##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from           to
 Commission File Number 000-26689
 FOUNDRY NETWORKS, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    77-0431154
(I.R.S. Employer
Identification No.)
 4980 Great America Parkway
Santa Clara, CA 95054
(Address of principal executive offices, including zip code)
 (408) 207-1700
(Registrants telephone number, including area code)
 N/A
(Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
 Large accelerated filerþ
    
    Accelerated filer o
    
    Non-accelerated filer   o(Do not check if a smaller reporting company)
    
    Smaller Reporting Companyo
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ




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##### 



FOUNDRY NETWORKS, INC.
 Table of Contents
 PagePART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Income
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36PART II  OTHER INFORMATION
    
    
    36Item 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 3. Defaults Upon Senior Securities
    
    
    50Item 4. Submission of Matters to a Vote of Security Holders
    
    
    50Item 5. Other Information
    
    
    50Item 6. Exhibits
    
    
    50SIGNATURE
    
    
    51EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FOUNDRY NETWORKS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 September 30,
    
    
    December 31,2008
    
    
    2007(unaudited)
    
    
    (1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    524,723
    
    
    $
    331,961Short-term investments
    
    
    394,645
    
    
    
    575,645Accounts receivable, net of allowances for doubtful accounts of $2,469
and $2,107 and sales returns of $2,093 and $2,626 at September 30, 2008
and December 31, 2007, respectively
    
    
    115,611
    
    
    
    124,234Inventories
    
    
    51,874
    
    
    
    42,384Deferred tax assets
    
    
    44,706
    
    
    
    44,207Prepaid expenses and other assets
    
    
    23,428
    
    
    
    12,439Total current assets
    
    
    1,154,987
    
    
    
    1,130,870Property and equipment, net
    
    
    6,948
    
    
    
    9,658Investments
    
    
    87,359
    
    
    
    58,062Deferred tax assets
    
    
    35,025
    
    
    
    35,007Other assets
    
    
    5,874
    
    
    
    5,234Total assets
    
    $
    1,290,193
    
    
    $
    1,238,831LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    23,426
    
    
    $
    23,892Accrued payroll and related expenses
    
    
    37,863
    
    
    
    50,806Other accrued expenses
    
    
    12,045
    
    
    
    12,382Deferred revenue
    
    
    63,748
    
    
    
    52,981Total current liabilities
    
    
    137,082
    
    
    
    140,061Deferred revenue
    
    
    29,014
    
    
    
    27,786Income taxes payable
    
    
    12,296
    
    
    
    11,860Other long-term liabilities
    
    
    364
    
    
    
    475Total liabilities
    
    
    178,756
    
    
    
    180,182Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.0001 par value: Authorized - 5,000 shares at
September 30, 2008 and December 31, 2007; None issued and outstanding
as of September 30, 2008 and December 31, 2007
    
    
    
    
    
    
    Common stock, $0.0001 par value:Authorized - 300,000 shares at September 30, 2008 and December 31, 2007:Issued and outstanding  149,260 and 148,700 shares at September 30,
2008 and December 31, 2007, respectively
    
    
    15
    
    
    
    15Additional paid-in capital
    
    
    920,901
    
    
    
    829,910Accumulated other comprehensive loss
    
    
    (97
    )
    
    
    (789
    )Retained earnings
    
    
    190,618
    
    
    
    229,513Total stockholders equity
    
    
    1,111,437
    
    
    
    1,058,649Total liabilities and stockholders equity
    
    $
    1,290,193
    
    
    $
    1,238,831
 
 (1)
    
    Derived from audited consolidated financial statements as of December 31, 2007.  3




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##### Table of Contents



FOUNDRY NETWORKS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenue:Product
    
    $
    137,494
    
    
    $
    136,974
    
    
    $
    398,200
    
    
    $
    372,976Service
    
    
    28,408
    
    
    
    22,523
    
    
    
    78,436
    
    
    
    65,574Total net revenue
    
    
    165,902
    
    
    
    159,497
    
    
    
    476,636
    
    
    
    438,550Cost of revenue:Product
    
    
    51,788
    
    
    
    55,032
    
    
    
    151,795
    
    
    
    157,864Service
    
    
    7,333
    
    
    
    4,395
    
    
    
    23,112
    
    
    
    15,305Total cost of revenue
    
    
    59,121
    
    
    
    59,427
    
    
    
    174,907
    
    
    
    173,169Gross margin
    
    
    106,781
    
    
    
    100,070
    
    
    
    301,729
    
    
    
    265,381Operating expenses:Research and development
    
    
    24,032
    
    
    
    18,425
    
    
    
    67,685
    
    
    
    57,528Sales and marketing
    
    
    46,580
    
    
    
    38,425
    
    
    
    140,106
    
    
    
    116,985General and administrative
    
    
    11,267
    
    
    
    10,271
    
    
    
    33,311
    
    
    
    32,975Other charges, net
    
    
    2,773
    
    
    
    60
    
    
    
    2,773
    
    
    
    5,660Total operating expenses
    
    
    84,652
    
    
    
    67,181
    
    
    
    243,875
    
    
    
    213,148Income from operations
    
    
    22,129
    
    
    
    32,889
    
    
    
    57,854
    
    
    
    52,233Other-than-temporary impairment charge on investments
    
    
    (13,390
    )
    
    
    
    
    
    
    (13,390
    )
    
    
    Interest and other income, net
    
    
    4,685
    
    
    
    11,440
    
    
    
    20,413
    
    
    
    32,337Income before provision for income taxes
    
    
    13,424
    
    
    
    44,329
    
    
    
    64,877
    
    
    
    84,570Provision for income taxes
    
    
    8,972
    
    
    
    16,761
    
    
    
    28,193
    
    
    
    32,279Net income
    
    $
    4,452
    
    
    $
    27,568
    
    
    $
    36,684
    
    
    $
    52,291Basic net income per share
    
    $
    0.03
    
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.35Weighted-average shares used in computing basic net income per share
    
    
    147,301
    
    
    
    148,897
    
    
    
    146,542
    
    
    
    147,768Diluted net income per share
    
    $
    0.03
    
    
    $
    0.18
    
    
    $
    0.24
    
    
    $
    0.34Weighted-average shares used in computing diluted net income per share
    
    
    153,103
    
    
    
    156,486
    
    
    
    151,098
    
    
    
    154,776
  4




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FOUNDRY NETWORKS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 Nine Months EndedSeptember 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    36,684
    
    
    $
    52,291Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    7,378
    
    
    
    8,395Stock-based compensation expense
    
    
    38,586
    
    
    
    32,801Provision for doubtful accounts
    
    
    361
    
    
    
    (359
    )Provision for sales returns
    
    
    (533
    )
    
    
    (592
    )Inventory provisions
    
    
    6,050
    
    
    
    3,138Benefit for deferred income taxes
    
    
    (516
    )
    
    
    (3,243
    )Excess tax benefits from stock-based compensation
    
    
    (4,302
    )
    
    
    (6,342
    )Other-than-temporary impairment charge on investments
    
    
    13,390
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    8,795
    
    
    
    (35,562
    )Inventories
    
    
    (15,476
    )
    
    
    (11,144
    )Prepaid expenses and other assets
    
    
    (12,528
    )
    
    
    (11,668
    )Accounts payable
    
    
    (466
    )
    
    
    (3,049
    )Accrued payroll and related expenses
    
    
    (12,943
    )
    
    
    6,337Income taxes payable
    
    
    4,675
    
    
    
    17,640Other accrued expenses
    
    
    (449
    )
    
    
    (1,457
    )Deferred revenue
    
    
    11,994
    
    
    
    10,098Net cash provided by operating activities
    
    
    80,700
    
    
    
    57,284CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of available-for-sale investments
    
    
    (25,950
    )
    
    
    (35,025
    )Purchases of held-to-maturity investments
    
    
    (643,165
    )
    
    
    (560,775
    )Proceeds from sales and maturities of available-for-sale investments
    
    
    27,800
    
    
    
    46,750Proceeds from sales and maturities of held-to-maturity investments
    
    
    779,629
    
    
    
    526,145Purchases of property and equipment, net
    
    
    (2,425
    )
    
    
    (4,180
    )Net cash provided by (used in) investing activities
    
    
    135,889
    
    
    
    (27,085
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuances of common stock under stock plans, net of repurchases
    
    
    46,759
    
    
    
    38,045Repurchase and retirement of common stock
    
    
    (75,580
    )
    
    
    (37,975
    )Excess tax benefits from stock-based compensation
    
    
    4,302
    
    
    
    6,342Net cash provided by (used in) financing activities
    
    
    (24,519
    )
    
    
    6,412Increase in cash and cash equivalents
    
    
    192,070
    
    
    
    36,611Effect of exchange rate changes on cash
    
    
    692
    
    
    
    (312
    )Cash and cash equivalents, beginning of period
    
    
    331,961
    
    
    
    258,137Cash and cash equivalents, end of period
    
    $
    524,723
    
    
    $
    294,436SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for income taxes, net of refunds
    
    $
    35,735
    
    
    $
    25,957
  5




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FOUNDRY NETWORKS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(information for the three and nine months ended September 30, 2008 and 2007 is unaudited)
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of Business
  Basis of Presentation
   Principles of Consolidation
  Reclassifications
  Use of Estimates
  6




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Cash Equivalents and Investments
        7




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##### Table of Contents



Valuation of Investments
  Fair Value Measurement
   
    
    Level 1Valuations based on quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access. Valuation adjustments are not applied
to Level 1 instruments. Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these products does not entail a
significant degree of judgment. Foundrys cash equivalents and investments utilizing Level 1
inputs include U.S. Government Treasuries and money market funds.
 
    
    Level 2Valuations based on quoted prices in markets that are not considered to be active,
broker or dealer quotations, or alternative pricing sources with reasonable levels of price
transparency. Foundrys cash equivalents and investments utilizing Level 2 inputs include
government sponsored securities and municipal bonds.
 
    
    Level 3Valuations based on inputs that are unobservable and significant to the overall fair
value measurement. Investments utilizing Level 3 inputs are the Companys auction rate
securities that are not traded in active markets or are subject to transfer restrictions.
Valuations are performed to adjust for illiquidity and/or non-transferability, and such
adjustments are generally based on available market evidence. In the absence of such evidence,
managements best estimate is used.
  8




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Concentrations
   Stock- Based Compensation
 Share-Based Payment
 Valuation of Stock-Based Compensation
   Three Months Ended September 30, 2008
    
    Nine Months Ended September 30, 2008Stock Option Plan
    
    Purchase Plan
    
    Stock Option Plan
    
    Purchase PlanRisk free interest rate
    
    
    
    
    
    
    2.7
    %
    
    
    2.4
    %
    
    
    3.2
    %Expected term (in years)
    
    
    
    
    
    1.5 years
    
    3.3 years
    
    1.4 yearsDividend yield
    
    
    
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility of common stock
    
    
    
    
    
    
    40
    %
    
    
    41
    %
    
    
    40
    %Weighted-average fair value
    
    
    
    
    
    $
    5.17
    
    
    $
    4.03
    
    
    $
    4.91
 Three Months Ended September 30, 2007
    
    Nine Months Ended September 30, 2007Stock Option Plan
    
    Purchase Plan
    
    Stock Option Plan
    
    Purchase PlanRisk free interest rate
    
    
    4.4
    %
    
    
    4.9
    %
    
    
    4.5
    %
    
    
    4.9
    %Expected term (in years)
    
    3.6 years
    
    1.5 years
    
    3.7 years
    
    1.3 yearsDividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility of common stock
    
    
    40
    %
    
    
    41
    %
    
    
    40
    %
    
    
    42
    %Weighted-average fair value
    
    $
    6.41
    
    
    $
    4.10
    
    
    $
    6.21
    
    
    $
    3.88
 9




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Risk-Free Interest Rate.
 Expected Term.
 Expected Dividend.
 Expected Volatility.
 Estimated Forfeitures.
 Computation of Per Share Amounts
  Revenue Recognition
 General. Revenue Recognition,
 10




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##### Table of Contents



Revenue Arrangements
with Multiple Deliverables
 Product.
 Services.
 Accounting for Separately Priced Extended Warranty
and Product Maintenance Contracts.
 Returns.
 Segment and Geographic Information
   Income Taxes
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
 11




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Recent Accounting Pronouncements
 Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities
  Determining the
Fair Value of a Financial Asset When the Market for That Asset Is Not Active
 The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115
 2. CASH EQUIVALENTS AND INVESTMENTS
  September 30, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCash equivalents:Money market funds
    
    $
    86,387
    
    
    $
    
    
    
    $
    
    
    
    $
    86,387U.S. Treasuries and Government-sponsored enterprise securities
    
    
    345,265
    
    
    
    200
    
    
    
    (4
    )
    
    
    345,461Available-for-sale:Auction rate municipal bonds
    
    
    67,260
    
    
    
    
    
    
    
    
    
    
    
    67,260Held-to-maturity:Municipal bonds
    
    
    16,844
    
    
    
    59
    
    
    
    (6
    )
    
    
    16,897U.S. Treasuries and Government-sponsored enterprise securities
    
    
    397,899
    
    
    
    571
    
    
    
    (323
    )
    
    
    398,147$
    913,655
    
    
    $
    830
    
    
    $
    (333
    )
    
    $
    914,152Cash equivalents
    
    $
    431,652
    
    
    $
    200
    
    
    $
    (4
    )
    
    $
    431,848Short-term investments
    
    
    394,644
    
    
    
    598
    
    
    
    (329
    )
    
    
    394,913Long-term investments
    
    
    87,359
    
    
    
    32
    
    
    
    
    
    
    
    87,391$
    913,655
    
    
    $
    830
    
    
    $
    (333
    )
    
    $
    914,152
 12




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December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCash equivalents:Money market funds
    
    $
    158,080
    
    
    $
    
    
    
    $
    
    
    
    $
    158,080Government-sponsored enterprise securities
    
    
    114,445
    
    
    
    29
    
    
    
    
    
    
    
    114,474Available-for-sale:Auction rate municipal bonds
    
    
    82,500
    
    
    
    
    
    
    
    
    
    
    
    82,500Held-to-maturity:Municipal bonds
    
    
    42,362
    
    
    
    133
    
    
    
    
    
    
    
    42,495Government-sponsored enterprise securities
    
    
    508,845
    
    
    
    551
    
    
    
    (9
    )
    
    
    509,387$
    906,232
    
    
    $
    713
    
    
    
    (9
    )
    
    $
    906,936Cash equivalents
    
    $
    272,525
    
    
    
    29
    
    
    
    
    
    
    $
    272,554Short-term investments
    
    
    575,645
    
    
    
    550
    
    
    
    (9
    )
    
    
    576,186Long-term investments
    
    
    58,062
    
    
    
    134
    
    
    
    
    
    
    
    58,196$
    906,232
    
    
    $
    713
    
    
    $
    (9
    )
    
    $
    906,936
 Municipal bonds.
 U.S. Treasuries and Government-sponsored enterprise securities (GSEs).
 Auction rate municipal bonds (auction rate securities).
   13




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The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments
 Loss Greater Than 12Loss Less Than 12 months
    
    
    months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesHeld-to-maturity:Municipal Bonds
    
    
    1,498
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    1,498
    
    
    
    (6
    )U.S. Treasuries and GSEs
    
    
    201,056
    
    
    
    (327
    )
    
    
    
    
    
    
    
    
    
    
    201,056
    
    
    
    (327
    )$
    202,554
    
    
    $
    (333
    )
    
    $
    
    
    
    $
    
    
    
    $
    202,554
    
    
    $
    (333
    )
  3. FAIR VALUE DISCLOSURES
 Fair Value Measurements
  14




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Fair Value Measurements at Reporting Date UsingQuoted Prices InActive Markets
    
    
    Significant
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs9/30/2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:Money market funds
    
    $
    86,387
    
    
    $
    86,387
    
    
    $
    
    
    
    $
    U.S. Treasuries and GSEs
    
    
    345,461
    
    
    
    345,461
    
    
    
    
    
    
    
    Available-for-sale:Auction rate municipal bonds
    
    
    67,260
    
    
    
    
    
    
    
    
    
    
    
    67,260Held-to-maturity:Municipal bonds
    
    
    16,897
    
    
    
    
    
    
    
    16,897
    
    
    
    U.S. Treasuries and GSEs
    
    
    398,147
    
    
    
    229,722
    
    
    
    168,425
    
    
    
    Total
    
    $
    914,152
    
    
    $
    661,570
    
    
    $
    185,322
    
    
    $
    67,260
  Fair Value Measurements UsingSignificant Unobservable Inputs (Level 3)Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2008Beginning Balance
    
    $
    77,127
    
    
    $
    Total realized gains or (losses) included in net income
    
    
    
    
    
    
    Change in unrealized losses included in other
comprehensive income
    
    
    6,023
    
    
    
    Total other-than-temporary impairment charge included
in net income
    
    
    (13,390
    )
    
    
    (13,390
    )Purchases, sales and settlements, net
    
    
    (2,500
    )
    
    
    (2,500
    )Transfers in Level 3
    
    
    
    
    
    
    83,150Ending balance
    
    $
    67,260
    
    
    $
    67,260
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2008Total gains included in earnings
    
    $
    277
    
    
    $
    289Change in unrealized gains or (losses) relating to assets still held at the reporting date
    
    $
    (13,390
    )
    
    $
    (13,390
    )
  15




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##### Table of Contents



4. INVENTORIES
  September 30, 2008
    
    
    December 31, 2007Purchased parts
    
    $
    7,873
    
    
    $
    4,279Work-in-process
    
    
    21,834
    
    
    
    17,195Finished goods
    
    
    22,167
    
    
    
    20,910$
    51,874
    
    
    $
    42,384
  5. DEFERRED REVENUE
  September 30, 2008
    
    
    December 31, 2007Product
    
    $
    7,036
    
    
    $
    3,095Support
    
    
    85,726
    
    
    
    77,672Total
    
    $
    92,762
    
    
    $
    80,767Reported as:Current
    
    $
    63,748
    
    
    $
    52,981Non Current
    
    
    29,014
    
    
    
    27,786Total
    
    $
    92,762
    
    
    $
    80,767
  Deferred support revenue at December 31, 2007
    
    $
    77,672New support arrangements
    
    
    85,312Recognition of support revenue
    
    
    (77,258
    )Ending balance at September 30, 2008
    
    $
    85,726
 6. COMMITMENTS AND CONTINGENCIES
 Purchase Commitments with Suppliers and Third-Party Manufacturers
  16




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##### Table of Contents



Guarantees and Product Warranties
   Balance, December 31, 2007
    
    $
    2,251Liabilities accrued for warranties issued during the period
    
    
    850Warranty claims settled during the period
    
    
    (1,073
    )Changes in liabilities for pre-existing warranties during the period, including changes in estimates
    
    
    (477
    )Balance, September 30, 2008
    
    $
    1,551
  Litigation
 Intellectual Property Proceedings. ex parte
 17




---



##### Table of Contents



Securities Litigation. In re Foundry Networks, Inc. Initial Public
Offering Securities Litigation, related to In re Initial Public
Offering Securities Litigation,
  18




---



##### Table of Contents



In re Initial
Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. Dec. 5, 2006).
 In re Foundry Networks, Inc. Derivative Litigation
 Patel v. Akin, et al Patel v. Akin, et al.
 Desai v. Johnson, et al McDonald v. Johnson, et al. Jackson v. Akin, et al. Edrington v. Johnson, Jr., et al. In re Foundry Networks, Inc.
Derivative Litigation,
 19




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##### Table of Contents



Edrington v. Johnson, Jr., et al
  Vanessa Simmonds v. Deutsche Bank AG, Merrrill Lynch & Co and JPMorgan
Chase & Co. Defendants, and Foundry Networks, Inc., Nominal Defendant
 Doug Edrington v. Bobby R. Johnson, Jr., et al
 United States Attorneys Office Subpoena for Production of Documents.
 20




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##### Table of Contents



General. Accounting for Contingencies,
 7. STOCKHOLDERS EQUITY
 Share Repurchase Program.
  Total Number
    
    
    Average Priceof Shares
    
    
    Paid per
    
    
    Amount ofNine Months Ended September 30, 2008
    
    Purchased
    
    
    Share
    
    
    RepurchasesCumulative balance at December 31, 2007
    
    
    4,381
    
    
    $
    18.93
    
    
    $
    82,930Repurchase of common stock
    
    
    5,640
    
    
    
    13.40
    
    
    
    75,580Cumulative balance at September 30, 2008
    
    
    10,021
    
    
    $
    15.82
    
    
    $
    158,510
  Other Repurchases of Common Stock.
 Stock-Based Compensation Plans.
  21




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##### Table of Contents



Weighted-Average
    
    RemainingOptions
    
    Exercise
    
    Contractual
    
    AggregateOutstanding
    
    Price
    
    Life (years)
    
    Intrinsic Value(in thousands)Balance, December 31, 2007
    
    
    30,528,237
    
    
    $
    16.38Granted
    
    
    1,604,250
    
    
    $
    12.81Exercised
    
    
    (3,506,833
    )
    
    $
    10.26Forfeited/expired
    
    
    (785,866
    )
    
    $
    19.44Balance, September 30, 2008
    
    
    27,839,788
    
    
    $
    16.85
    
    
    
    3.83
    
    
    $
    117,549Vested and expected to vest at September 30, 2008
    
    
    26,668,492
    
    
    $
    16.91
    
    
    
    3.83
    
    
    $
    114,374Exercisable at September 30, 2008
    
    
    21,218,188
    
    
    $
    17.20
    
    
    
    3.76
    
    
    $
    99,786
   Restricted Stock Awards.
 Restricted Stock
    
    Weighted AverageOutstanding
    
    Grant Date Fair Value(in thousands)Balance, December 31, 2007
    
    
    953
    
    
    $
    16.59Granted
    
    
    
    
    
    $
    Vested
    
    
    (555
    )
    
    $
    15.92Forfeited
    
    
    
    
    
    $
    Balance, September 30, 2008
    
    
    398
    
    
    $
    17.53
  22




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##### Table of Contents



Restricted Stock Units.
 RemainingContractual
    
    AggregateShares
    
    Life (years)
    
    Intrinsic Value(in thousands)
    
    
    
    
    
    (in thousands)Balance, December 31, 2007
    
    
    1,639Awarded
    
    
    3,907Released
    
    
    (499
    )Forfeited/expired
    
    
    (77
    )Balance, September 30, 2008
    
    
    4,970
    
    
    
    1.81
    
    
    $
    90,499Vested and expected to vest at September 30, 2008
    
    
    4,239
    
    
    
    1.77
    
    
    $
    77,198Exercisable at September 30, 2008
    
    
    
    
    
    
    
    
    
    $
    
   Employee Stock Purchase Plan.
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of revenue  Product
    
    $
    421
    
    
    $
    385
    
    
    $
    1,326
    
    
    $
    1,019Cost of revenue  Service
    
    
    891
    
    
    
    601
    
    
    
    2,613
    
    
    
    1,464Research and development
    
    
    4,899
    
    
    
    4,956
    
    
    
    13,617
    
    
    
    11,734Sales and marketing
    
    
    5,150
    
    
    
    5,108
    
    
    
    15,122
    
    
    
    12,705General and administrative
    
    
    2,066
    
    
    
    2,236
    
    
    
    5,908
    
    
    
    5,879Total
    
    $
    13,427
    
    
    $
    13,286
    
    
    $
    38,586
    
    
    $
    32,801
  23




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##### Table of Contents



8. NET INCOME PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands, except per share amounts)Net income
    
    $
    4,452
    
    
    $
    27,568
    
    
    $
    36,684
    
    
    $
    52,291Basic:Weighted-average shares outstanding
    
    
    147,301
    
    
    
    148,897
    
    
    
    146,542
    
    
    
    147,768Basic EPS
    
    $
    0.03
    
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.35Diluted:Weighted-average shares outstanding
    
    
    147,301
    
    
    
    148,897
    
    
    
    146,542
    
    
    
    147,768Add: Weighted-average dilutive potential shares
    
    
    5,802
    
    
    
    7,589
    
    
    
    4,556
    
    
    
    7,008Weighted-average shares used in computing diluted EPS
    
    
    153,103
    
    
    
    156,486
    
    
    
    151,098
    
    
    
    154,776Diluted EPS
    
    $
    0.03
    
    
    $
    0.18
    
    
    $
    0.24
    
    
    $
    0.34
  9. COMPREHENSIVE INCOME
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    4,452
    
    
    $
    27,568
    
    
    $
    36,684
    
    
    $
    52,291Other comprehensive income:Reclass to net income of unrealized loss on
available-for-sale securities
    
    
    6,023
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustments
    
    
    861
    
    
    
    (191
    )
    
    
    692
    
    
    
    (312
    )Total comprehensive income
    
    $
    11,336
    
    
    $
    27,377
    
    
    $
    37,376
    
    
    $
    51,979
 10. SEGMENT AND GEOGRAPHIC INFORMATION
  24




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Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007Americas
    
    
    73
    %
    
    
    70
    %
    
    
    68
    %
    
    
    69
    %EMEA
    
    
    17
    %
    
    
    16
    %
    
    
    20
    %
    
    
    16
    %Asia Pacific
    
    
    6
    %
    
    
    9
    %
    
    
    8
    %
    
    
    9
    %Japan
    
    
    4
    %
    
    
    5
    %
    
    
    4
    %
    
    
    6
    %
   11. INCOME TAXES
      25




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##### Table of Contents



12. BROCADE ACQUISITION
    
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
should be read together with our condensed consolidated financial statements and related notes
appearing elsewhere in this Form 10-Q . This discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions, including our expectations that our
interest income will decline over the next several quarters, that our remaining cash, cash
equivalents, short term investments and cash generated from operations will satisfy our working
capital needs, capital expenditures, commitments and other liquidity requirements associated with
our operations through at least the next 12 months, regarding our intention to vigorously defend
ourselves in certain litigation, regarding our expectation that our operating expenses will
increase modestly during the fourth quarter and fiscal year
 26




---



##### Table of Contents



ended 2008, and regarding the impact of the recent auction market failures on our liquidity.
Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors, including, but not limited to, those discussed in Part II, Item 1A.
Risk Factors. Our recent announcement of the agreement for Brocade to acquire Foundry may
intensify certain of these risks. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements opinions only as of the date hereof. We
undertake no obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors described in this
document as well as in other documents we file from time to time with the SEC. All public reports
filed by us with the SEC are available free of charge on our website at www.foundrynetworks.com or
from the SEC at www.sec.gov as soon as practicable after we electronically file such reports with
the SEC.
 Recent Developments
    Overview
  Critical Accounting Policies and Use of Estimates
  27




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##### Table of Contents



Results of Operations
 Net Revenue
   Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeNet revenue:Product
    
    $
    137,494
    
    
    
    83
    %
    
    $
    136,974
    
    
    
    86
    %
    
    $
    520
    
    
    
    Service
    
    
    28,408
    
    
    
    17
    %
    
    
    22,523
    
    
    
    14
    %
    
    
    5,885
    
    
    
    26
    %Total net revenue
    
    $
    165,902
    
    
    
    100
    %
    
    $
    159,497
    
    
    
    100
    %
    
    $
    6,405
    
    
    
    4
    %Net product revenue:Chassis
    
    $
    98,996
    
    
    
    72
    %
    
    $
    97,252
    
    
    
    71
    %
    
    $
    1,744
    
    
    
    2
    %Stackable
    
    
    38,498
    
    
    
    28
    %
    
    
    39,722
    
    
    
    29
    %
    
    
    (1,224
    )
    
    
    (3
    %)Total net product revenue
    
    $
    137,494
    
    
    
    100
    %
    
    $
    136,974
    
    
    
    100
    %
    
    $
    520
    
    
    
    
 Nine Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeNet revenue:Product
    
    $
    398,200
    
    
    
    84
    %
    
    $
    372,976
    
    
    
    85
    %
    
    $
    25,224
    
    
    
    7
    %Service
    
    
    78,436
    
    
    
    16
    %
    
    
    65,574
    
    
    
    15
    %
    
    
    12,862
    
    
    
    20
    %Total net revenue
    
    $
    476,636
    
    
    
    100
    %
    
    $
    438,550
    
    
    
    100
    %
    
    $
    38,086
    
    
    
    9
    %Net product revenue:Chassis
    
    
    290,480
    
    
    
    73
    %
    
    
    265,965
    
    
    
    71
    %
    
    $
    24,515
    
    
    
    9
    %Stackable
    
    
    107,720
    
    
    
    27
    %
    
    
    107,011
    
    
    
    29
    %
    
    
    709
    
    
    
    1
    %Total net product revenue
    
    $
    398,200
    
    
    
    100
    %
    
    $
    372,976
    
    
    
    100
    %
    
    $
    25,224
    
    
    
    7
    %
 28




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##### Table of Contents



Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007Americas
    
    
    73
    %
    
    
    70
    %
    
    
    68
    %
    
    
    69
    %EMEA
    
    
    17
    %
    
    
    16
    %
    
    
    20
    %
    
    
    16
    %Asia Pacific
    
    
    6
    %
    
    
    9
    %
    
    
    8
    %
    
    
    9
    %Japan
    
    
    4
    %
    
    
    5
    %
    
    
    4
    %
    
    
    6
    %
      29




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##### Table of Contents



Gross Margin
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    Gross$
    
    
    Margin %
    
    
    $
    
    
    Margin %
    
    
    $
    
    
    Margin %
    
    
    $
    
    
    Margin %Gross margin:Product
    
    $
    85,706
    
    
    
    62
    %
    
    $
    81,942
    
    
    
    60
    %
    
    $
    246,405
    
    
    
    62
    %
    
    $
    215,112
    
    
    
    58
    %Service
    
    
    21,075
    
    
    
    74
    %
    
    
    18,128
    
    
    
    80
    %
    
    
    55,324
    
    
    
    71
    %
    
    
    50,269
    
    
    
    77
    %Total gross margin
    
    $
    106,781
    
    
    
    64
    %
    
    $
    100,070
    
    
    
    63
    %
    
    $
    301,729
    
    
    
    63
    %
    
    $
    265,381
    
    
    
    61
    %
    30




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##### Table of Contents



Operating Expenses
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    
    
    
    
    2008
    
    2007% of Net
    
    
    
    
    
    % of Net
    
    %
    
    
    
    
    
    % of Net
    
    
    
    
    
    % of Net
    
    %$
    
    Revenue
    
    $
    
    Revenue
    
    Change
    
    $
    
    Revenue
    
    $
    
    Revenue
    
    ChangeResearch and
development
    
    $
    24,032
    
    
    
    14
    %
    
    $
    18,425
    
    
    
    12
    %
    
    
    30
    %
    
    $
    67,685
    
    
    
    14
    %
    
    $
    57,528
    
    
    
    13
    %
    
    
    18
    %Sales and marketing
    
    
    46,580
    
    
    
    28
    %
    
    
    38,425
    
    
    
    24
    %
    
    
    21
    %
    
    
    140,106
    
    
    
    29
    %
    
    
    116,985
    
    
    
    27
    %
    
    
    20
    %General and
administrative
    
    
    11,267
    
    
    
    7
    %
    
    
    10,271
    
    
    
    6
    %
    
    
    10
    %
    
    
    33,311
    
    
    
    7
    %
    
    
    32,975
    
    
    
    8
    %
    
    
    1
    %Other charges, net
    
    
    2,773
    
    
    
    2
    %
    
    
    60
    
    
    
    
    
    
    
    4521
    %
    
    
    2,773
    
    
    
    1
    %
    
    
    5,660
    
    
    
    1
    %
    
    
    (51
    %)
    31




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##### Table of Contents



Doug
Edrington v. Bobby R. Johnson, Jr., et al
 Other-Than-Temporary Impairment Charge on Investments
  32




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Interest and Other Income, Net
  Provision for Income Taxes
  Liquidity and Capital Resources
    33




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34




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Off-Balance Sheet Arrangements and Contractual Obligations
 Contractual Commitments
  Less Than
    
    
    1-3
    
    
    3-5
    
    
    More ThanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsOperating leases of facilities and equipment
    
    $
    12,327
    
    
    $
    5,916
    
    
    $
    6,082
    
    
    $
    329
    
    
    $
    Purchase commitments with contract manufacturers
    
    
    69,605
    
    
    
    69,605
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    81,932
    
    
    $
    75,521
    
    
    $
    6,082
    
    
    $
    329
    
    
    $
    
   Off-Balance Sheet Arrangements
  Indemnifications
  35




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Limitations on Effectiveness of Controls.
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our business and results of operations may be affected by the announcement of our merger with
Brocade Communication Systems, Inc.
  36




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##### Table of Contents



We may suffer additional consequences if the merger with Brocade is not completed.
  
    
    Activities relating to the acquisition and related uncertainties may divert our
managements attention from our day-to-day business and cause disruptions among our
employees and to our relationships with customers and business partners, thus detracting
from our ability to grow revenue and minimize costs and possibly leading to a loss of
revenue and market position that we may not be able to regain if the transaction does not
occur;
    
    The market price of our common stock could decline following an announcement that
the merger has been abandoned, to the extent that the current market price reflects a
market assumption that the merger will be completed;
    
    We could be required to pay Brocade a termination fee and provide reimbursement to
Brocade for certain costs incurred;
    
    We would remain liable for our costs related to the merger, such as legal and
accounting fees and a portion of the investment banking fees;
    
    We may not be able to continue our present level of operations and therefore would
have to scale back our present level of business and consider additional reductions in
force;
    
    We may experience the departure of employees from the Company; and
    
    We may not be able to take advantage of alternative business opportunities or
effectively respond to competitive pressures.
   37




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The slowdown in the domestic and global economies may adversely affect our financial condition
and operating results.
     Intense competition in the market for networking solutions could prevent us from maintaining or
increasing revenue and sustaining profitability.
    38




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##### Table of Contents



We must continue to introduce new products with superior performance and features in a timely
manner in order to sustain and increase our revenue, and if we fail to predict and respond to
emerging technological trends and customers changing needs, our operating results may suffer.
   Our gross margins and average selling prices of our products have decreased in the past and could
decrease as a result of competitive pressures and other factors.
   Our investments in auction rate securities are subject to risks which may cause losses and affect
the liquidity of these investments.
  39




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##### Table of Contents



We depend on large, recurring purchases from certain significant customers, and a loss,
cancellation or delay in purchases by these customers could negatively affect our revenue.
   
    
    our reseller agreements generally do not require substantial minimum purchases;
    
    our customers can stop purchasing and our resellers can stop marketing our products at
any time; and
    
    our reseller agreements generally are not exclusive and are for one-year terms, with no
obligation of the resellers to renew the agreements.
  40




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##### Table of Contents



The United States government is a significant customer and has been one key to our financial
success. However, government demand is unpredictable and there is no guarantee of future contract
awards.
  We purchase several key components for our products from sole sources; if these components are not
available, our revenue may be adversely affected.
    We may be subject to litigation risks and intellectual property infringement claims that are costly
to defend and could limit our ability to use certain technologies in the future. Additionally, we
may be found to infringe on intellectual property rights of others.
  41




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##### Table of Contents



If we fail to protect our intellectual property, our business and ability to compete could suffer.
   The matters relating to our Special Committee investigation into our stock option granting
practices and the restatement of our financial statements have exposed us to civil litigation
claims, regulatory proceedings and government proceedings which could burden Foundry and have a
material adverse effect on us.
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Our reliance on third-party manufacturing vendors to manufacture our products may cause a delay in
our ability to fill orders which could cause us to lose revenue.
    Our ability to increase our revenue depends on expanding our direct sales operations and reseller
distribution channels and providing excellent customer support.
   Our operations in international markets involve inherent risks that we may not be able to control.
As a result, our business may be harmed if we are unable to successfully address these risks.
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
    
    seasonal reductions in business activity;
    
    potential recessions in economies outside the United States;
    
    adverse fluctuations in currency exchange rates;
    
    difficulties in managing operations and in servicing products under contracts across
disparate geographic areas;
    
    export restrictions;
    
    unexpected changes in regulatory requirements;
    
    higher costs of doing business in foreign countries;
    
    longer accounts receivable collection cycles;
    
    potential adverse tax consequences;
    
    difficulties associated with enforcing agreements through foreign legal systems;
    
    infringement claims on foreign patents, copyrights, or trademark rights;
    
    natural disasters and widespread medical epidemics;
    
    military conflict and terrorist activities; and
    
    political instability.
   Because our financial results are difficult to predict and may fluctuate significantly, we may not
meet quarterly financial expectations, which could cause our stock price to decline.
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We need additional qualified personnel to maintain and expand our business. If we are unable to
promptly attract and retain qualified personnel, our business may be harmed.
   Due to the lengthy sales cycles of some of our products, the timing of our revenue is difficult to
predict and may cause us to fail to meet our revenue expectations.
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We are required to expense equity compensation given to our employees, which has reduced our
reported earnings, will significantly impact our operating results in future periods and may reduce
our stock price and our ability to effectively utilize equity compensation to attract and retain
employees.
  If we do not adequately manage and evolve our financial reporting and managerial systems and
processes, our ability to manage and grow our business may be harmed.
  If our internal control over financial reporting or disclosure controls and procedures are not
effective, there may be errors in our financial statements that could require a restatement or our
filings may not be timely and investors may lose confidence in our reported financial information,
which could lead to a decline in our stock price.
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If the merger with Brocade does not occur, we might engage in acquisitions that could result in
dilution for our stockholders, disrupt our operations, cause us to incur substantial expenses and
harm our business if we cannot successfully integrate the acquired business, products, technologies
or personnel.
  
    
    difficulties in the assimilation of products, operations, personnel and technologies of
the acquired companies;
    
    diversion of managements attention from other business concerns;
    
    disruptions to our operations, including potential difficulties in completing ongoing
projects in a timely manner;
    
    risks of entering geographic and business markets in which we have no or limited prior
experience;
    
    exposure to third party intellectual property infringement claims; and
    
    potential loss of key employees of acquired organizations.
  The timing of the adoption of industry standards may negatively affect widespread market acceptance
of our products.
  If our products do not interface with our customers networks, our sales may be delayed or
cancelled and our business could be harmed.
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If our products contain undetected software or hardware errors, we could incur significant
unexpected expenses and lost sales and be subject to product liability claims.
  
    
    negative customer reactions;
    
    product liability claims;
    
    negative publicity regarding us and our products;
    
    delays in or loss of market acceptance of our products;
    
    product returns;
    
    lost sales; and
    
    unexpected expenses to remedy defects or errors.
 We may incur liabilities that are not subject to maximum loss clauses.
  Our products may not continue to comply with the regulations governing their sale, which may harm
our business.
  Our stock price has been volatile historically, which may make it more difficult to sell shares
when needed at attractive prices.
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Anti-takeover provisions could make it more difficult for a third party to acquire us.
  Our operations could be significantly hindered by the occurrence of natural disasters, terrorist
acts or other catastrophic events.
  Increases in our provision for income taxes or adverse outcomes resulting from examination of our
income or other tax returns could adversely affect our results.
 Accounting for
Uncertainty in Income Taxes
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Approximate DollarTotal
    
    Value of SharesTotal Number
    
    Average Price
    
    Number of Shares
    
    That May Yet Beof Shares
    
    Paid per
    
    Purchased as Part of
    
    Purchased Under thePeriod
    
    Purchased (1)
    
    Share (1)
    
    Repurchase Program(2)
    
    Repurchase Program (2)July 1  31
    
    
    87,278
    
    
    $
    17.38
    
    
    
    
    
    
    $
    141,289,432August 1  31
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    141,289,432September 1  30
    
    
    178,394
    
    
    $
    18.36
    
    
    
    
    
    
    $
    141,289,432Total
    
    
    265,672
    
    
    $
    18.04
    
    
    
    
    
    
    $
    141,289,432
 
 (1)
    
    Includes 265,672 shares repurchased to satisfy tax withholding obligations that arise on the
vesting of restricted stock awards.(2)
    
    In July 2007, the Companys Board of Directors approved a share repurchase program
authorizing the Company to purchase up to $200 million of its common stock. In April 2008, the
Companys Board of Directors approved an increase to the size of the share repurchase program
of an additional $100 million. This approval expands the share repurchase authorization to
$300 million. Since inception of the stock repurchase program, the Company repurchased and
retired 10,020,922 shares of its common stock at a weighted-average price of $15.82 per share
for an aggregate purchase price of $158.7 million including the related transaction fees. The
remaining authorized amount for stock repurchases under this program, including the expansion
amount announced in April 2008, was approximately $141.3 million and will expire on December
31, 2008. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Number
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of July 21, 2008, by and among Brocade Communications Systems,
Inc., Falcon Acquisition Sub, Inc. and Foundry Networks, Inc. (Filed as Exhibit 2.1 to registrants
current report on Form 8-K on July 23, 2008 and incorporated herein by reference).2.2
    
    Voting Agreement, dated as of July 21, 2008, by and among Brocade Communications Systems, Inc. and
Bobby R. Johnson, Jr. (Filed as Exhibit 2.2 to registrants current report on Form 8-K on July 23,
2008 and incorporated herein by reference).10.23
    
    Form of Stock Unit Agreement entered into between Foundry Networks, Inc. and certain executive officers
(Filed as Exhibit 10.23 to registrants current report on Form 8-K on August 6, 2008 and incorporated
herein by reference).10.24
    
    Form of Stock Unit Agreement for Non-U.S. Participants (Filed as Exhibit 10.24 to registrants current
report on Form 8-K on August 6, 2008 and incorporated herein by reference).31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer pursuant to Section 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350.
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SIGNATURE
  Foundry Networks, Inc.
(Registrant)By:

/s/
Daniel W. FairfaxDaniel W. FairfaxVice President, Finance and Administration and
Chief Financial Officer
(Principal Financial and Accounting Officer)  51




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Exhibit Index
 Number
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of July 21, 2008, by and among Brocade Communications Systems,
Inc., Falcon Acquisition Sub, Inc. and Foundry Networks, Inc. (Filed as Exhibit 2.1 to registrants
current report on Form 8-K on July 23, 2008 and incorporated herein by reference).2.2
    
    Voting Agreement, dated as of July 21, 2008, by and among Brocade Communications Systems, Inc. and
Bobby R. Johnson, Jr. (Filed as Exhibit 2.2 to registrants current report on Form 8-K on July 23,
2008 and incorporated herein by reference).10.23
    
    Form of Stock Unit Agreement entered into between Foundry Networks, Inc. and certain executive officers
(Filed as Exhibit 10.23 to registrants current report on Form 8-K on August 6, 2008 and incorporated
herein by reference).10.24
    
    Form of Stock Unit Agreement for Non-U.S. Participants (Filed as Exhibit 10.24 to registrants current
report on Form 8-K on August 6, 2008 and incorporated herein by reference).31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer pursuant to Section 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350.