1009626--12/15/2008--BROCADE_COMMUNICATIONS_SYSTEMS

related topics

{acquisition, growth, future}

{product, market, service}

{regulation, change, law}

{customer, product, revenue}

{stock, price, operating}

{property, intellectual, protect}

{condition, economic, financial}

{cost, operation, labor}

{system, service, information}

{cost, contract, operation}

{personnel, key, retain}

Brocade will take on substantial additional indebtedness to finance the acquisition, which will decrease Brocade s business flexibility and increase its borrowing costs. The integration of Foundry into Brocade may result in significant expenses and accounting charges that adversely affect Brocade s operating results and financial condition. The pendency of the acquisition could cause disruptions in the businesses of Brocade and Foundry, which could have an adverse effect on their respective business and financial results, and consequently on the combined company. Failure to complete the acquisition could negatively impact the stock price and the future business and financial results of Brocade and Foundry. Foundry, and subsequently the combined company, must continue to retain and motivate executives and key employees and recruit new employees, which may be difficult in light of uncertainty regarding the merger, and failure to do so could seriously harm the combined company. Issuances of shares of Brocade common stock in connection with the merger and the resale thereof may cause the market price of shares of Brocade common stock to decline. Integrating Brocade and Foundry may divert management s attention away from the combined company s operations. Assuming the successful completion of the acquisition of Foundry, the Foundry business unit will face many similar risks as Brocade s other business units. Additionally, the following risk factors of Foundry will also apply to the combined company as a result of the acquisition of Foundry. Intense competition in the market for networking solutions could prevent the combined company from maintaining or increasing revenue and sustaining profitability with respect to its networking solutions. The United States government is a significant customer and has been key to Foundry s financial success. Government demand, however, is unpredictable and there is no guarantee of future contract awards. Foundry may be subject to litigation risks and intellectual property infringement claims that are costly to defend and could limit its ability to use certain technologies in the future. Additionally, Foundry may be found to infringe on intellectual property rights of others. Risk Factors 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. Brocade s revenues may be affected by changes in domestic and international information technology spending and overall demand for data center solutions. Brocade is currently expanding its product and service offerings in new and adjacent markets and Brocade s operating results will likely suffer if these initiatives are not successful. Increased market competition may lead to reduced sales, margins, profits and market share. Brocade depends on a limited number of OEM partners for a substantial portion 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. Brocade s failure to successfully manage the transition between its new products and its older products may adversely affect Brocade s financial results. Failure to manage expansion effectively could seriously harm Brocade s business, financial condition and prospects. 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. 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. Brocade is dependent on sole source and limited source suppliers for certain key components, the loss of which may significantly impact results of operations. Certain former officers and directors of Brocade are subject to ongoing actions by the SEC, the Department of Justice ( DOJ ), the Company and others, which have required, and may continue to require, a significant amount of legal expense pursuant to indemnification obligations of Brocade, which could adversely affect Brocade s results of operations and cash flows. If Brocade loses key personnel or is unable to hire additional qualified personnel, Brocade s business may be harmed. Brocade may not realize the anticipated benefits in connection with its recent purchase of real estate and plans to develop and construct office buildings, which could disrupt its business and negatively impact its financial performance. Brocade may not realize the anticipated benefits of past or future acquisitions and strategic investments, and integration of acquired companies or technologies may negatively impact Brocade s business. Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of Brocade s products or businesses and asset impairments. Brocade s business is subject to cyclical fluctuations and uneven sales patterns, which make predicting results of operations difficult. 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. Undetected software or hardware errors could increase Brocade s costs, reduce Brocade s revenues and delay market acceptance of Brocade s products. Brocade is subject to environmental regulations that could have a material adverse effect on Brocade s business. Brocade s future operating expenses may be adversely affected by changes in Brocade s stock price. Brocade has extensive international operations, which subjects it to additional business risks. 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. Business interruptions could adversely affect Brocade s business. 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.

Full 10-K form ▸

1009626--12/15/2008--BROCADE_COMMUNICATIONS_SYSTEMS_INC