    other business partners of the acquired business;
    dilution of the percentage of Brocades stockholders to the
    extent equity is used as consideration or option plans are
    assumed; and
    potential loss of Brocades key employees or the key
    employees of an acquired organization.   19




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If
    Brocade loses key personnel or is unable to hire additional
    qualified personnel, Brocades business may be
    harmed.
      Brocade
    is subject to environmental regulations that could have a
    material adverse effect on Brocades
    business.
   20




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Brocades
    revenues will be affected by changes in domestic and
    international information technology spending and overall demand
    for storage area network solutions.
      Brocades
    failure to successfully manage the transition between its new
    products and its older products may adversely affect
    Brocades financial results.
    Brocades
    business is subject to increasingly complex corporate
    governance, public disclosure, accounting, and tax requirements
    that have increased both its costs and the risk of
    noncompliance.
     21




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Brocades
    future operating expenses may be adversely affected by changes
    in Brocades stock price.
    Changes
    in accounting rules, including the expensing of stock options
    granted to Brocades employees, could have a material
    impact on Brocades reported business and financial
    results.
      Brocade
    has extensive international operations, which subjects it to
    additional business risks.
    
    supporting multiple languages;
    recruiting sales and technical support personnel with the skills
    to design, manufacture, sell, and support Brocades
    products;
    increased complexity and costs of managing international
    operations;
    increased exposure to foreign currency exchange rate
    fluctuations;
    commercial laws and business practices that favor local
    competition;
    multiple, potentially conflicting, and changing governmental
    laws, regulations and practices, including differing export,
    import, tax, labor, anti-bribery and employment laws;
    longer sales cycles and manufacturing lead times;
    difficulties in collecting accounts receivable;
    reduced or limited protection of intellectual property rights; 22




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
    managing a development team in geographically disparate
    locations, including China and India; and
    more complicated logistics and distribution arrangements.      Undetected
    software or hardware errors could increase Brocades costs,
    reduce Brocades revenues and delay market acceptance of
    Brocades products.
    Brocade
    relies on licenses from third parties and the loss or inability
    to obtain any such license could harm Brocades
    business.
    Third-parties
    may bring infringement claims against Brocade, which could be
    time-consuming and expensive to defend.
   23




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
    stop selling, incorporating or using products or services that
    use the challenged intellectual property;
    obtain from the owner of the infringed intellectual property a
    license to the relevant intellectual property, which may require
    Brocade to pay royalty or license fees, or to license
    Brocades intellectual property to such owner, and which
    may not be available on commercially reasonable terms or at
    all; and
    redesign those products or services that use technology that is
    the subject of an infringement claim.    Business
    interruptions could adversely affect Brocades
    business.
    Provisions
    in Brocades charter documents, customer agreements, and
    Delaware law could prevent or delay a change in control of
    Brocade, which could hinder stockholders ability to
    receive a premium for Brocades stock.
    
    authorizing the issuance of preferred stock without stockholder
    approval;
    providing for a classified board of directors with staggered,
    three-year terms;
    prohibiting cumulative voting in the election of directors;
    limiting the persons who may call special meetings of
    stockholders;
    prohibiting stockholder actions by written consent; and
    requiring super-majority voting to effect amendments to the
    foregoing provisions of Brocades certificate of
    incorporation and bylaws.     24




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Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties    Item 3.
    Legal
    Proceedings         25




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Rule 10b-5
        Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity Securities     26




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Total Number of


Approximate DollarShares Purchased


Value of Shares thatTotal Number





as Part of Publicly


May Yet beof Shares


Average Price


Announced


Purchased UnderPurchased(1)


Paid per Share


Program


the Program(2)July 30, 2006  
    August 26, 2006













$
52,743August 27, 2006 
    September 23, 2006


1



6.00






$
52,737September 24,
    2006  October 28, 2006













$
52,737Total


1



6.00






$
52,737     (1)
    
    The total number of shares repurchased includes those shares of
    Brocade common stock that employees surrender for tax
    withholding purposes in connection with vesting of restricted
    stock. As of October 28, 2006, approximately
    1.9 million shares are subject to repurchase by Brocade.(2)
    
    In August 2004, our board of directors approved a share
    repurchase program for up to $100.0 million of our common
    stock. The purchases may be made, from time to time, in the open
    market and will be funded from available working capital. The
    number of shares to be purchased and the timing of purchases
    will be based on the level of our cash balances, general
    business and market conditions, and other factors, including
    alternative investment opportunities. As of October 28,
    2006, we have purchased 7.9 million shares at an average
    price of $5.93 per share, and under this program
    $52.7 million remains available for future repurchases. 27




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Item 6.
    Selected
    Financial Data  Form 10-K.
  Form 10-K.
  Fiscal Year EndedOctober 28,


October 29,


October 30,


October 25,


October 26,2006(1)


2005(2)


2004(3)


2003(4)


2002(In thousands, except per share amounts)Statement of Operations
    Data:Net revenues

$
750,592


$
574,120


$
596,265


$
525,277


$
562,369Cost of revenues


305,184



251,161



268,974



241,163



226,933Gross margin


445,408



322,959



327,291



284,114



335,436Operating expenses (benefits):Research and development


164,843



132,448



142,535



146,545



126,027Sales and marketing


139,434



101,202



102,445



115,075



108,784General and administrative


31,089



25,189



24,593



21,306



7,583Legal fees associated with
    indemnification obligations, SEC investigation and other related
    costs


13,654



14,027











Provision for SEC settlement


7,000















Amortization of intangible assets


2,294















Acquisition and integration costs


9,646















Restructuring and facilities lease
    losses, net


3,775



(670
)


84,557



20,828



Settlement of an
    acquisition-related claim










6,943







In-process research and development






7,784







134,898



Total operating expenses


371,735



279,980



361,073



438,652



242,394Income (loss) from operations


73,673



42,979



(33,782
)


(154,538
)


93,042Interest and other income, net


29,098



22,656



18,786



18,424



22,668Interest expense


(7,082
)


(7,693
)


(10,677
)


(13,339
)


(11,427
)Gain on repurchases of convertible
    subordinated debt






2,318



5,613



11,118



Gain (loss) on investments, net


2,663



(5,062
)


436



3,638



7,095Income (loss) before provision for
    income taxes


98,352



55,198



(19,624
)


(134,697
)


111,378Income tax provision


30,723



12,077



14,070



11,852



5,343Net income (loss)

$
67,629


$
43,121


$
(33,694
)

$
(146,549
)

$
106,035Net income (loss) per
    share  basic

$
0.25


$
0.16


$
(0.13
)

$
(0.58
)

$
0.46Net income (loss) per
    share  diluted

$
0.25


$
0.16


$
(0.13
)

$
(0.58
)

$
0.44Shares used in per share
    calculation  basic


269,602



268,176



260,446



250,610



231,591Shares used in per share
    calculation  diluted


274,142



270,260



260,446



250,610



240,761Balance Sheet Data:Cash, cash equivalents, investments
    and restricted short-term investments

$
582,554


$
764,402


$
736,908


$
835,565


$
888,388Working capital(5)


428,233



317,819



434,162



355,634



534,777Total assets


900,718



981,730



987,382



1,063,174



1,171,367Non-current liabilities associated
    with lease losses


11,105



12,481



16,799



16,518



22,602Convertible subordinated debt and
    capital lease obligations






278,883



352,279



442,950



550,000Total stockholders equity


616,230



508,847



445,652



447,868



446,255  28




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52/53-week 52/53-week 53-week 53-week 52-week
    (1)
    
    The fiscal year ended October 28, 2006 includes the impact
    of the acquisition of NuView, which was completed in the second
    quarter of fiscal year 2006 (see Note 3,
    Acquisitions, of the Notes to Consolidated Financial
    Statements). In addition, in the fiscal year ended
    October 28, 2006 we recorded a $2.7 million gain on
    investments on the disposition of portfolio investments
    primarily associated with non-marketable private strategic
    investments (see Note 16, Gain on Investment,
    net, of the Notes to Consolidated Financial Statements).
    The fiscal year ended October 28, 2006 also includes legal
    fees associated with applicable indemnification obligations, SEC
    investigation and other related costs of $13.7 million.
    Further, during the first fiscal quarter we began active
    settlement discussions with the SECs Division of
    Enforcement regarding our financial restatements related to
    stock option accounting. As a result of these discussions, we
    recorded a provision of $7.0 million for an estimated
    settlement expense (see Note 10 Commitments and
    Contingencies, of the Notes to Consolidated Financial
    Statements). During the second fiscal quarter, we recorded a
    charge of $3.8 million related to estimated facilities
    lease losses, net of expected sublease income (see Note 6,
    Liabilities Associated with Facilities Lease Losses,
    of the Notes to Consolidated Financial Statements). Moreover,
    during the fourth quarter, and related to prior acquisitions and
    the potential acquisition of McDATA, we recorded acquisition and
    integration costs for a total of $9.6 million (see
    Note 10 Commitments and Contingencies, of the
    Notes to the Consolidated Financial Statements).(2)
    
    The fiscal year ended October 29, 2005 includes the impact
    of the acquisition of Therion, which was completed in the third
    quarter of fiscal year 2005. In connection with our acquisition
    of Therion, we recorded in-process research and development
    expense of $7.8 million (see Note 3,
    Acquisitions, of the Notes to Consolidated Financial
    Statements). The fiscal year ended October 29, 2005 also
    includes Audit Committee internal review and SEC investigation
    costs of $14.0 million. In January 2005 we announced that
    our Audit Committee completed an internal review regarding
    historical stock option granting practices. Following the
    January 2005 Audit Committee internal review, on May 16,
    2005, we announced that additional information came to our
    attention that indicated that certain guidelines regarding stock
    option granting practices were not followed and our Audit
    Committee had commenced an internal review of our stock option
    accounting focusing on leaves of absence and transition and
    advisory roles. Our Audit Committee review was completed in
    November 2005. In addition, in the fiscal year ended
    October 29, 2005 we recorded a $5.1 million net loss
    on investments on the disposition of portfolio investments
    primarily associated with the defeasance of the indenture
    agreement relating to our 2% Convertible Notes (see
    Note 9, Convertible Subordinated Debt, of the
    Notes to Consolidated Financial Statements) and recorded a total
    of $2.3 million gain on repurchases of convertible
    subordinated debt.(3)
    
    The fiscal year ended October 30, 2004 includes the impact
    of restructuring costs of $9.0 million related to a
    restructuring plan implemented during the three months ended
    May 1, 2004 (see Note 5, Restructuring
    Costs, of the Notes to Consolidated Financial Statements).
    The fiscal year ended October 30, 2004 also includes a net
    lease termination charge and other of $75.6 million. During
    the three months ended January 24, 2004, we purchased a
    previously leased building located near our San Jose
    headquarters for $106.8 million in cash. The
    $106.8 million consisted of $30.0 million for the
    purchase of land and a building and $76.8 million for a
    lease termination fee (see Note 6, Liabilities
    Associated with Facilities Lease Losses, of the Notes to
    Consolidated Financial Statements). In addition, in the fiscal
    year ended October 30, 2004 we recorded a $6.9 million
    charge in settlement of a claim relating to our acquisition of
    Rhapsody and recorded a total of $5.6 million gain on
    repurchases of convertible subordinated debt.(4)
    
    The fiscal year ended October 25, 2003 includes the impact
    of our acquisition of Rhapsody, which was completed in the
    second quarter of fiscal year 2003. In connection with our
    acquisition of Rhapsody, we recorded in-process research and
    development expense of $134.9 million. The fiscal year
    ended October 25, 2003 also includes restructuring costs of
    $20.8 million (see Note 5, Restructuring
    Costs, of the Notes to 29




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##### Table of Contents



Consolidated Financial Statements), gain on repurchases of
    convertible subordinated debt of $11.1 million, and net
    gains on the disposition of non-marketable private strategic
    investments of $3.6 million.(5)
    
    The calculation of working capital for the fiscal year ended
    October 30, 2005 also includes the balance of convertible
    subordinated debt of $278.9 million.  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share and stock price amounts)Quarterly Data:Fiscal Year Ended
    October 28, 2006Net revenues

$
170,082


$
182,742


$
188,947


$
208,821Gross margin

$
100,701


$
105,144


$
111,914


$
127,649Income from operations

$
12,261


$
15,357


$
21,575


$
24,480Net income

$
9,660


$
13,513


$
24,498


$
19,958Per share amounts:Basic

$
0.04


$
0.05


$
0.09


$
0.07Diluted

$
0.04


$
0.05


$
0.09


$
0.07Shares used in computing per share
    amounts:Basic


269,400



270,564



269,417



269,027Diluted


272,101



274,393



273,959



276,113Closing prices:High

$
4.63


$
6.97


$
6.69


$
8.92Low

$
3.44


$
4.56


$
5.52


$
5.01Fiscal Year Ended
    October 29, 2005Net revenues

$
161,578


$
144,753


$
122,273


$
145,516Gross margin

$
97,172


$
82,834


$
62,386


$
80,567Income (loss) from operations

$
30,162


$
19,448


$
(14,311
)

$
7,680Net income (loss)

$
27,943


$
21,357


$
(7,235
)

$
1,056Per share amounts:Basic

$
0.10


$
0.08


$
(0.03
)

$
0.00Diluted

$
0.10


$
0.08


$
(0.03
)

$
0.00Shares used in computing per share
    amounts:Basic


266,218



268,043



268,765



269,679Diluted


271,422



269,823



268,765



270,311Closing prices:High

$
7.99


$
6.42


$
4.49


$
4.49Low

$
5.83


$
4.35


$
3.88


$
3.51 30




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##### Table of Contents



First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share and stock price amounts)Fiscal Year Ended
    October 30, 2004Net revenues

$
145,040


$
145,579


$
150,040


$
155,606Gross margin

$
77,404


$
78,793


$
84,213


$
86,881Income (loss) from operations

$
(68,154
)

$
(6,214
)

$
18,635


$
21,951Net income (loss)

$
(69,485
)

$
1,883


$
13,620


$
20,288Per share amounts:Basic

$
(0.27
)

$
0.01


$
0.05


$
0.08Diluted

$
(0.27
)

$
0.01


$
0.05


$
0.08Shares used in computing per share
    amounts:Basic


257,796



259,265



261,481



263,242Diluted


257,796



263,373



263,541



265,194Closing prices:High

$
7.95


$
7.44


$
6.14


$
6.80Low

$
5.49


$
5.35


$
4.41


$
4.04  31




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Results
    of Operations
  52/53-week 52/53-week 53-week 53-week 52-week
  Fiscal Years EndedOctober 28,


October 29,


October 30,2006


2005


2004Net revenues


100.0
%


100.0
%


100.0
%Cost of revenues


40.7



43.7



45.1Gross margin


59.3



56.3



54.9Operating expenses:Research and development


22.0



23.1



23.9Sales and marketing


18.6



17.6



17.2General and administrative


4.1



4.4



4.1Legal fees associated with
    indemnification obligations, SEC investigation and other related
    costs


1.8



2.4



Provision for SEC settlement


0.9Amortization of intangible assets


0.3







Acquisition and integration costs


1.3







Restructuring and facilities lease
    losses, net


0.5



(0.1
)


14.2Settlement of an
    acquisition-related claim










1.2In-process research and development






1.4



Total operating expenses


49.5



48.8



60.6Income (loss) from operations


9.8



7.5



(5.7
)Interest and other income, net


3.9



3.9



3.2Interest expense


(0.9
)


(1.3
)


(1.8
)Gain on repurchases of convertible
    subordinated debt


0.0



0.4



0.9Gain (loss) on investments, net


0.4



(0.9
)


0.1Income (loss) before provision for
    income taxes


13.1



9.6



(3.3
)Income tax provision


4.1



2.1



2.4Net income (loss)


9.0
%


7.5
%


(5.7
)%   Revenues.
    Year Ended


Increase/


%October 28, 2006


October 29, 2005


(Decrease)


ChangeDomestic

$
478,138



64
%

$
363,761



63
%

$
114,377



31
%International


272,454



36
%


210,359



37
%


62,095



30
%Total Net Revenue

$
750,592



100
%

$
574,120



100
%

$
176,472



31
%  32




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##### Table of Contents



Year Ended


Increase/


%October 29, 2005


October 30, 2004


(Decrease)


ChangeDomestic

$
363,761



63
%

$
384,650



65
%

$
(20,889
)


(5
)%International


210,359



37
%


211,615



35
%


(1,256
)


(1
)%Total Net Revenue

$
574,120



100
%

$
596,265



100
%

$
(22,145
)


(4
)%           Cost of Goods Sold
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
305,184



41%


$
251,161



44%



22%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
251,161



44%


$
268,974



45%



(7
)%  33




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##### Table of Contents



Research and development expenses.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
164,843



22%


$
132,448



23%



24%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
132,448



23%


$
142,535



24%



(7
)%  34




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##### Table of Contents



Sales and marketing expenses.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
139,434



19%


$
101,202



18%



38%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
101,202



18%


$
102,445



17%



(1
)%         General and administrative expenses.
 35




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##### Table of Contents



October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
31,089



4%


$
25,189



4%



23%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
25,189



4%


$
24,593



4%



2%         Legal fees associated with indemnification obligations, SEC
    investigation and other related costs.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
13,654



2%


$
14,027



2%



(3
)%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
14,027



2%


$




%



100%      36




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##### Table of Contents



Provision
    for SEC settlement.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
7,000



1%


$




%



100%     Stock
    compensation expense.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
31,407



4%


$
(616
)


(0.1
)%


5199%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
(616
)


(0.1
)%

$
5,007



0.8%



(112
)%        37




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##### Table of Contents



Amortization
    of intangible assets.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
2,294



0.3%


$




%



100%   Goodwill and Other Intangible Assets
    Restructuring
    and facilities lease losses, net.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
3,775



0.5%


$
(670
)


(0.1
)%


663%  38




---



##### Table of Contents



October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
(670
)


(0.1
)%

$
84,557



14%



(101
)%       Settlement
    of an acquisition related claim.
    October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$




%


$
6,943



1.2%



(100
)%       In-process
    research and development.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$




%


$
7,784



1%



(100
)%    39




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##### Table of Contents



Acquisition
    and integration costs.    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
9,646



1%


$




%



100%         Interest
    and other income, net.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
29,098



4%


$
22,656



4%



28%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
22,656



4%


$
18,786



3%



21%     Interest
    expense.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
(7,082
)


(0.9
)%

$
(7,693
)


(1
)%


(8
)%  40




---



##### Table of Contents



October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
(7,693
)


(1
)%

$
(10,677
)


(2
)%


(28
)%     Gain
    on repurchases of convertible subordinated debt.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$




%


$
2,318



0.4%



(100
)%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
2,318



0.4%


$
5,613



0.9%



(59
)%     Gain
    (loss) on investments, net.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
2,663



0.4%


$
(5,062
)


(0.9
)%


153%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
(5,062
)


(0.9
)%

$
436



0.1%



(1,261
)%    41




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##### Table of Contents



Provision
    for income taxes.
    October 28,


% of Net


October 29,


% of Net2006


Revenue


2005


Revenue


% Change$
30,723



4%


$
12,077



2%



154%     October 29,


% of Net


October 30,


% of Net2005


Revenue


2004


Revenue


% Change$
12,077



2%


$
14,070



2%



(14
)%   Accounting for Income
    Taxes
      non-U.S. stock
 42




---



##### Table of Contents



Liquidity
    and Capital Resources
  Year EndedOctober 28,


October 29,


Increase/2006


2005


(Decrease)(In thousands)Cash and cash equivalents

$
274,368


$
182,001


$
92,367Short-term investments


267,694



209,865



57,829Restricted short-term investments






277,230



(277,230
)Long-term investments


40,492



95,306



(54,814
)Total

$
582,554


$
764,402


$
(181,848
)Percentage of total assets


65
%


78
%      43




---



##### Table of Contents



Manufacturing and Purchase Commitments
  Convertible Subordinated Debt
      Other Contractual Obligations
 44




---



##### Table of Contents



Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsContractual
    Obligations:Non-cancelable operating leases


57,603
(1)


16,702



28,943



11,958



Purchase commitments, gross


87,897
(2)


87,897











Total contractual obligations

$
145,500


$
104,599


$
28,943 943


$
11,958


$
Other Commitments:Standby letters of credit

$
8,343


$
n/a


$
n/a


$
n/a


$
n/aGuarantee

$
1,015


$
n/a


$
n/a


$
n/a


$
n/a     (1)
    
    Amount excludes sublease income of $5.4 million, which
    consist of $1.1 million to be received in less than
    1 year, $3.0 million to be received in 1 through
    3 years, and $1.3 million to be received in 3 to
    5 years.(2)
    
    Amount reflects total gross purchase commitments under our
    manufacturing agreement with Foxconn. Of this amount, we have
    reserved $6.1 million for estimated purchase commitments
    that we do not expect to consume in normal operations.  Share Repurchase Program.
    Critical
    Accounting Policies
     45




---



##### Table of Contents




    Revenue recognition, and allowances for sales returns, sales
    programs, and doubtful accounts;
    Stock-based compensation;
    Warranty reserves;
    Inventory and purchase commitment reserves;
    Restructuring charges and lease loss reserves;
    Goodwill and intangible assets;
    Litigation costs; and
    Accounting for income taxes.  Revenue recognition, and allowances for sales returns, sales
    programs, and doubtful accounts.
      97-2, Software Revenue Recognition (SOP 97-2),
 46




---



##### Table of Contents



Stock-Based Compensation.
    Warranty reserves.
  Inventory and purchase commitment reserves.
  Restructuring charges and lease loss
    reserves.
 47




---



##### Table of Contents



Goodwill and intangible assets. Goodwill and Other Intangible Assets and/or
  Accounting for
    the Impairment or Disposal of Long-Lived Assets and/or
  Litigation costs.
  Accounting for income taxes. Accounting for
    Contingencies
   48




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income
    Taxes  An Interpretation of FASB Statement
    No. 109 Accounting for Income Taxes.
  Fair Value Measures
  Quantifying
    Misstatements in Current Year Financial Statements, Accounting Changes and
    Error Corrections.
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   49




---



##### Table of Contents



Valuation of Securities


Fair Value


Valuation of SecuritiesGiven an Interest Rate


as of


Given an Interest RateDecrease of X Basis Points


October 28,


Increase of X Basis PointsIssuer

(150 BPS)


(100 BPS)


(50 BPS)


2006


50 BPS


100 BPS


150 BPSU.S. government,
    U.S. government agencies and municipal obligations

$
129,791


$
127,525


$
125,455


$
123,554


$
121,818


$
120,217


$
118,740Corporate bonds and notes

$
185,959


$
185,532


$
185,087


$
184,631


$
184,180


$
183,730


$
183,283Total

$
315,750


$
313,057


$
310,542


$
308,185


$
305,998


$
303,947


$
302,023   available-for-sale.
    AverageAmount


Interest RateCash and cash equivalents

$
274,368



4.8
%Short-term investments


267,694



4.3
%Long-term investments


40,492



4.7
%Total

$
582,554



4.6
%    50




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of
    Independent Registered Public Accounting Firm


52Consolidated
    Statements of Operations


53Consolidated
    Balance Sheets


54Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)


55Consolidated
    Statements of Cash Flows


56Notes to
    Consolidated Financial Statements


57  51




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share-Based Payments
  Internal Control 
    Integrated Framework
  KPMG
    LLP
    52




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004(In thousands, except per share amounts)Net revenues

$
750,592


$
574,120


$
596,265Cost of revenues


305,184



251,161



268,974Gross margin


445,408



322,959



327,291Operating expenses:Research and development


164,843



132,448



142,535Sales and marketing


139,434



101,202



102,445General and administrative


31,089



25,189



24,593Legal fees associated with
    indemnification costs, SEC investigation and other related costs


13,654



14,027



Provision for SEC settlement


7,000







Amortization of intangible assets


2,294







Acquisition and integration costs


9,646







Restructuring and facilities lease
    losses, net


3,775



(670
)


84,557Settlement of an
    acquisition-related claim










6,943In-process research and development






7,784



Total operating expenses


371,735



279,980



361,073Income (loss) from operations


73,673



42,979



(33,782
)Interest and other income, net


29,098



22,656



18,786Interest expense


(7,082
)


(7,693
)


(10,677
)Gain on repurchases of convertible
    subordinated debt






2,318



5,613Gain (loss) on investments, net


2,663



(5,062
)


436Income (loss) before provision for
    income taxes


98,352



55,198



(19,624
)Income tax provision


30,723



12,077



14,070Net income (loss)

$
67,629


$
43,121


$
(33,694
)Net income (loss) per
    share  basic

$
0.25


$
0.16


$
(0.13
)Net income (loss) per
    share  diluted

$
0.25


$
0.16


$
(0.13
)Shares used in per share
    calculation  basic


269,602



268,176



260,446Shares used in per share
    calculation  diluted


274,142



270,260



260,446    53




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
 CONSOLIDATED
    BALANCE SHEETS  October 28,


October 29,2006


2005(In thousands,except par value)ASSETSCurrent assets:Cash and cash equivalents

$
274,368


$
182,001Short-term investments


267,694



209,865Total cash, cash equivalents and
    short-term investments


542,062



391,866Restricted short-term investments






277,230Accounts receivable, net of
    allowances of $4,842 and $4,942 in 2006 and 2005, respectively


98,394



70,104Inventories


8,968



11,030Prepaid expenses and other current
    assets


43,365



19,908Total current assets


692,789



770,138Long-term investments


40,492



95,306Property and equipment, net


104,299



108,118Goodwill


41,013



Intangible assets, net


15,465



Other assets


6,660



8,168Total assets

$
900,718


$
981,730LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
56,741


$
23,778Accrued employee compensation


62,842



37,762Deferred revenue


52,051



37,405Current liabilities associated
    with lease losses


4,931



4,659Other accrued liabilities


87,991



69,832Convertible subordinated debt






278,883Total current liabilities


264,556



452,319Non-current liabilities associated
    with lease losses


11,105



12,481Non-current deferred revenue


8,827



8,083Total liabilities


284,488



472,883Commitments and contingencies
    (Note 10)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: 272,141
    and 269,695 shares at October 28, 2006 and
    October 29, 2005, respectively


272



270Additional paid-in capital


888,978



855,563Deferred stock compensation






(3,180
)Accumulated other comprehensive
    loss


(817
)


(3,974
)Accumulated deficit


(272,203
)


(339,832
)Total stockholders equity


616,230



508,847Total liabilities and
    stockholders equity

$
900,718


$
981,730    54




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE INCOME (LOSS)  AccumulatedAdditional


Deferred


Other





Total


ComprehensiveCommon Stock


Paid-In


Stock


Comprehensive


Accumulated


Stockholders


IncomeShares


Amount


Capital


Compensation


Income


Deficit


Equity


(Loss)(In thousands)Balances at October 25, 2003


257,641



258



795,294



(4,222
)


5,797



(349,259
)


447,868



(146,830
)Issuance of common stock


5,461



5



24,747















24,752



Issuance of common stock for
    acquisition-related claim


1,346



1



6,942















6,943



Repurchase and retirement of common
    stock


(206
)






(288
)














(288
)


Change in deferred stock
    compensation










3,335



(3,335
)














Deferred stock compensation related
    to restricted stock grants










1,705



(1,705
)














Amortization of deferred stock
    compensation














4,088











4,088



Stock-based compensation expense










920















920



Change in unrealized gain (loss) on
    marketable equity securities and investments, net of tax


















(5,219
)






(5,219
)


(5,219
)Change in cumulative translation
    adjustments


















282







282



282Net loss






















(33,694
)


(33,694
)


(33,694
)Balances at October 30, 2004


264,242



264



832,655



(5,174
)


860



(382,953
)


445,652



(38,631
)Issuance of common stock


6,665



7



30,032















30,039



Repurchase and retirement of common
    stock


(62
)






(326
)














(326
)


Common stock repurchase program


(1,150
)


(1
)


(7,049
)














(7,050
)


Tax benefits from employee stock
    option transactions










2,571















2,571



Change in deferred stock
    compensation










(4,231
)


4,231















Deferred stock compensation related
    to restricted stock grants and Therion acquisition










1,911



(1,622
)










289



Amortization of deferred stock
    compensation














(615
)










(615
)


Change in unrealized gain (loss) on
    marketable equity securities and investments, net of tax


















(4,270
)






(4,270
)


(4,270
)Change in cumulative translation
    adjustments


















(564
)






(564
)


(564
)Net income






















43,121



43,121



43,121Balances at October 29, 2005


269,695


$
270


$
855,563


$
(3,180
)

$
(3,974
)

$
(339,832
)

$
508,847


$
38,287Issuance of common stock


9,644



10



34,266















34,276



Repurchase and retirement of common
    stock


(421
)






(3,328
)














(3,328
)


Common stock repurchase program


(6,777
)


(8
)


(40,200
)














(40,208
)


Tax benefits from employee stock
    option transactions










15,792















15,792



Stock-based compensation










30,065















30,065



Elimination of deferred stock
    compensation upon adoption of SFAS 123R










(3,180
)


3,180















Change in unrealized gain (loss) on
    marketable equity securities and investments, net of tax


















3,037







3,037



3,037Change in cumulative translation
    adjustments


















120







120



120Net income






















67,629



67,629



67,629Balances at October 28, 2006


272,141


$
272


$
888,978


$



$
(817
)

$
(272,203
)

$
616,230


$
70,786    55




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
67,629


$
43,121


$
(33,694
)Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Excess tax benefit (provision) from
    employee stock plans


(15,792
)


2,571



Depreciation and amortization


34,731



46,203



52,162Loss on disposal of property and
    equipment


438



1,879



8,510Amortization of debt issuance costs


1,430



1,366



1,929Net (gains) losses on investments
    and marketable equity securities


(2,685
)


5,178



(202
)Gain on repurchases of convertible
    subordinated debt






(2,318
)


(5,613
)Provision for doubtful accounts
    receivable and sales returns


3,526



2,955



3,406Provision for SEC settlement


7,000







Non-cash compensation expense


31,407



377



5,008Settlement of an
    acquisition-related claim










6,943Non-cash restructuring charges










4,995In-process research and development






7,784



Non-cash facilities lease loss
    expense and restructuring


3,775



(670
)


Changes in assets and liabilities:Accounts receivable


(31,244
)


21,312



(24,249
)Inventories


2,062



(5,433
)


(1,636
)Prepaid expenses and other assets


(19,839
)


(245
)


1,089Accounts payable


32,963



(17,117
)


4,874Accrued employee compensation


25,080



4,432



2,784Deferred revenue


15,390



10,602



14,994Other accrued liabilities and long
    term debt


15,858



9,113



6,595Liabilities associated with lease
    losses


(4,869
)


(5,245
)


(5,910
)Net cash provided by operating
    activities


166,860



125,865



41,985Cash flows from investing
    activities:Purchases of short-term investments


(325,884
)


(254,642
)


(26,551
)Purchases of long-term investments


(40,267
)


(202,764
)


(288,436
)Proceeds from maturities and sale
    of short-term investments


363,873



618,063



72,025Proceeds from maturities and sale
    of long-term investments






178,428



118,078Proceeds from sale of marketable
    equity securities and equity investments


10,185







Purchases of property and equipment


(30,430
)


(27,267
)


(53,758
)Purchases of non-marketable
    minority equity investments


(4,575
)


(3,498
)


(500
)Proceeds (purchases) from the
    maturities of restricted short-term investments


281,414



(275,995
)


Cash paid in connection with
    acquisitions, net of cash acquired


(52,829
)


(7,185
)


Cash placed in escrow in connection
    with acquisition of NuView


(7,058
)






Net cash provided by (used in)
    investing activities


194,429



25,140



(179,142
)Cash flows from financing
    activities:Purchases of convertible
    subordinated debt






(70,485
)


(84,366
)Accrual (settlement) of repurchase
    obligation










(9,029
)Proceeds from issuance of common
    stock, net


34,255



29,720



21,207Common stock repurchase program


(40,206
)


(7,050
)


Redemption of outstanding
    convertible debt


(278,883
)






Excess tax benefit from employee
    stock plans


15,792







Net cash used in financing
    activities


(269,042
)


(47,815
)


(72,188
)Effect of exchange rate
    fluctuations on cash and cash equivalents


120



(564
)


283Net increase (decrease) in cash and
    cash equivalents


92,367



102,626



(209,062
)Cash and cash equivalents,
    beginning of year


182,001



79,375



288,437Cash and cash equivalents, end of
    year

$
274,368


$
182,001


$
79,375Supplemental disclosure of cash
    flow information:Cash paid for interest

$
8,916


$
8,195


$
11,165Cash paid for income taxes

$
12,911


$
3,193


$
4,047    56




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Operations of Brocade        2.
    Summary
    of Significant Accounting Policies  Fiscal
    Year
  52/53-week 53-week 52-week 53-week
  Principles
    of Consolidation
    Cash
    and Cash Equivalents
    Investments
    and Equity Securities
    available-for-sale,
 57




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      other-than-temporary.
  available-for-sale
  other-than-temporary. other-than-temporary
  Fair
    Value of Financial Instruments
    Inventories
  first-in,
 58




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property
    and Equipment
    Notes Receivable
    from Non-Executive Employees
    Accrued
    Employee Compensation
    Goodwill
    and Intangible Assets
  Goodwill and
    Other Intangible Assets and/or
  Accounting for
    the Impairment or Disposal of Long-Lived Assets and/or
 59




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Concentrations
            Revenue
    Recognition
  Product revenue.
   60




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Service revenue.
  Multiple-element arrangements. 97-2, Software Revenue Recognition (SOP 97-2),
  Warranty Expense.
  Software
    Development Costs
  Accounting for the Costs of Computer Software to be
    Sold, Leased, or Otherwise Marketed.
  98-1, Accounting for Costs of Computer Software Developed or
    Obtained for Internal Use.
  Advertising
    Costs
    Income
    Taxes
   61




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Computation
    of Net Income (Loss) per Share
    Foreign
    Currency Translation
  non-United
  Stock-Based
    Compensation
  No. 123-R, Share-Based Payment Accounting for Stock-Based Compensation
  Accounting for Stock Issued to Employees
 62




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    No. FAS 123R-3, Transition Election Related to Accounting for tax Effects of
    Share-Based Payment Awards (FAS 123R-3).
  Use of
    Estimates in Preparation of Consolidated Financial
    Statements
    Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income
    Taxes  An Interpretation of FASB Statement
    No. 109 Accounting for Income Taxes.
  Fair Value Measures
  Quantifying
    Misstatements in Current Year Financial Statements,
 63




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting Changes and Error Corrections.
    Reclassifications
    3.
    Acquisitions  NuView,
    Inc.
       64




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Assets acquiredCash

$
130Accounts receivable


1,947Identifiable intangible assetsTradename


932Core/Developed technology


7,896Customer relationships


8,931Goodwill


41,013Other assets


114Total assets acquired


60,963Liabilities assumedAccounts payable and accrued
    liabilities


230Deferred revenue


220Total liabilities acquired


450Net assets acquired

$
60,513     Therion
    Software Corporation
       65




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Goodwill
    and Intangible Assets    Balance at October 29, 2005

$
NuView acquisition


41,013Balance at October 28, 2006

$
41,013     Gross





NetCarrying


Accumulated


CarryingValue


Amortization


ValueTradename

$
932


$
120


$
812Core/Developed technology


7,896



1,020



6,876Customer relationships


8,931



1,154



7,777Total intangible assets

$
17,759


$
2,294


$
15,465     FutureEstimatedFiscal Years

Amortization2007

$
3,5522008


3,5522009


3,5522010


3,5522011


1,257Total

$
15,465   5.
    Restructuring
    Costs  Fiscal
    2004 Second Quarter Restructuring
     66




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal
    2003 Second Quarter Restructuring
        Fiscal
    2003 First Quarter Restructuring
       67




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ContractSeverance


Terminations


Equipmentand Benefits


and Other


Impairment


TotalFiscal 2003 restructuring costs

$
12,714


$
2,425


$
5,867


$
21,006Cash payments


(10,019
)


(1,938
)






(11,957
)Non-cash charges


(2,221
)






(5,867
)


(8,088
)Adjustments


(178
)










(178
)Remaining accrued liabilities at
    October 25, 2003


296



487







783Cash payments for 2003
    restructuring


(43
)


(255
)






(298
)Adjustments for 2003 restructuring


(225
)


(232
)






(457
)Remaining accrued liabilities for
    2003 restructuring


28











28Fiscal 2004 second quarter
    restructuring costs


7,480



1,740



1,241



10,461Cash payments for 2004
    restructuring


(5,661
)


(1,692
)






(7,353
)Non-cash charges










(1,241
)


(1,241
)Adjustments


(981
)


(48
)






(1,029
)Remaining accrued liabilities for
    2004 restructuring


838











838Total restructuring accrued
    liabilities at October 30, 2004


866











866Cash payments for 2003
    restructuring


(28
)










(28
)Cash payments for 2004
    restructuring


(838
)










(838
)Total restructuring accrued
    liabilities at October 29, 2005

$



$



$



$
     6.
    Liabilities
    Associated with Facilities Lease Losses and Asset Impairment
    Charges  Lease
    Termination Charge and Other, Net
     68




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Lease termination charge

$
76,800Closing costs and other related
    charges


1,234Reversal of previously recorded
    facilities lease loss reserve


(23,731
)Additional reserve booked as a
    result of facilities consolidation


20,855Asset impairments associated with
    facilities consolidation


433Total charge, net

$
75,591   Facilities
    Lease Losses and Related Asset Impairment Charges
         69




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Lease LossReserveReserve balances at
    October 25, 2003

$
24,277Reversal of previously recorded
    lease loss reserve associated with building purchase


(16,933
)Additional reserve booked as a
    result of November 2003 facilities leases


20,855Cash payments on facilities leases


(5,910
)Non-cash charges and other
    adjustments, net


187Reserve balances at
    October 30, 2004


22,476Cash payments on facilities leases


(5,202
)Non-cash charges and other
    adjustments, net


(134
)Reserve balances at
    October 29, 2005


17,140Additional reserve booked as a
    result of second quarter 2006 current market data


3,775Cash payments on facilities leases


(4,765
)Non-cash charges and other
    adjustments, net


(114
)Reserve balances at
    October 28, 2006

$
16,036    70




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Balance
    Sheet Details    October 28,


October 29,2006


2005Inventories:Raw materials

$
82


$
1,517Finished goods


8,886



9,513Total

$
8,968


$
11,030Property and equipment,
    net:Computer equipment and software

$
73,421


$
68,294Engineering and other equipment


144,530



123,811Furniture and fixtures


4,360



4,136Land and building


30,000



30,000Leasehold improvements


43,519



41,696295,830



267,937Less: Accumulated depreciation and
    amortization


(191,531
)


(159,819
)Total

$
104,299


$
108,118Other accrued
    liabilities:Income taxes payable

$
39,076


$
36,923Accrued warranty


2,230



1,746Inventory purchase commitments


6,104



6,634Accrued sales programs


12,051



8,327Other


28,530



16,202Total

$
87,991


$
69,832    71




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Investments
    and Equity Securities    Gross


GrossUnrealized


UnrealizedCost


Gains


Losses


Fair ValueOctober 28, 2006U.S. government and its
    agencies and municipal obligations

$
124,105


$
5


$
(556
)

$
123,554Corporate bonds and notes


185,183



32



(583
)


184,632Total

$
309,288


$
37


$
(1,139
)

$
308,186Reported as:Short-term investments













$
267,694Long-term investments














40,492Total













$
308,186   Gross


GrossUnrealized


UnrealizedCost


Gains


Losses


Fair ValueOctober 29, 2005U.S. government and its
    agencies and municipal obligations

$
413,574


$



$
(2,629
)

$
410,945Corporate bonds and notes


173,021



11



(1,576
)


171,456Equity securities


34



2







36Total

$
586,629


$
13


$
(4,205
)

$
582,437Reported as:Short-term investments













$
209,865Restricted short-term investments














277,230Other current assets














36Long-term investments














95,306Total













$
582,437    72




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Less Than 12 Months


12 Months or Longer


TotalGross





Gross





GrossUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


LossesOctober 28, 2006U.S. government and its
    agencies and municipal obligations

$
69,016


$
(427
)

$
14,635


$
(130
)

$
83,651


$
(557
)Corporate bonds and notes


112,769



(446
)


18,208



(136
)


130,977



(582
)Total

$
181,785


$
(873
)

$
32,843


$
(266
)

$
214,628


$
(1,139
)   Less Than 12 Months


12 Months or Longer


TotalGross





Gross





GrossUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


LossesOctober 29, 2005U.S. government agencies and
    municipal obligations

$
324,219


$
(1,769
)

$
69,376


$
(860
)

$
393,595


$
(2,629
)Corporate bonds and notes


95,303



(1,050
)


54,206



(526
)


149,509



(1,576
)Total

$
419,522


$
(2,819
)

$
123,582


$
(1,386
)

$
543,104


$
(4,205
)       AmortizedCost


Fair ValueLess than one year

$
268,535


$
267,694Due in 1  2 years


39,253



38,991Due in 2  3 years


1,500



1,501Total

$
309,288


$
308,186   9.
    Convertible
    Subordinated Debt   73




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      sm
    10.
    Commitments
    and Contingencies  Leases
      OperatingFiscal Year Ended October

Leases2007

$
16,7022008


14,7592009


14,1842010


11,879Thereafter


79Total minimum lease payments

$
57,603  74




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Product
    Warranties
    AccruedWarrantyBalance at October 30, 2004

$
4,669Liabilities accrued


1,053Claims paid


(582
)Changes in liability for
    pre-existing warranties


(3,394
)Balance at October 29, 2005

$
1,746Liabilities accrued


1,865Claims paid


(559
)Changes in liability for
    pre-existing warranties


(822
)Balance at October 28, 2006

$
2,230     Manufacturing
    and Purchase Commitments
   75




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Legal
    Proceedings
        Rule 10b-5
   76




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Integration
    costs
      11.
    Stockholders
    Equity  Stock
    Option Exchange Program
     77




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Tender
    Offer
    Stockholder
    Rights Plan
    Employee
    Stock Purchase Plan
   78




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  1999 Director
    Option Plan
    1999
    Stock Plan
    1999
    Nonstatutory Stock Option Plan
    Rhapsody
    Stock Option Plan
  and/or
  Therion
    Stock Option Plan
  and/or
  Stock
    Options
   79




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fiscal Year Ended


Fiscal Year Ended


Fiscal Year EndedOctober 28, 2006


October 29, 2005


October 30, 2004Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


45,179


$
6.59



49,524


$
7.12



46,591


$
7.70Granted


7,657


$
5.63



11,488


$
5.15



15,319


$
5.52Exercised


(4,498
)

$
5.25



(3,836
)

$
4.98



(2,705
)

$
4.83Cancelled


(8,384
)

$
7.78



(11,997
)

$
8.02



(9,681
)

$
7.52Outstanding at end of year


39,954


$
6.35



45,179


$
6.59



49,524


$
7.14Exercisable and vested at end of
    year


24,160


$
6.96



25,963


$
7.52



24,654


$
7.99     Options Outstanding


Options ExercisableWeighted








WeightedAverage


Weighted





AverageRemaining


Average





ExerciseRange of Exercise Prices

Number


Years


Exercise Price


Number


Price$ 0.01 - $  4.97


8,505



5.62


$
3.98



3,898


$
3.92$ 5.06 - $  6.93


29,595



5.82


$
6.08



18,782


$
6.17$ 6.95 - $ 25.34


1,524



4.27


$
12.01



1,150


$
13.55$28.11 - $ 45.53


115



3.45


$
38.63



115


$
38.63$62.00 - $104.94


215



3.81


$
79.17



215


$
79.17$ 0.01 - $104.94


39,954



5.70


$
6.35



24,160


$
6.96Ending vested and expected to vest


37,827






$
6.39      80




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Equity
    Compensation Plan Information
    A


B


CNumber of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities





Under Equityto be Issued


Weighted Average


Compensation Plansupon Exercise of


Exercise Price of


(Excluding SecuritiesPlan Category

Outstanding Options


Outstanding Options


Reflected in Column A)Equity compensation plans approved
    by shareholders(1)


31,201
(3)

$
5.94



51,643
(4)Equity compensation plans not
    approved by shareholders(2)


8,753
(5)

$
7.80



35,258Total


39,954


$
6.34



86,901     (1)
    
    Consists of the Purchase Plan, the Director Plan, the 1999 Plan,
    the Rhapsody Plan, and the Therion Plan. Both the Rhapsody Plan
    and Therion Plan were assumed in connection with acquisitions.(2)
    
    Consists solely of the NSO Plan.(3)
    
    Excludes purchase rights accruing under the Purchase Plan. As of
    October 28, 2006, the Purchase Plan had a
    shareholder-approved reserve of 43.9 million shares, of
    which 32.2 million shares were available for future
    issuance.(4)
    
    Consists of shares available for future issuance under the
    Purchase Plan, the Director Plan, the 1999 Plan, the Rhapsody
    Plan, and the Therion Plan.(5)
    
    Substantially all shares were granted prior to fiscal year ended
    October 25, 2003.  Employee
    401(k) Plan
      12.
    Employee
    Benefit and Stock-Based Compensation Plans  Stock
    Options
   81




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Stock
    OptionsExpected dividend yield


0.0
%


0.0
%


0.0
%Risk-free interest rate


4.5 - 5.2
%


3.7 - 4.1
%


1.8 - 3.5
%Expected volatility


47.4 - 52.8
%


42.8 - 47.6
%


45.2 - 57.3
%Expected term (in years)


3.3



2.8



2.7         Employee
    Stock Purchase Plan
      Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Employee Stock Purchase
    PlanExpected dividend yield






0.0
%


0.0
%


0.0
%Risk-free interest rate






4.4 - 5.2
%


2.5 - 3.4
%


1.0 - 1.5
%Expected volatility






42.6 - 44.3
%


45.8 - 50.3
%


43.6 - 61.7
%Expected term (in years)






0.5



0.5



0.5    82




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Information
    as Reported in the Financial Statements
    Year Ended


Year Ended


Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Restricted stock awards

$
3,856


$
$926


$
668Options remeasured at their
    intrinsic value


3,894



(2,061
)


3,802Acquisition related amortization
    of stock compensation


1,794



519



537Incremental expense related to the
    adoption of SFAS 123R


19,755







Incremental expense related to
    tender offer


2,108







Total

$
31,407


$
(616
)

$
5,007     Year EndedOctober 28,2006Stock-based compensation expense
    for stock options and employee stock purchases included in
    operations:Cost of revenues

$
(5,673
)Research and development


(6,632
)Sales and marketing


(4,941
)General and administrative


(2,509
)Total


(19,755
)Tax benefit


309Net decrease in net income

$
(19,446
)Effect on:Net income per share 
    Basic

$
(0.07
)Net income per share 
    Diluted

$
(0.07
)    83




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Information
    Calculated as if Fair Value Method Had Applied to All Awards for
    years prior to Fiscal 2006
    Year


YearEnded


EndedOctober 29,


October 30,2005


2004Net income (loss)  as
    reported

$
43,121


$
(33,694
)Add(Deduct): Stock-based
    compensation expense (benefit) included in reported net income,
    net of tax


(616
)


5,007Deduct: Stock-based compensation
    expense determined under the fair value based method, net of tax


(19,337
)


(37,376
)Pro forma net income (loss)

$
23,168


$
(66,063
)Basic net income (loss) per share:As reported

$
0.16


$
(0.13
)Pro forma

$
0.09


$
(0.25
)Diluted net income (loss) per
    share:As reported

$
0.16


$
(0.13
)Pro forma

$
0.09


$
(0.25
)   Restricted
    Stock Awards
     84




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverageGrant-DateShares


Fair Value(In thousand)Nonvested, October 29, 2005


13


$
7.05Granted


1,923


$
4.43Vested


(12
)

$
7.05Forfeited


(76
)

$
4.43Nonvested, October 28, 2006


1,848


$
4.44Expected to vest, October 28,
    2006


1,543


$
4.44   13.
    Income
    Taxes    Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004United States

$
45,088


$
20,398


$
(46,684
)International


53,264



34,800



27,060Total

$
98,352


$
55,198


$
(19,624
)     Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Federal:Current

$
18,475


$
2,942


$
Deferred










18,475



2,942



State:Current


4,893



2,826



428Deferred










4,893



2,826



428Foreign:Current


7,397



6,309



13,642Deferred


(42
)






7,355



6,309



13,642Total

$
30,723


$
12,077


$
14,070  85




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Provision for (benefit from)
    income taxes at statutory rate


35.0
%


35.0
%


(35.0
)%State taxes, net of federal tax
    benefit


3.5



4.1



1.8Foreign income taxed at other than
    U.S. rates


(8.9
)


(10.7
)


14.7In-process research and development






4.9



Research and development credit


(0.4
)


(0.3
)


(31.5
)Other permanent items


4.9



2.9



1.7Tax on repatriated foreign
    earnings under Act, net of credits






7.2



Change in valuation allowance


(2.9
)


(21.2
)


120.0Provision for income taxes


31.2
%


21.9
%


71.7
%         October 28,


October 29,2006


2005Net operating loss carryforwards

$
121,563


$
157,393Variable stock option compensation
    charge


6,438



4,957Tax credit carryforwards


73,425



66,046Reserves and accruals


73,244



57,631Non-U.S. Stock
    Option Expense


42



Capitalized research expenditures


19,090



22,257Net unrealized losses on
    investments






1,675Other


212



177Total


294,014



310,136Less: Valuation allowance


(293,972
)


(310,136
)Net deferred tax assets

$
42


$
  86




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          14.
    Segment
    Information      Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Revenues by geography:Domestic


64
%


63
%


65
%International


36
%


37
%


35
%Total


100
%


100
%


100
%  87




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##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Net Revenues:North America (principally the
    United States)

$
478,138


$
373,710


$
387,225Europe, the Middle East, and Africa


201,996



139,741



153,114Asia Pacific


70,458



60,669



55,926Total

$
750,592


$
574,120


$
596,265     15.
    Interest
    and Other Income, net    Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Interest income

$
29,233


$
22,270


$
19,619Other income (expense), net


(135
)


386



(833
)Total

$
29,098


$
22,656


$
18,786   16.
    Gain on
    Investments, net   88




---



##### Table of Contents



BROCADE
    COMMUNICATIONS SYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  17.
    Net
    Income (Loss) per Share    Fiscal Year EndedOctober 28,


October 29,


October 30,2006


2005


2004Net income (loss)

$
67,629


$
43,121


$
(33,694
)Basic and diluted net income
    (loss) per share:Weighted-average shares of common
    stock outstanding


271,498



268,256



260,849Less: Weighted-average shares of
    common stock subject to repurchase


(1,896
)


(80
)


(403
)Weighted-average shares used in
    computing basic net income (loss) per share


269,602



268,176



260,446Dilutive potential common shares


4,540



2,084



Weighted-average shares used in
    computing diluted net income per share


274,142



270,260



260,446Basic net income (loss) per share

$
0.25


$
0.16


$
(0.13
)Diluted net income (loss) per share

$
0.25


$
0.16


$
(0.13
)     18.
    Related
    Party and Other Transactions    19.
    Subsequent
    Events     89




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Form 10-K
      Limitations
    on the Effectiveness of Disclosure Controls and
    Procedures.
    Changes
    in Internal Control over Financial Reporting
  Rules 13a-15 15d-15
  Management
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f) 15d-15(f)
 90




---



##### Table of Contents




    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.       91




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 
     92




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III    Item 10.
    Directors
    and Executive Officers of the Registrant      Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   93




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K
    Form 10-K.
      Schedule II 
    Valuation and Qualifying Accounts


Page 102     (3)
    
    Exhibits:  Regulation S-K Form 10-K
  Exhibit Index
  ExhibitNumber

Description of Document2
.1

Agreement and Plan of
    Reorganization by and among Brocade, Rhapsody Networks, Inc.,
    and certain other parties dated November 5, 2002
    (incorporated by reference to Exhibit 2.1 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)2
.2

First Amendment to Agreement and
    Plan of Reorganization by and among Brocade, Rhapsody Networks,
    Inc., and certain other parties dated January 5, 2003
    (incorporated by reference to Exhibit 2.2 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)2
.3

Agreement and Plan of
    Reorganization by and among Brocade, McDATA Corporation and
    certain other parties dated August 7, 2006 (incorporated by
    reference to Exhibit 2.1 from Brocades
    Form 8-K
    filed on August 8, 2006)3
.1

Amended and Restated Certificate
    of Incorporation (incorporated by reference to Exhibit 3.1
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)3
.2

Amended and Restated Bylaws of the
    Registrant amended as of November 17, 2006 (incorporated by
    reference to Exhibit 99.1 from Brocades
    Form 8-K
    filed on November 24, 2006)3
.3

Certificate of Designation of
    Rights, Preferences and Privileges of Series A
    Participating Preferred Stock of Brocade Communications Systems,
    Inc. (incorporated by reference to Exhibit 4.1 from
    Brocades Registration Statement on
    Form 8-A
    filed on February 11, 2002)4
.1

Form of Registrants Common
    Stock certificate (incorporated by reference to Exhibit 4.1
    from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)4
.2

Preferred Stock Rights Agreement
    dated as of February 7, 2002 between Brocade and Wells
    Fargo Bank MN, N.A. (incorporated by reference to
    Exhibit 4.1 from Brocades Registration Statement on
    Form 8-A
    filed on February 11, 2002)4
.3

Amendment No. 1 dated
    August 7, 2006 to the Preferred Stock Rights Agreement
    dated as of February 7, 2002 between Brocade and Wells
    Fargo Bank MN, N.A. (incorporated by reference to
    Exhibit 4.4 from Brocades Quarterly Repot on
    Form 10-Q
    for the fiscal quarter ended July 29, 2006)10
.1

Form of Indemnification Agreement
    entered into between Brocade and each of its directors and
    executive officers (incorporated by reference to
    Exhibit 10.1 from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended) 94




---



##### Table of Contents



ExhibitNumber

Description of Document10
.2

Master Equipment Lease Agreement
    between Venture Lending & Leasing, Inc. and Brocade
    dated September 5, 1996 (incorporated by reference to
    Exhibit 10.13 from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)10
.3#

Acknowledgement between Wind River
    Systems, Inc. and Brocade dated April 22, 1999
    (incorporated by reference to Exhibit 10.18 from
    Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)10
.4#

Manufacturing Agreement between
    Solectron California Corporation and Brocade dated July 30,
    1999 (incorporated by reference to Exhibit 10.24 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 31, 1999, as amended)10
.5

Master Lease Agreement between
    Spieker Properties and Brocade dated December 17, 1999
    (incorporated by reference to Exhibit 10.25 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 31, 1999, as amended)10
.6

First Amendment to Lease between
    Spieker Properties and Brocade dated February 16, 2000
    (incorporated by reference to Exhibit 10.22 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.7

Second Amendment to Lease between
    Spieker Properties and Brocade dated August 11, 2000
    (incorporated by reference to Exhibit 10.23 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.8

Credit Agreement between Comerica
    Bank-California and Brocade dated January 5, 2000
    (incorporated by reference to Exhibit 10.26 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 29, 2000)10
.9

First Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    March 21, 2000 (incorporated by reference to
    Exhibit 10.25 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.10

Second Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    September 20, 2000 (incorporated by reference to
    Exhibit 10.26 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.11

Master Lease Agreement between
    Spieker Properties and Brocade dated July 26, 2000
    (incorporated by reference to Exhibit 10.27 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.12#

Purchase Agreement between Compaq
    Computer Corporation and Brocade dated February 1, 2000
    (incorporated by reference to Exhibit 10.28 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.13#

Purchase Agreement between EMC
    Corporation and Brocade dated January 25, 2000 (EMC
    Purchase Agreement) (incorporated by reference to
    Exhibit 10.29 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.14#

Extension Agreement between EMC
    Corporation and Brocade dated December 18, 2000
    (incorporated by reference to Exhibit 10.23 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.15

Extension Agreement between EMC
    Corporation and Brocade dated November 13, 2002
    (incorporated by reference to Exhibit 10.24 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 25, 2003)10
.16#

Goods Agreement between
    International Business Machines Corporation and Brocade dated
    April 15, 1999 (incorporated by reference to
    Exhibit 10.24 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.17

Amendment #1 to the Goods
    Agreement between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.25
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.18#

Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.26 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001) 95




---



##### Table of Contents



ExhibitNumber

Description of Document10
.19#

Amendment #3 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.27
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.20#

Amendment #4 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.28
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.21#

Statement of Work #2 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.29 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.22

Third Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    January 22, 2001 (incorporated by reference to
    Exhibit 10.2 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 27, 2001)10
.23

Lease Agreement between MV Golden
    State San Jose, LLC and Brocade dated December 1, 2000
    (incorporated by reference to Exhibit 10.1 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 27, 2001)10
.24#

Amendment No. 5 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.2 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.25#

Amendment No. 6 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.3 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.26#

Amendment No. 7 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.37 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.27#

Amendment No. 8 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.36 from Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)10
.28#

Amendment No. 1 to Statement
    of Work No. 2 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.4 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.29

Amendment No. 2 to Statement
    of Work No. 2 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.5 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.30#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated January 28, 2000
    (2000 OEM Purchase Agreement) (incorporated by reference to
    Exhibit 10.38 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.31#

Amendment to 2000 OEM Purchase
    Agreement between Brocade and Hewlett-Packard Company dated
    April 20, 2001 (incorporated by reference to
    Exhibit 10.39 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.32

Letter Amendment to 2000 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated January 25, 2002 (incorporated by reference to
    Exhibit 10.40 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.33#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated April 20, 2001
    (2001 OEM Purchase Agreement) (incorporated by reference to
    Exhibit 10.41 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.34#

Amendment No. 1 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated July 1, 2001 (incorporated by reference to
    Exhibit 10.42 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.35#

Amendment No. 2 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated November 6, 2001 (incorporated by reference to
    Exhibit 10.43 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002) 96




---



##### Table of Contents



ExhibitNumber

Description of Document10
.36#

Amendment No. 3 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated February 1, 2002 (incorporated by reference to
    Exhibit 10.44 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.37#

Amendment No. 4 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated June 5, 2002 (incorporated by reference to
    Exhibit 10.45 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.38#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated December 16,
    2002. (incorporated by reference to Exhibit 10.48 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)10
.39#

Manufacturing and Purchase
    Agreement between Brocade and Hon Hai Precision Industry Co.,
    Ltd. dated April 5, 2003 (HHPI Manufacturing and Purchase
    Agreement) (incorporated by reference to Exhibit 10.49 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.40

Amendment Number One to HHPI
    Manufacturing and Purchase Agreement between Brocade and Hon Hai
    Precision Industry Co., Ltd. dated April 5, 2003
    (incorporated by reference to Exhibit 10.50 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.41#

Manufacturing and Purchase
    Agreement between Brocade Communications Switzerland SarL and
    Hon Hai Precision Industry Co., Ltd. dated May 1, 2003
    (incorporated by reference to Exhibit 10.51 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.42#

Manufacturing and Purchase
    Agreement between Brocade and Solectron Corporation dated
    February 21, 2003 (Solectron Manufacturing and Purchase
    Agreement) (incorporated by reference to Exhibit 10.52 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.43

Amendment No. 1 to Solectron
    Manufacturing and Purchase Agreement between Brocade and
    Solectron Corporation dated March 21, 2003 (incorporated by
    reference to Exhibit 10.53 from Brocades Quarterly
    Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.44#

Manufacturing and Purchase
    Agreement between Brocade Communications Switzerland SarL and
    Solectron Corporation dated March 21, 2003 (incorporated by
    reference to Exhibit 10.54 from Brocades Quarterly
    Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.45#

Amendment No. 2 to EMC
    Purchase Agreement between Brocade and EMC dated
    February 18, 2003. (incorporated by reference to
    Exhibit 10.55 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.46#

Amendment No. 3 to EMC
    Purchase Agreement between Brocade and EMC dated July 30,
    2003 (incorporated by reference to Exhibit 10.56 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 25, 2003)10
.47#

Amendment #10 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.55
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.48#

Amendment #11 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.56
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.49#

Amendment #14 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.59
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.50#

Statement of Work #3 between
    International Business Machines Corporation and Brocade dated
    December 15, 2003 (incorporated by reference to
    Exhibit 10.60 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.51#

Amendment No. 4 to EMC
    Purchase Agreement between Brocade and EMC dated
    October 29, 2003 (incorporated by reference to
    Exhibit 10.61 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004) 97




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##### Table of Contents



ExhibitNumber

Description of Document10
.52

Third Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 30, 2000 (incorporated by reference to
    Exhibit 10.62 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.53

Fourth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.63 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.54

Fifth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.64 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.55

Sixth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.65 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.56

Real Estate Sale and Lease
    Termination Agreement between EOP-Skyport I, LLC and
    Brocade effective November 18, 2003 (incorporated by
    reference to Exhibit 10.66 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.57

Grant Deed from
    EOP-Skyport I, L.L.C to Brocade Communications Systems
    Skyport LLC dated November 18, 2003 (incorporated by
    reference to Exhibit 10.67 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.58

Fourth Amendment to the Skyport
    Plaza Declaration of Common Easements, Covenants, Conditions and
    Restrictions dated October 18, 2003 (incorporated by
    reference to Exhibit 10.68 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.59

Guaranty of Brocade Communications
    Systems, Inc. to EOP Skyport I, L.L.C dated
    November 18, 2003 (incorporated by reference to
    Exhibit 10.69 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.60

Right of First Offer Agreement
    between EOP-Skyport I, L.L.C to Brocade Communications
    Systems Skyport LLC dated November 18, 2003 (incorporated
    by reference to Exhibit 10.70 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.61#

Amendment #15 dated
    March 26, 2004 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.71 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended May 1, 2004)10
.62#

Amendment No. 6 dated
    April 27, 2004 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.72 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended May 1, 2004)10
.63#

Amendment No. 5 dated
    May 4, 2004 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.73 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 31, 2004)10
.64#

Amendment #1 dated
    May 12, 2004 to Statement of Work #3 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.76 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 31, 2004)10
.65#

Amendment #18 dated
    October 5, 2004 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.77 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.66#

Amendment No. 7 dated
    July 28, 2004 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.78 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.67#

Amendment No. 8 dated
    November 1, 2004 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.79 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.68#

Amendment #1 dated
    November 2, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.80 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004) 98




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##### Table of Contents



ExhibitNumber

Description of Document10
.69#

Amendment #2 dated
    October 27, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.81 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.70*

Employment Letter for Michael
    Klayko (incorporated by reference to Exhibit 10.85 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.71*

Employment Letter for Don Jaworski
    (incorporated by reference to Exhibit 10.86 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.72#

Amendment #19 dated
    January 28, 2005 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.88 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.73#

Amendment #3 dated
    November 22, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.89 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.74*

Change of Control Retention
    Agreement entered into by Brocade Communications Systems, Inc.
    and Michael Klayko dated March 9, 2005 (incorporated by
    reference to Exhibit 10.90 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.75*

Form of Change of Control
    Retention Agreement entered into by Brocade Communications
    Systems, Inc. and each of Don Jaworski, T.J. Grewal, Luc Moyen
    and Tom Buiocchi dated March 9, 2005 (incorporated by
    reference to Exhibit 10.91 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.76#

Amendment #10 dated
    March 20, 2005 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 30, 2005)10
.77#

Amendment #11 dated
    March 25, 2005 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.2 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 30, 2005)10
.78*

Senior Leadership Plan as amended
    and restated as of October 21, 2005 (incorporated by
    reference to Exhibit 10.83 from Brocades Annual
    Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.79*

Therion Software Corporation 2004
    Stock Plan (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.80

Fourth Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    July 27, 2005 (incorporated by reference to
    Exhibit 10.2 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.81#

Amendment #21 to Statement of
    Work No. 1 between International Business Machines
    Corporation and Brocade dated June 28, 2005 (incorporated
    by reference to Exhibit 10.3 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.82#

Amendment #13 dated
    July 12, 2005 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.4 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.83*

Form of Change of Control
    Retention Agreement between the Company and Ian Whiting dated
    May 1, 2005 (incorporated by reference to Exhibit 10.5
    from Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.84*

Amended and Restated 1999 Stock
    Plan and related forms of agreements (incorporated by reference
    to Exhibit 10.89 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.85*

Amended and Restated Employee
    Stock Purchase Plan and related forms of agreements
    (incorporated by reference to Exhibit 10.7 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005) 99




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##### Table of Contents



ExhibitNumber

Description of Document10
.86*

Amended and Restated 1999
    Nonstatutory Stock Option Plan and related forms of agreements
    (incorporated by reference to Exhibit 10.8 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.87*

Employment Letter for Ian Whiting
    dated May 1, 2005 (incorporated by reference to
    Exhibit 10.92 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.88#

Amendment #22 to Statement of
    Work No. 1 between International Business Machines
    Corporation and Brocade dated August 12, 2005 (incorporated
    by reference to Exhibit 10.93 from Brocades annual
    report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.89#

Amendment #6 to Statement of
    Work No. 3 between International Business Machines
    Corporation and Brocade dated September 13, 2005
    (incorporated by reference to Exhibit 10.94 from
    Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.90#

Statement of Work No. 4
    between International Business Machines Corporation and Brocade
    dated August 12, 2005 (incorporated by reference to
    Exhibit 10.95 from Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.91#

Amendment #14 dated
    October 24, 2005 to EMC Purchase Agreement between Brocade
    and EMC dated January 25, 2000 (incorporated by reference
    to Exhibit 10.96 from Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.92

Fifth Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    January 5, 2006 (incorporated by reference to
    Exhibit 10.1 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.93

Tolling Agreement dated as of
    January 1, 2006 between Gregory L. Reyes and Brocade, David
    House, William Krause, Nicholas Moore, William OBrien,
    Christopher Paisley, Larry Sonsini, Seth Neiman, Neal Dempsey
    and Sanjay Vaswani (incorporated by reference to
    Exhibit 10.2 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.94#

Amendment #23 dated
    December 15, 2005 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.3 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.95

Amendment #24 dated
    December 15, 2005 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.4 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.96

Amendment #4 dated
    January 20, 2006 to the OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.97

Amendment No. 12 to the OEM
    Purchase Agreement dated January 25, 2000 (effective as of
    January 31, 2006) by and among Brocade, Brocade
    Communications Switzerland SarL, and EMC Corporation
    (incorporated by references to Exhibit 10.2 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.98

Amendment #25 effective
    April 14, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.3 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.99

Amendment #4 dated
    March 30, 2006 to the Goods Agreement between International
    Business Machines Corporation and Brocade (incorporated by
    reference to Exhibit 10.4 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.100

Amendment #1 to Statement of
    Work No. 4 between International Business Machines
    Corporation and Brocade effective May 31, 2006
    (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 29, 2006)10
.101

Amendment #7 to Statement of
    Work No. 3 between International Business Machines
    Corporation and Brocade dated July 19, 2006 (incorporated
    by reference to Exhibit 10.2 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended July 29, 2006) 100




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##### Table of Contents



ExhibitNumber

Description of Document10
.102*

Change of Control Retention
    Agreement entered into by Brocade Communications Systems, Inc.
    and Tyler Wall dated June 22, 2005 (incorporated by
    reference to Exhibit 10.108 from Brocades Registration
    Statement on Form S-4 filed on December 5, 2006)10
.103/**

Amendment #26 dated
    September 19, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 200510
.104/**

Amendment #27 dated
    October 3, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 200510
.105/**

Amendment #6 effective as of
    August 4, 2006 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 200210
.106/**

Amendment #7 dated
    August 4, 2006 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 200212
.1**

Statement of Computation of Ratio
    of Earnings to Fixed Charges21
.1**

Subsidiaries of Registrant23
.1**

Consent of Independent Registered
    Public Accounting Firm24
.1**

Power of attorney (see signature
    page)31
.1**

Rule 13a-14(a)/15d-14(a)
    Certification by the Chief Executive Officer31
.2**

Rule 13a-14(a)/15d-14(a)
    Certification by the Chief Financial Officer32
.1**

Certification by the Chief
    Executive Officer and Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Indicates management contract or compensatory plan or
    arrangement required to be filed as an exhibit pursuant to
    Item 15(b) of
    Form 10-K.**
    
    Filed herewith.#
    
    Confidential treatment granted as to certain portions, which
    portions were omitted and filed separately with the Securities
    and Exchange Commission.
    
    Confidential treatment requested as to certain portions, which
    portions were omitted and filed separately with the Securities
    and Exchange Commission. 101




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##### Table of Contents



SCHEDULE II
  VALUATION
    AND QUALIFYING ACCOUNTS
  Years
    Ended October 28, 2006, October 29, 2005, and
    October 30, 2004
  AdditionsBalance at


Charged to





Balance atBeginning of


Expenses/





End ofDescription

Period


Revenues


Deductions*


Period(In thousands)Allowance for doubtful accounts:2006

$
467


$
427


$
(200
)

$
6942005

$
409


$
200


$
(142
)

$
4672004

$
639


$



$
(230
)

$
409Sales returns and allowances:2006

$
4,475


$
3,099


$
(3,426
)

$
4,1482005

$
3,452


$
2,755


$
(1,732
)

$
4,4752004

$
3,541


$
3,406


$
(3,495
)

$
3,452     *
    
    Deductions related to the allowance for doubtful accounts and
    sales returns and allowances represent amounts written off
    against the allowance less recoveries. 102




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##### Table of Contents



SIGNATURES      By:
    /s/  Michael
    Klayko       POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K attorneys-in-fact
    Signature

Title

Date/s/  Michael
    KlaykoMichael
    Klayko

Chief Executive Officer
    (Principal Executive Officer and Director)

January 9, 2007/s/  Richard
    DeranleauRichard
    Deranleau

Chief Financial Officer and Vice
    President, Finance (Principal Financial and Accounting Officer)

January 8, 2007/s/  David
    L. HouseDavid
    L. House

Chairman of the Board of Directors

January 8, 2007/s/  L.
    William KrauseL.
    William Krause

Lead Director

January 8, 2007/s/  Neal
    DempseyNeal
    Dempsey

Director

January 8, 2007/s/  Glenn
    JonesGlenn
    Jones

Director

January 4, 2007 103




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##### Table of Contents



Signature

Title

Date/s/  Michael
    J. RoseMichael
    J. Rose

Director

January 8, 2007/s/  Sanjay
    VaswaniSanjay
    Vaswani

Director

January 8, 2007/s/  Robert
    WalkerRobert
    Walker

Director

January 3, 2007  104




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of Document2
.1

Agreement and Plan of
    Reorganization by and among Brocade, Rhapsody Networks, Inc.,
    and certain other parties dated November 5, 2002
    (incorporated by reference to Exhibit 2.1 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)2
.2

First Amendment to Agreement and
    Plan of Reorganization by and among Brocade, Rhapsody Networks,
    Inc., and certain other parties dated January 5, 2003
    (incorporated by reference to Exhibit 2.2 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)2
.3

Agreement and Plan of
    Reorganization by and among Brocade, McDATA Corporation and
    certain other parties dated August 7, 2006 (incorporated by
    reference to Exhibit 2.1 from Brocades
    Form 8-K
    filed on August 8, 2006)3
.1

Amended and Restated Certificate
    of Incorporation (incorporated by reference to Exhibit 3.1
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)3
.2

Amended and Restated Bylaws of the
    Registrant amended as of November 17, 2006 (incorporated by
    reference to Exhibit 99.1 from Brocades
    Form 8-K
    filed on November 24, 2006)3
.3

Certificate of Designation of
    Rights, Preferences and Privileges of Series A
    Participating Preferred Stock of Brocade Communications Systems,
    Inc. (incorporated by reference to Exhibit 4.1 from
    Brocades Registration Statement on
    Form 8-A
    filed on February 11, 2002)4
.1

Form of Registrants Common
    Stock certificate (incorporated by reference to Exhibit 4.1
    from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)4
.2

Preferred Stock Rights Agreement
    dated as of February 7, 2002 between Brocade and Wells
    Fargo Bank MN, N.A. (incorporated by reference to
    Exhibit 4.1 from Brocades Registration Statement on
    Form 8-A
    filed on February 11, 2002)4
.3

Amendment No. 1 dated
    August 7, 2006 to the Preferred Stock Rights Agreement
    dated as of February 7, 2002 between Brocade and Wells
    Fargo Bank MN, N.A. (incorporated by reference to
    Exhibit 4.4 from Brocades Quarterly Repot on
    Form 10-Q
    for the fiscal quarter ended July 29, 2006)10
.1

Form of Indemnification Agreement
    entered into between Brocade and each of its directors and
    executive officers (incorporated by reference to
    Exhibit 10.1 from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)10
.2

Master Equipment Lease Agreement
    between Venture Lending & Leasing, Inc. and Brocade
    dated September 5, 1996 (incorporated by reference to
    Exhibit 10.13 from Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)10
.3#

Acknowledgement between Wind River
    Systems, Inc. and Brocade dated April 22, 1999
    (incorporated by reference to Exhibit 10.18 from
    Brocades Registration Statement on
    Form S-1
    (Reg.
    No. 333-74711),
    as amended)10
.4#

Manufacturing Agreement between
    Solectron California Corporation and Brocade dated July 30,
    1999 (incorporated by reference to Exhibit 10.24 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 31, 1999, as amended)10
.5

Master Lease Agreement between
    Spieker Properties and Brocade dated December 17, 1999
    (incorporated by reference to Exhibit 10.25 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 31, 1999, as amended)10
.6

First Amendment to Lease between
    Spieker Properties and Brocade dated February 16, 2000
    (incorporated by reference to Exhibit 10.22 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.7

Second Amendment to Lease between
    Spieker Properties and Brocade dated August 11, 2000
    (incorporated by reference to Exhibit 10.23 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.8

Credit Agreement between Comerica
    Bank-California and Brocade dated January 5, 2000
    (incorporated by reference to Exhibit 10.26 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 29, 2000)10
.9

First Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    March 21, 2000 (incorporated by reference to
    Exhibit 10.25 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.10

Second Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    September 20, 2000 (incorporated by reference to
    Exhibit 10.26 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.11

Master Lease Agreement between
    Spieker Properties and Brocade dated July 26, 2000
    (incorporated by reference to Exhibit 10.27 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.12#

Purchase Agreement between Compaq
    Computer Corporation and Brocade dated February 1, 2000
    (incorporated by reference to Exhibit 10.28 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.13#

Purchase Agreement between EMC
    Corporation and Brocade dated January 25, 2000 (EMC
    Purchase Agreement) (incorporated by reference to
    Exhibit 10.29 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 28, 2000)10
.14#

Extension Agreement between EMC
    Corporation and Brocade dated December 18, 2000
    (incorporated by reference to Exhibit 10.23 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.15

Extension Agreement between EMC
    Corporation and Brocade dated November 13, 2002
    (incorporated by reference to Exhibit 10.24 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 25, 2003)10
.16#

Goods Agreement between
    International Business Machines Corporation and Brocade dated
    April 15, 1999 (incorporated by reference to
    Exhibit 10.24 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.17

Amendment #1 to the Goods
    Agreement between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.25
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.18#

Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.26 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.19#

Amendment #3 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.27
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.20#

Amendment #4 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.28
    from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.21#

Statement of Work #2 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.29 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 27, 2001)10
.22

Third Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    January 22, 2001 (incorporated by reference to
    Exhibit 10.2 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 27, 2001)10
.23

Lease Agreement between MV Golden
    State San Jose, LLC and Brocade dated December 1, 2000
    (incorporated by reference to Exhibit 10.1 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended January 27, 2001)10
.24#

Amendment No. 5 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.2 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.25#

Amendment No. 6 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.3 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.26#

Amendment No. 7 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.37 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.27#

Amendment No. 8 to Statement
    of Work No. 1 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.36 from Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)10
.28#

Amendment No. 1 to Statement
    of Work No. 2 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.4 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.29

Amendment No. 2 to Statement
    of Work No. 2 between International Business Machines
    Corporation and Brocade (incorporated by reference to
    Exhibit 10.5 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 27, 2002)10
.30#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated January 28, 2000
    (2000 OEM Purchase Agreement) (incorporated by reference to
    Exhibit 10.38 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.31#

Amendment to 2000 OEM Purchase
    Agreement between Brocade and Hewlett-Packard Company dated
    April 20, 2001 (incorporated by reference to
    Exhibit 10.39 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.32

Letter Amendment to 2000 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated January 25, 2002 (incorporated by reference to
    Exhibit 10.40 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.33#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated April 20, 2001
    (2001 OEM Purchase Agreement) (incorporated by reference to
    Exhibit 10.41 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.34#

Amendment No. 1 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated July 1, 2001 (incorporated by reference to
    Exhibit 10.42 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.35#

Amendment No. 2 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated November 6, 2001 (incorporated by reference to
    Exhibit 10.43 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.36#

Amendment No. 3 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated February 1, 2002 (incorporated by reference to
    Exhibit 10.44 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.37#

Amendment No. 4 to 2001 OEM
    Purchase Agreement between Brocade and Hewlett-Packard Company
    dated June 5, 2002 (incorporated by reference to
    Exhibit 10.45 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 27, 2002)10
.38#

OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated December 16,
    2002. (incorporated by reference to Exhibit 10.48 from
    Brocades
    Form 10-Q
    for the quarter ended January 25, 2003)10
.39#

Manufacturing and Purchase
    Agreement between Brocade and Hon Hai Precision Industry Co.,
    Ltd. dated April 5, 2003 (HHPI Manufacturing and Purchase
    Agreement) (incorporated by reference to Exhibit 10.49 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.40

Amendment Number One to HHPI
    Manufacturing and Purchase Agreement between Brocade and Hon Hai
    Precision Industry Co., Ltd. dated April 5, 2003
    (incorporated by reference to Exhibit 10.50 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.41#

Manufacturing and Purchase
    Agreement between Brocade Communications Switzerland SarL and
    Hon Hai Precision Industry Co., Ltd. dated May 1, 2003
    (incorporated by reference to Exhibit 10.51 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.42#

Manufacturing and Purchase
    Agreement between Brocade and Solectron Corporation dated
    February 21, 2003 (Solectron Manufacturing and Purchase
    Agreement) (incorporated by reference to Exhibit 10.52 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.43

Amendment No. 1 to Solectron
    Manufacturing and Purchase Agreement between Brocade and
    Solectron Corporation dated March 21, 2003 (incorporated by
    reference to Exhibit 10.53 from Brocades Quarterly
    Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.44#

Manufacturing and Purchase
    Agreement between Brocade Communications Switzerland SarL and
    Solectron Corporation dated March 21, 2003 (incorporated by
    reference to Exhibit 10.54 from Brocades Quarterly
    Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.45#

Amendment No. 2 to EMC
    Purchase Agreement between Brocade and EMC dated
    February 18, 2003. (incorporated by reference to
    Exhibit 10.55 from Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 26, 2003)10
.46#

Amendment No. 3 to EMC
    Purchase Agreement between Brocade and EMC dated July 30,
    2003 (incorporated by reference to Exhibit 10.56 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 25, 2003)10
.47#

Amendment #10 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.55
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.48#

Amendment #11 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.56
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.49#

Amendment #14 to Statement of
    Work #1 between International Business Machines Corporation
    and Brocade (incorporated by reference to Exhibit 10.59
    from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.50#

Statement of Work #3 between
    International Business Machines Corporation and Brocade dated
    December 15, 2003 (incorporated by reference to
    Exhibit 10.60 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.51#

Amendment No. 4 to EMC
    Purchase Agreement between Brocade and EMC dated
    October 29, 2003 (incorporated by reference to
    Exhibit 10.61 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.52

Third Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 30, 2000 (incorporated by reference to
    Exhibit 10.62 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.53

Fourth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.63 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.54

Fifth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.64 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.55

Sixth Amendment to Lease between
    Spieker Properties and Brocade Communications Systems, Inc.
    dated November 18, 2003 (incorporated by reference to
    Exhibit 10.65 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.56

Real Estate Sale and Lease
    Termination Agreement between EOP-Skyport I, LLC and
    Brocade effective November 18, 2003 (incorporated by
    reference to Exhibit 10.66 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.57

Grant Deed from
    EOP-Skyport I, L.L.C to Brocade Communications Systems
    Skyport LLC dated November 18, 2003 (incorporated by
    reference to Exhibit 10.67 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.58

Fourth Amendment to the Skyport
    Plaza Declaration of Common Easements, Covenants, Conditions and
    Restrictions dated October 18, 2003 (incorporated by
    reference to Exhibit 10.68 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.59

Guaranty of Brocade Communications
    Systems, Inc. to EOP Skyport I, L.L.C dated
    November 18, 2003 (incorporated by reference to
    Exhibit 10.69 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)10
.60

Right of First Offer Agreement
    between EOP-Skyport I, L.L.C to Brocade Communications
    Systems Skyport LLC dated November 18, 2003 (incorporated
    by reference to Exhibit 10.70 from Brocades Report on
    Form 10-Q
    for the fiscal quarter ended January 24, 2004)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.61#

Amendment #15 dated
    March 26, 2004 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.71 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended May 1, 2004)10
.62#

Amendment No. 6 dated
    April 27, 2004 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.72 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended May 1, 2004)10
.63#

Amendment No. 5 dated
    May 4, 2004 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.73 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 31, 2004)10
.64#

Amendment #1 dated
    May 12, 2004 to Statement of Work #3 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.76 from
    Brocades Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 31, 2004)10
.65#

Amendment #18 dated
    October 5, 2004 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.77 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.66#

Amendment No. 7 dated
    July 28, 2004 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.78 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.67#

Amendment No. 8 dated
    November 1, 2004 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.79 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.68#

Amendment #1 dated
    November 2, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.80 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.69#

Amendment #2 dated
    October 27, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.81 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.70*

Employment Letter for Michael
    Klayko (incorporated by reference to Exhibit 10.85 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.71*

Employment Letter for Don Jaworski
    (incorporated by reference to Exhibit 10.86 from
    Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 30, 2004)10
.72#

Amendment #19 dated
    January 28, 2005 to Statement of Work #1 between
    International Business Machines Corporation and Brocade
    (incorporated by reference to Exhibit 10.88 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.73#

Amendment #3 dated
    November 22, 2004 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.89 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.74*

Change of Control Retention
    Agreement entered into by Brocade Communications Systems, Inc.
    and Michael Klayko dated March 9, 2005 (incorporated by
    reference to Exhibit 10.90 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.75*

Form of Change of Control
    Retention Agreement entered into by Brocade Communications
    Systems, Inc. and each of Don Jaworski, T.J. Grewal, Luc Moyen
    and Tom Buiocchi dated March 9, 2005 (incorporated by
    reference to Exhibit 10.91 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended January 29, 2005)10
.76#

Amendment #10 dated
    March 20, 2005 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 30, 2005)10
.77#

Amendment #11 dated
    March 25, 2005 to EMC Purchase Agreement between Brocade
    and EMC (incorporated by reference to Exhibit 10.2 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 30, 2005)10
.78*

Senior Leadership Plan as amended
    and restated as of October 21, 2005 (incorporated by
    reference to Exhibit 10.83 from Brocades Annual
    Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.79*

Therion Software Corporation 2004
    Stock Plan (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.80

Fourth Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    July 27, 2005 (incorporated by reference to
    Exhibit 10.2 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.81#

Amendment #21 to Statement of
    Work No. 1 between International Business Machines
    Corporation and Brocade dated June 28, 2005 (incorporated
    by reference to Exhibit 10.3 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.82#

Amendment #13 dated
    July 12, 2005 to EMC Purchase Agreement between Brocade and
    EMC (incorporated by reference to Exhibit 10.4 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.83*

Form of Change of Control
    Retention Agreement between the Company and Ian Whiting dated
    May 1, 2005 (incorporated by reference to Exhibit 10.5
    from Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.84*

Amended and Restated 1999 Stock
    Plan and related forms of agreements (incorporated by reference
    to Exhibit 10.89 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.85*

Amended and Restated Employee
    Stock Purchase Plan and related forms of agreements
    (incorporated by reference to Exhibit 10.7 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.86*

Amended and Restated 1999
    Nonstatutory Stock Option Plan and related forms of agreements
    (incorporated by reference to Exhibit 10.8 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 30, 2005)10
.87*

Employment Letter for Ian Whiting
    dated May 1, 2005 (incorporated by reference to
    Exhibit 10.92 from Brocades Annual Report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.88#

Amendment #22 to Statement of
    Work No. 1 between International Business Machines
    Corporation and Brocade dated August 12, 2005 (incorporated
    by reference to Exhibit 10.93 from Brocades annual
    report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.89#

Amendment #6 to Statement of
    Work No. 3 between International Business Machines
    Corporation and Brocade dated September 13, 2005
    (incorporated by reference to Exhibit 10.94 from
    Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.90#

Statement of Work No. 4
    between International Business Machines Corporation and Brocade
    dated August 12, 2005 (incorporated by reference to
    Exhibit 10.95 from Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.91#

Amendment #14 dated
    October 24, 2005 to EMC Purchase Agreement between Brocade
    and EMC dated January 25, 2000 (incorporated by reference
    to Exhibit 10.96 from Brocades annual report on
    Form 10-K
    for the fiscal year ended October 29, 2005)10
.92

Fifth Amendment to Credit
    Agreement between Comerica Bank-California and Brocade dated
    January 5, 2006 (incorporated by reference to
    Exhibit 10.1 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.93

Tolling Agreement dated as of
    January 1, 2006 between Gregory L. Reyes and Brocade, David
    House, William Krause, Nicholas Moore, William OBrien,
    Christopher Paisley, Larry Sonsini, Seth Neiman, Neal
    Dempsey and Sanjay Vaswani (incorporated by reference to
    Exhibit 10.2 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.94#

Amendment #23 dated
    December 15, 2005 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.3 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.95

Amendment #24 dated
    December 15, 2005 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.4 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended January 28, 2006)10
.96

Amendment #4 dated
    January 20, 2006 to the OEM Purchase Agreement between
    Brocade and Hewlett-Packard Company dated December 16, 2002
    (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)




---



##### Table of Contents



ExhibitNumber

Description of Document10
.97

Amendment No. 12 to the OEM
    Purchase Agreement dated January 25, 2000 (effective as of
    January 31, 2006) by and among Brocade, Brocade
    Communications Switzerland SarL, and EMC Corporation
    (incorporated by references to Exhibit 10.2 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.98

Amendment #25 effective
    April 14, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 2005 (incorporated by reference to
    Exhibit 10.3 from Brocades quarterly report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.99

Amendment #4 dated
    March 30, 2006 to the Goods Agreement between International
    Business Machines Corporation and Brocade (incorporated by
    reference to Exhibit 10.4 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended April 29, 2006)10
.100

Amendment #1 to Statement of
    Work No. 4 between International Business Machines
    Corporation and Brocade effective May 31, 2006
    (incorporated by reference to Exhibit 10.1 from
    Brocades quarterly report on
    Form 10-Q
    for the quarter ended July 29, 2006)10
.101

Amendment #7 to Statement of
    Work No. 3 between International Business Machines
    Corporation and Brocade dated July 19, 2006 (incorporated
    by reference to Exhibit 10.2 from Brocades quarterly
    report on
    Form 10-Q
    for the quarter ended July 29, 2006)10
.102*

Change of Control Retention
    Agreement entered into by Brocade Communications Systems, Inc.
    and Tyler Wall dated June 22, 2005 (incorporated by
    reference to Exhibit 10.108 from Brocades Registration
    Statement on Form S-4 filed on December 5, 2006)10
.103/**

Amendment #26 dated
    September 19, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 200510
.104/**

Amendment #27 dated
    October 3, 2006 to Statement of Work No. 1 between
    International Business Machines Corporation and Brocade dated
    August 12, 200510
.105/**

Amendment #6 effective as of
    August 4, 2006 to OEM Purchase Agreement between Brocade
    and Hewlett-Packard Company dated December 16, 200210
.106/**

Amendment #7 dated
    August 4, 2006 to OEM Purchase Agreement between Brocade
    and
    Hewlett-Packard
    Company dated December 16, 200212
.1**

Statement of Computation of Ratio
    of Earnings to Fixed Charges21
.1**

Subsidiaries of Registrant23
.1**

Consent of Independent Registered
    Public Accounting Firm24
.1**

Power of attorney (see signature
    page)31
.1**

Rule 13a-14(a)/15d-14(a)
    Certification by the Chief Executive Officer31
.2**

Rule 13a-14(a)/15d-14(a)
    Certification by the Chief Financial Officer32
.1**

Certification by the Chief
    Executive Officer and Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Indicates management contract or compensatory plan or
    arrangement required to be filed as an exhibit pursuant to
    Item 15(b) of
    Form 10-K.**
    
    Filed herewith.#
    
    Confidential treatment granted as to certain portions, which
    portions were omitted and filed separately with the Securities
    and Exchange Commission.
    
    Confidential treatment requested as to certain portions, which
    portions were omitted and filed separately with the Securities
    and Exchange Commission.