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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Brocade Communications Systems, Inc. | NASDAQ:BRCD | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 12.73 | 12.55 | 12.73 | 0 | 01:00:00 |
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
Delaware
|
|
77-0409517
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(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Large accelerated filer
ý
|
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Accelerated filer
o
|
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Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
|
(Do not check if a smaller reporting company)
|
|
|
Page
|
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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||
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Item 1A.
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Item 2.
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Item 6.
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||
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Three Months Ended
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Six Months Ended
|
||||||||||||
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April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
428,193
|
|
|
$
|
458,243
|
|
|
$
|
909,360
|
|
|
$
|
944,481
|
|
Service
|
95,113
|
|
|
88,332
|
|
|
188,230
|
|
|
178,333
|
|
||||
Total net revenues
|
523,306
|
|
|
546,575
|
|
|
1,097,590
|
|
|
1,122,814
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|
||||
Cost of revenues:
|
|
|
|
|
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|
||||||||
Product
|
132,208
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|
|
137,612
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|
|
276,305
|
|
|
287,538
|
|
||||
Service
|
40,787
|
|
|
36,754
|
|
|
82,159
|
|
|
73,384
|
|
||||
Total cost of revenues
|
172,995
|
|
|
174,366
|
|
|
358,464
|
|
|
360,922
|
|
||||
Gross margin
|
350,311
|
|
|
372,209
|
|
|
739,126
|
|
|
761,892
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
89,263
|
|
|
91,870
|
|
|
182,520
|
|
|
177,101
|
|
||||
Sales and marketing
|
148,933
|
|
|
143,078
|
|
|
300,760
|
|
|
283,316
|
|
||||
General and administrative
|
22,791
|
|
|
20,722
|
|
|
45,220
|
|
|
45,393
|
|
||||
Amortization of intangible assets
|
902
|
|
|
627
|
|
|
1,804
|
|
|
765
|
|
||||
Acquisition and integration costs
|
5,757
|
|
|
2,344
|
|
|
5,757
|
|
|
2,344
|
|
||||
Restructuring and other related benefits
|
—
|
|
|
(637
|
)
|
|
(566
|
)
|
|
(637
|
)
|
||||
Total operating expenses
|
267,646
|
|
|
258,004
|
|
|
535,495
|
|
|
508,282
|
|
||||
Income from operations
|
82,665
|
|
|
114,205
|
|
|
203,631
|
|
|
253,610
|
|
||||
Interest expense
|
(9,955
|
)
|
|
(10,552
|
)
|
|
(19,820
|
)
|
|
(35,976
|
)
|
||||
Interest and other income (loss), net
|
1,091
|
|
|
466
|
|
|
1,760
|
|
|
(93
|
)
|
||||
Income before income tax
|
73,801
|
|
|
104,119
|
|
|
185,571
|
|
|
217,541
|
|
||||
Income tax expense
|
30,716
|
|
|
27,079
|
|
|
48,840
|
|
|
53,234
|
|
||||
Net income
|
$
|
43,085
|
|
|
$
|
77,040
|
|
|
$
|
136,731
|
|
|
$
|
164,307
|
|
Net income per share—basic
|
$
|
0.11
|
|
|
$
|
0.18
|
|
|
$
|
0.34
|
|
|
$
|
0.39
|
|
Net income per share—diluted
|
$
|
0.11
|
|
|
$
|
0.18
|
|
|
$
|
0.33
|
|
|
$
|
0.38
|
|
Shares used in per share calculation—basic
|
400,554
|
|
|
420,718
|
|
|
404,228
|
|
|
424,627
|
|
||||
Shares used in per share calculation—diluted
|
408,748
|
|
|
433,234
|
|
|
411,917
|
|
|
436,195
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per share
|
$
|
0.045
|
|
|
$
|
0.035
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
|
(In thousands)
|
||||||||||||||
Net income
|
$
|
43,085
|
|
|
$
|
77,040
|
|
|
$
|
136,731
|
|
|
$
|
164,307
|
|
Other comprehensive income and loss, net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized gains and losses
|
1,964
|
|
|
(143
|
)
|
|
(336
|
)
|
|
(1,918
|
)
|
||||
Net gains and losses reclassified into earnings
|
724
|
|
|
1,109
|
|
|
1,350
|
|
|
1,713
|
|
||||
Net unrealized gains (losses) on cash flow hedges
|
2,688
|
|
|
966
|
|
|
1,014
|
|
|
(205
|
)
|
||||
Foreign currency translation adjustments
|
2,070
|
|
|
(1,068
|
)
|
|
(133
|
)
|
|
(5,289
|
)
|
||||
Total other comprehensive income (loss)
|
4,758
|
|
|
(102
|
)
|
|
881
|
|
|
(5,494
|
)
|
||||
Total comprehensive income
|
$
|
47,843
|
|
|
$
|
76,938
|
|
|
$
|
137,612
|
|
|
$
|
158,813
|
|
|
April 30,
2016 |
|
October 31,
2015 |
||||
|
(In thousands, except par value)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,427,643
|
|
|
$
|
1,440,882
|
|
Accounts receivable, net of allowances for doubtful accounts of $1,739 and $1,838 as of April 30, 2016, and October 31, 2015, respectively
|
204,915
|
|
|
235,883
|
|
||
Inventories
|
39,521
|
|
|
40,524
|
|
||
Deferred tax assets
|
—
|
|
|
78,675
|
|
||
Prepaid expenses and other current assets
|
67,598
|
|
|
56,235
|
|
||
Total current assets
|
1,739,677
|
|
|
1,852,199
|
|
||
Property and equipment, net
|
441,717
|
|
|
439,224
|
|
||
Goodwill
|
1,621,691
|
|
|
1,617,161
|
|
||
Intangible assets, net
|
69,611
|
|
|
75,623
|
|
||
Non-current deferred tax assets
|
69,309
|
|
|
813
|
|
||
Other assets
|
50,968
|
|
|
51,133
|
|
||
Total assets
|
$
|
3,992,973
|
|
|
$
|
4,036,153
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
97,498
|
|
|
$
|
98,143
|
|
Accrued employee compensation
|
133,511
|
|
|
142,075
|
|
||
Deferred revenue
|
230,540
|
|
|
244,622
|
|
||
Other accrued liabilities
|
68,757
|
|
|
77,524
|
|
||
Total current liabilities
|
530,306
|
|
|
562,364
|
|
||
Long-term debt, net of current portion
|
802,482
|
|
|
793,779
|
|
||
Non-current deferred revenue
|
74,434
|
|
|
72,065
|
|
||
Non-current income tax liability
|
62,110
|
|
|
47,010
|
|
||
Non-current deferred tax liabilities
|
—
|
|
|
24,024
|
|
||
Other non-current liabilities
|
2,499
|
|
|
3,376
|
|
||
Total liabilities
|
1,471,831
|
|
|
1,502,618
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
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: 399,383 and 413,923 shares as of April 30, 2016, and October 31, 2015, respectively
|
399
|
|
|
414
|
|
||
Additional paid-in capital
|
1,519,439
|
|
|
1,632,984
|
|
||
Accumulated other comprehensive loss
|
(24,121
|
)
|
|
(25,002
|
)
|
||
Retained earnings
|
1,025,425
|
|
|
925,139
|
|
||
Total stockholders’ equity
|
2,521,142
|
|
|
2,533,535
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,992,973
|
|
|
$
|
4,036,153
|
|
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|||||||
|
Six Months Ended
|
||||||
|
April 30,
2016 |
|
May 2,
2015 |
||||
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
136,731
|
|
|
$
|
164,307
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Excess tax benefits from stock-based compensation
|
(10,987
|
)
|
|
(29,570
|
)
|
||
Depreciation and amortization
|
45,839
|
|
|
40,247
|
|
||
Loss on disposal of property and equipment
|
437
|
|
|
1,241
|
|
||
Amortization of debt issuance costs and debt discount
|
8,704
|
|
|
5,224
|
|
||
Write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing
|
—
|
|
|
4,808
|
|
||
Provision (recovery) for doubtful accounts receivable and sales allowances
|
(1,083
|
)
|
|
4,694
|
|
||
Non-cash stock-based compensation expense
|
48,833
|
|
|
40,157
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Accounts receivable
|
32,051
|
|
|
35,237
|
|
||
Inventories
|
(424
|
)
|
|
3,008
|
|
||
Prepaid expenses and other assets
|
(1,882
|
)
|
|
(25,702
|
)
|
||
Deferred tax assets
|
(74
|
)
|
|
503
|
|
||
Accounts payable
|
(5,127
|
)
|
|
(6,160
|
)
|
||
Accrued employee compensation
|
(21,136
|
)
|
|
(39,997
|
)
|
||
Deferred revenue
|
(11,715
|
)
|
|
(9,149
|
)
|
||
Other accrued liabilities
|
5,500
|
|
|
25,285
|
|
||
Restructuring liabilities
|
(1,035
|
)
|
|
(1,866
|
)
|
||
Net cash provided by operating activities
|
224,632
|
|
|
212,267
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of non-marketable equity and debt investments
|
(2,000
|
)
|
|
(150
|
)
|
||
Purchases of property and equipment
|
(42,425
|
)
|
|
(34,091
|
)
|
||
Purchase of intangible assets
|
—
|
|
|
(7,750
|
)
|
||
Net cash paid in connection with acquisitions
|
(8,061
|
)
|
|
(95,278
|
)
|
||
Proceeds from collection of note receivable
|
250
|
|
|
250
|
|
||
Net cash used in investing activities
|
(52,236
|
)
|
|
(137,019
|
)
|
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued
(Unaudited)
|
|||||||
|
Six Months Ended
|
||||||
|
April 30,
2016 |
|
May 2,
2015 |
||||
|
(In thousands)
|
||||||
Cash flows from financing activities:
|
|
|
|
||||
Payment of principal related to senior secured notes
|
—
|
|
|
(300,000
|
)
|
||
Payment of debt issuance costs
|
—
|
|
|
(1,661
|
)
|
||
Payment of principal related to capital leases
|
(197
|
)
|
|
(1,267
|
)
|
||
Common stock repurchases
|
(180,848
|
)
|
|
(208,244
|
)
|
||
Proceeds from issuance of common stock
|
20,512
|
|
|
21,975
|
|
||
Payment of cash dividends to stockholders
|
(36,445
|
)
|
|
(29,854
|
)
|
||
Proceeds from convertible notes
|
—
|
|
|
565,656
|
|
||
Purchase of convertible note hedge
|
—
|
|
|
(86,135
|
)
|
||
Proceeds from issuance of warrants
|
—
|
|
|
51,175
|
|
||
Excess tax benefits from stock-based compensation
|
10,987
|
|
|
29,570
|
|
||
Net cash provided by (used in) financing activities
|
(185,991
|
)
|
|
41,215
|
|
||
Effect of exchange rate fluctuations on cash and cash equivalents
|
356
|
|
|
(4,668
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(13,239
|
)
|
|
111,795
|
|
||
Cash and cash equivalents, beginning of period
|
1,440,882
|
|
|
1,255,017
|
|
||
Cash and cash equivalents, end of period
|
$
|
1,427,643
|
|
|
$
|
1,366,812
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
10,891
|
|
|
$
|
18,937
|
|
Cash paid for income taxes
|
$
|
31,712
|
|
|
$
|
23,599
|
|
Supplemental schedule of non-cash investing activities:
|
|
|
|
||||
Settlement of debt investment in relation to acquisition
|
$
|
—
|
|
|
$
|
150
|
|
|
Storage Area Networking (“SAN”)
Products
|
|
IP Networking Products
|
|
Global Services
|
|
Total
|
||||||||
Balance at October 31, 2015
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
$
|
176,325
|
|
|
$
|
1,414,634
|
|
|
$
|
155,416
|
|
|
$
|
1,746,375
|
|
Accumulated impairment losses
|
—
|
|
|
(129,214
|
)
|
|
—
|
|
|
(129,214
|
)
|
||||
|
176,325
|
|
|
1,285,420
|
|
|
155,416
|
|
|
1,617,161
|
|
||||
Acquisitions
(1)
|
—
|
|
|
4,625
|
|
|
—
|
|
|
4,625
|
|
||||
Tax adjustments
(2)
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Translation adjustments
|
—
|
|
|
(90
|
)
|
|
—
|
|
|
(90
|
)
|
||||
Balance at April 30, 2016
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
176,320
|
|
|
1,419,169
|
|
|
155,416
|
|
|
1,750,905
|
|
||||
Accumulated impairment losses
|
—
|
|
|
(129,214
|
)
|
|
—
|
|
|
(129,214
|
)
|
||||
|
$
|
176,320
|
|
|
$
|
1,289,955
|
|
|
$
|
155,416
|
|
|
$
|
1,621,691
|
|
(1)
|
The goodwill acquired relates to the acquisition completed in March 2016. See Note
3
, “
Acquisitions
,” of the Notes to Condensed Consolidated Financial Statements.
|
(2)
|
The goodwill adjustments were primarily a result of tax benefits from the exercise of stock awards of acquired companies.
|
•
|
The Company’s operating forecasts;
|
•
|
The Company’s forecasted revenue growth rates; and
|
•
|
Risk-commensurate discount rates and costs of capital.
|
|
April 30, 2016
|
||||||||||||
|
Gross
Carrying Value |
|
Accumulated
Amortization |
|
Net
Carrying Value |
|
Weighted-
Average Remaining Useful Life (In years) |
||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trade names
|
$
|
1,090
|
|
|
$
|
527
|
|
|
$
|
563
|
|
|
4.13
|
Core/developed technology
(1) (2)
|
57,290
|
|
|
14,912
|
|
|
42,378
|
|
|
4.00
|
|||
Patent portfolio license
(3)
|
7,750
|
|
|
1,399
|
|
|
6,351
|
|
|
17.49
|
|||
Customer relationships
|
23,110
|
|
|
3,982
|
|
|
19,128
|
|
|
6.71
|
|||
Non-compete agreements
|
1,050
|
|
|
824
|
|
|
226
|
|
|
0.69
|
|||
Patents with broader applications
|
1,040
|
|
|
75
|
|
|
965
|
|
|
13.88
|
|||
Total finite-lived intangible assets
|
91,330
|
|
|
21,719
|
|
|
69,611
|
|
|
6.10
|
|||
Total intangible assets, excluding goodwill
|
$
|
91,330
|
|
|
$
|
21,719
|
|
|
$
|
69,611
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
October 31, 2015
|
||||||||||||
|
Gross
Carrying Value |
|
Accumulated
Amortization |
|
Net
Carrying Value |
|
Weighted-
Average Remaining Useful Life (In years) |
||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trade names
|
$
|
1,090
|
|
|
$
|
415
|
|
|
$
|
675
|
|
|
4.36
|
Core/developed technology
(2)
|
40,530
|
|
|
9,605
|
|
|
30,925
|
|
|
3.49
|
|||
Patent portfolio license
(3)
|
7,750
|
|
|
849
|
|
|
6,901
|
|
|
17.74
|
|||
Customer relationships
|
23,110
|
|
|
2,484
|
|
|
20,626
|
|
|
7.18
|
|||
Non-compete agreements
|
1,050
|
|
|
664
|
|
|
386
|
|
|
1.17
|
|||
Patents with broader applications
|
1,040
|
|
|
40
|
|
|
1,000
|
|
|
14.38
|
|||
Total finite-lived intangible assets
|
74,570
|
|
|
14,057
|
|
|
60,513
|
|
|
6.55
|
|||
Indefinite-lived intangible assets, excluding goodwill:
|
|
|
|
|
|
|
|
||||||
In-process research and development (“IPR&D”)
(1)
|
15,110
|
|
|
—
|
|
|
15,110
|
|
|
|
|||
Total indefinite-lived intangible assets, excluding goodwill
|
15,110
|
|
|
—
|
|
|
15,110
|
|
|
|
|||
Total intangible assets, excluding goodwill
|
$
|
89,680
|
|
|
$
|
14,057
|
|
|
$
|
75,623
|
|
|
|
(1)
|
Acquired IPR&D are intangible assets accounted for as indefinite-lived assets until the completion or abandonment of the associated research and development efforts. If the research and development efforts associated with the IPR&D are successfully completed, then the IPR&D intangible assets will be amortized over the estimated useful lives to be determined as of the date the efforts are completed. During the
six months ended
April 30, 2016
, research and development efforts were completed on
$15.1 million
of the IPR&D intangible assets, and the completed IPR&D intangible assets are being amortized as Core/developed technology over the respective estimated useful lives of
five
and
six
years.
|
(2)
|
During the
six months ended
April 30, 2016
,
$1.0 million
of finite-lived intangible assets became fully amortized and, therefore, were removed from the balance sheet.
|
(3)
|
The patent portfolio license was assigned an estimated useful life that reflects the Company’s consumption of the expected defensive benefits related to this license to certain patents. The method of amortization for the patent portfolio license reflects the Company’s estimate of the pattern in which these expected defensive benefits will be used by the Company and is primarily based on the mix of expiration patterns of the individual patents included in the license.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
April 30, 2016
|
|
May 2, 2015
|
||||||||
Cost of revenues
|
$
|
3,193
|
|
|
$
|
1,857
|
|
|
$
|
6,348
|
|
|
$
|
2,494
|
|
General and administrative
(1)
|
274
|
|
|
291
|
|
|
550
|
|
|
291
|
|
||||
Amortization of intangible assets
|
902
|
|
|
627
|
|
|
1,804
|
|
|
765
|
|
||||
Total
|
$
|
4,369
|
|
|
$
|
2,775
|
|
|
$
|
8,702
|
|
|
$
|
3,550
|
|
(1)
|
The amortization is related to the
$7.8 million
of perpetual, non-exclusive license to certain patents purchased during the fiscal year ended October 31, 2015.
|
Fiscal Year
|
|
Estimated
Future
Amortization
|
||
2016 (remaining six months)
|
|
$
|
8,979
|
|
2017
|
|
17,531
|
|
|
2018
|
|
13,012
|
|
|
2019
|
|
9,483
|
|
|
2020
|
|
8,394
|
|
|
Thereafter
|
|
12,212
|
|
|
Total
|
|
$
|
69,611
|
|
|
April 30,
2016 |
|
October 31,
2015 |
||||
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
17,357
|
|
|
$
|
18,788
|
|
Finished goods
|
22,164
|
|
|
21,736
|
|
||
Inventories
|
$
|
39,521
|
|
|
$
|
40,524
|
|
|
April 30,
2016 |
|
October 31,
2015 |
||||
Property and equipment, net:
|
|
|
|
||||
Gross property and equipment
|
|
|
|
||||
Computer equipment
|
$
|
20,046
|
|
|
$
|
14,820
|
|
Software
|
70,991
|
|
|
67,625
|
|
||
Engineering and other equipment
(1)
|
424,059
|
|
|
407,342
|
|
||
Furniture and fixtures
(1)
|
32,870
|
|
|
31,028
|
|
||
Leasehold improvements
|
37,016
|
|
|
33,986
|
|
||
Land and building
|
385,760
|
|
|
385,415
|
|
||
Total gross property and equipment
|
970,742
|
|
|
940,216
|
|
||
Accumulated depreciation and amortization
(1), (2)
|
(529,025
|
)
|
|
(500,992
|
)
|
||
Property and equipment, net
|
$
|
441,717
|
|
|
$
|
439,224
|
|
(1)
|
Engineering and other equipment, furniture and fixtures, and accumulated depreciation and amortization include the following amounts under capital leases as of
April 30, 2016
, and
October 31, 2015
(in thousands):
|
|
April 30,
2016 |
|
October 31,
2015 |
||||
Cost
|
$
|
1,312
|
|
|
$
|
1,312
|
|
Accumulated depreciation
|
(1,274
|
)
|
|
(857
|
)
|
||
Property and equipment, net, under capital leases
|
$
|
38
|
|
|
$
|
455
|
|
(2)
|
The following table presents the depreciation of property and equipment included on the Company’s Condensed Consolidated
Statements of Income
(in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Depreciation expense
|
$
|
18,658
|
|
|
$
|
17,898
|
|
|
$
|
37,137
|
|
|
$
|
36,697
|
|
|
|
|
Fair Value Measurements Using
|
||||||||||||
|
Balance as of
April 30, 2016 |
|
Quoted Prices in
Active Markets for Identical Instruments (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
1,151,583
|
|
|
$
|
1,151,583
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
1,025
|
|
|
—
|
|
|
1,025
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
1,152,608
|
|
|
$
|
1,151,583
|
|
|
$
|
1,025
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
$
|
739
|
|
|
$
|
—
|
|
|
$
|
739
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
739
|
|
|
$
|
—
|
|
|
$
|
739
|
|
|
$
|
—
|
|
(1)
|
Money market funds are reported within “Cash and cash equivalents” on the Company’s Condensed Consolidated Balance Sheets.
|
|
|
|
Fair Value Measurements Using
|
||||||||||||
|
Balance as of
October 31, 2015 |
|
Quoted Prices in
Active Markets for Identical Instruments (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
1,184,410
|
|
|
$
|
1,184,410
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
709
|
|
|
—
|
|
|
709
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
1,185,119
|
|
|
$
|
1,184,410
|
|
|
$
|
709
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
$
|
1,125
|
|
|
$
|
—
|
|
|
$
|
1,125
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
1,125
|
|
|
$
|
—
|
|
|
$
|
1,125
|
|
|
$
|
—
|
|
(1)
|
Money market funds are reported within “Cash and cash equivalents” on the Company’s Condensed Consolidated Balance Sheets.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Lease loss reserve and related benefits
|
$
|
—
|
|
|
$
|
(637
|
)
|
|
$
|
(566
|
)
|
|
$
|
(637
|
)
|
|
Fiscal 2013 Fourth Quarter Restructuring Plan
|
|
Other Restructuring Plans
|
|
|
||||||||||
|
Severance and Benefits
|
|
Lease Loss Reserve and Related Costs
|
|
Lease Loss
Reserve and Related Costs
|
|
Total
|
||||||||
Restructuring liabilities at October 31, 2015
|
$
|
110
|
|
|
$
|
1,811
|
|
|
$
|
408
|
|
|
$
|
2,329
|
|
Restructuring and other related benefits
|
—
|
|
|
(566
|
)
|
|
—
|
|
|
(566
|
)
|
||||
Cash payments
|
—
|
|
|
(285
|
)
|
|
(180
|
)
|
|
(465
|
)
|
||||
Translation adjustment
|
2
|
|
|
(6
|
)
|
|
—
|
|
|
(4
|
)
|
||||
Restructuring liabilities at April 30, 2016
|
$
|
112
|
|
|
$
|
954
|
|
|
$
|
228
|
|
|
$
|
1,294
|
|
|
|
|
|
|
|
|
|
||||||||
Current restructuring liabilities at April 30, 2016
|
$
|
112
|
|
|
$
|
378
|
|
|
$
|
228
|
|
|
$
|
718
|
|
Non-current restructuring liabilities at April 30, 2016
|
$
|
—
|
|
|
$
|
576
|
|
|
$
|
—
|
|
|
$
|
576
|
|
|
|
|
|
|
|
April 30, 2016
|
|
October 31, 2015
|
||||||||
|
|
Maturity
|
|
Stated Annual Interest Rate
|
|
Amount
|
Effective Interest Rate
|
|
Amount
|
Effective Interest Rate
|
||||||
Convertible Senior Unsecured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||
2020 Convertible Notes
|
|
2020
|
|
1.375%
|
|
$
|
575,000
|
|
4.98
|
%
|
|
$
|
575,000
|
|
4.98
|
%
|
Senior Unsecured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||
2023 Notes
|
|
2023
|
|
4.625%
|
|
300,000
|
|
4.83
|
%
|
|
300,000
|
|
4.83
|
%
|
||
Capital lease obligations
|
|
2016
|
|
4.625%
|
|
101
|
|
4.63
|
%
|
|
298
|
|
4.63
|
%
|
||
Total gross long-term debt
|
|
|
|
|
|
875,101
|
|
|
|
875,298
|
|
|
||||
Unamortized discount
|
|
|
|
|
|
(70,675
|
)
|
|
|
(79,196
|
)
|
|
||||
Unamortized debt issuance costs
|
|
|
|
|
|
(1,843
|
)
|
|
|
(2,025
|
)
|
|
||||
Current portion of long-term debt
|
|
|
|
|
|
(101
|
)
|
|
|
(298
|
)
|
|
||||
Long-term debt, net of current portion
|
|
|
|
|
|
$
|
802,482
|
|
|
|
$
|
793,779
|
|
|
|
April 30,
2016 |
|
October 31,
2015 |
||||
Principal
|
$
|
575,000
|
|
|
$
|
575,000
|
|
Unamortized discount of the liability component
|
(67,959
|
)
|
|
(76,311
|
)
|
||
Net carrying amount of liability component
|
$
|
507,041
|
|
|
$
|
498,689
|
|
Carrying amount of equity component
|
$
|
63,164
|
|
|
$
|
70,765
|
|
•
|
During any fiscal quarter commencing after the fiscal quarter ending on May 2, 2015 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to
130%
of the conversion price of the notes on each applicable trading day;
|
•
|
During the
five
-business-day period after any
10
consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each trading day of that
10
consecutive trading day period was less than
98%
of the product of the last reported sale price of the Company’s common stock and the conversion rate of the notes on each such trading day; or
|
•
|
Upon the occurrence of certain corporate events as specified in the terms of the indenture governing the 2020 Convertible Notes.
|
•
|
Incur certain liens and enter into certain sale-leaseback transactions;
|
•
|
Create, assume, incur, or guarantee additional indebtedness of the Company’s subsidiaries without such subsidiaries guaranteeing the 2023 Notes on a pari passu basis; and
|
•
|
Enter into certain consolidation or merger transactions, or convey, transfer, or lease all or substantially all of the Company’s or its subsidiaries’ assets.
|
Fiscal Year
|
|
Principal
Balances
|
||
2016 (remaining six months)
|
|
$
|
101
|
|
2017
|
|
—
|
|
|
2018
|
|
—
|
|
|
2019
|
|
—
|
|
|
2020
|
|
575,000
|
|
|
Thereafter
|
|
300,000
|
|
|
Total
|
|
$
|
875,101
|
|
|
Accrued Warranty
|
||||||
|
Six Months Ended
|
||||||
|
April 30,
2016 |
|
May 2,
2015 |
||||
Beginning balance
|
$
|
7,599
|
|
|
$
|
7,486
|
|
Liabilities accrued for warranties issued during the period
|
1,876
|
|
|
2,302
|
|
||
Warranty claims paid and used during the period
|
(1,931
|
)
|
|
(2,132
|
)
|
||
Changes in liability for pre-existing warranties during the period
|
(115
|
)
|
|
(349
|
)
|
||
Ending balance
|
$
|
7,429
|
|
|
$
|
7,307
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
April 30, 2016
|
|
May 2, 2015
|
||||||||
Cost of revenues
|
$
|
(66
|
)
|
|
$
|
(328
|
)
|
|
$
|
(160
|
)
|
|
$
|
(464
|
)
|
Research and development
|
(427
|
)
|
|
(32
|
)
|
|
(626
|
)
|
|
(67
|
)
|
||||
Sales and marketing
|
(270
|
)
|
|
(870
|
)
|
|
(644
|
)
|
|
(1,324
|
)
|
||||
General and administrative
|
(17
|
)
|
|
(25
|
)
|
|
(44
|
)
|
|
(83
|
)
|
||||
Total
|
$
|
(780
|
)
|
|
$
|
(1,255
|
)
|
|
$
|
(1,474
|
)
|
|
$
|
(1,938
|
)
|
|
Derivatives Designated
as Hedging Instruments |
||||||
In U.S. dollars
|
April 30, 2016
|
|
October 31, 2015
|
||||
British pound
|
$
|
21,936
|
|
|
$
|
46,330
|
|
Euro
|
21,311
|
|
|
40,961
|
|
||
Indian rupee
|
17,668
|
|
|
35,647
|
|
||
Chinese yuan
|
7,418
|
|
|
15,129
|
|
||
Singapore dollar
|
6,943
|
|
|
13,745
|
|
||
Japanese yen
|
4,985
|
|
|
8,809
|
|
||
Swiss franc
|
4,771
|
|
|
9,265
|
|
||
Total
|
$
|
85,032
|
|
|
$
|
169,886
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
April 30, 2016
|
|
May 2, 2015
|
||||||||
Cost of revenues
|
$
|
3,531
|
|
|
$
|
1,986
|
|
|
$
|
6,436
|
|
|
$
|
5,802
|
|
Research and development
|
5,123
|
|
|
3,080
|
|
|
10,599
|
|
|
8,013
|
|
||||
Sales and marketing
|
11,052
|
|
|
7,207
|
|
|
22,130
|
|
|
17,050
|
|
||||
General and administrative
|
5,083
|
|
|
3,802
|
|
|
9,668
|
|
|
9,292
|
|
||||
Total stock-based compensation expense
|
$
|
24,789
|
|
|
$
|
16,075
|
|
|
$
|
48,833
|
|
|
$
|
40,157
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
April 30, 2016
|
|
May 2, 2015
|
||||||||
Stock options
|
$
|
708
|
|
|
$
|
536
|
|
|
$
|
1,437
|
|
|
$
|
1,892
|
|
RSUs, including restricted stock units with market conditions
|
20,589
|
|
|
11,317
|
|
|
40,382
|
|
|
29,251
|
|
||||
Employee stock purchase plan (“ESPP”)
|
3,492
|
|
|
4,222
|
|
|
7,014
|
|
|
9,014
|
|
||||
Total stock-based compensation expense
|
$
|
24,789
|
|
|
$
|
16,075
|
|
|
$
|
48,833
|
|
|
$
|
40,157
|
|
|
Unrecognized
Compensation
Expense
|
|
Weighted-
Average Period
(In years)
|
||
Stock options
|
$
|
1,414
|
|
|
0.91
|
RSUs, including restricted stock units with market conditions
|
$
|
109,208
|
|
|
1.82
|
ESPP
|
$
|
6,518
|
|
|
1.03
|
Declaration Date
|
|
Dividend per Share
|
|
Record Date
|
|
Total Amount Paid
|
|
Payment Date
|
||||
November 22, 2015
|
|
$
|
0.045
|
|
|
December 10, 2015
|
|
$
|
18,429
|
|
|
January 4, 2016
|
February 16, 2016
|
|
$
|
0.045
|
|
|
March 10, 2016
|
|
$
|
18,016
|
|
|
April 4, 2016
|
|
Three Months Ended
|
||||||||||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
||||||||||||||||||||
|
Before-Tax Amount
|
|
Tax Expense
|
|
Net-of-Tax Amount
|
|
Before-Tax Amount
|
|
Tax Expense
|
|
Net-of-Tax Amount
|
||||||||||||
Unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in unrealized gains and losses, foreign exchange contracts
|
$
|
2,254
|
|
|
$
|
(290
|
)
|
|
$
|
1,964
|
|
|
$
|
(17
|
)
|
|
$
|
(126
|
)
|
|
$
|
(143
|
)
|
Net gains and losses reclassified into earnings, foreign exchange contracts
(1)
|
780
|
|
|
(56
|
)
|
|
724
|
|
|
1,255
|
|
|
(146
|
)
|
|
1,109
|
|
||||||
Net unrealized gains (losses) on cash flow hedges
|
3,034
|
|
|
(346
|
)
|
|
2,688
|
|
|
1,238
|
|
|
(272
|
)
|
|
966
|
|
||||||
Foreign currency translation adjustments
|
2,070
|
|
|
—
|
|
|
2,070
|
|
|
(1,068
|
)
|
|
—
|
|
|
(1,068
|
)
|
||||||
Total other comprehensive income (loss)
|
$
|
5,104
|
|
|
$
|
(346
|
)
|
|
$
|
4,758
|
|
|
$
|
170
|
|
|
$
|
(272
|
)
|
|
$
|
(102
|
)
|
|
Six Months Ended
|
||||||||||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
||||||||||||||||||||
|
Before-Tax Amount
|
|
Tax (Expense) Benefit
|
|
Net-of-Tax Amount
|
|
Before-Tax Amount
|
|
Tax (Expense) Benefit
|
|
Net-of-Tax Amount
|
||||||||||||
Unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in unrealized gains and losses, foreign exchange contracts
|
$
|
(342
|
)
|
|
$
|
6
|
|
|
$
|
(336
|
)
|
|
$
|
(2,197
|
)
|
|
$
|
279
|
|
|
$
|
(1,918
|
)
|
Net gains and losses reclassified into earnings, foreign exchange contracts
(1)
|
1,474
|
|
|
(124
|
)
|
|
1,350
|
|
|
1,938
|
|
|
(225
|
)
|
|
1,713
|
|
||||||
Net unrealized gains (losses) on cash flow hedges
|
1,132
|
|
|
(118
|
)
|
|
1,014
|
|
|
(259
|
)
|
|
54
|
|
|
(205
|
)
|
||||||
Foreign currency translation adjustments
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
|
(5,289
|
)
|
|
—
|
|
|
(5,289
|
)
|
||||||
Total other comprehensive income (loss)
|
$
|
999
|
|
|
$
|
(118
|
)
|
|
$
|
881
|
|
|
$
|
(5,548
|
)
|
|
$
|
54
|
|
|
$
|
(5,494
|
)
|
(1)
|
For classification of amounts reclassified from accumulated other comprehensive loss into earnings as reported on the Company’s Condensed Consolidated
Statements of Income
, see Note
10
, “
Derivative Instruments and Hedging Activities
,” of the Notes to Condensed Consolidated Financial Statements.
|
|
Six Months Ended
|
||||||||||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
||||||||||||||||||||
|
Losses on Cash Flow Hedges
|
|
Foreign Currency Translation Adjustments
|
|
Total Accumulated Other Comprehensive Loss
|
|
Losses on Cash Flow Hedges
|
|
Foreign Currency Translation Adjustments
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||||||
Beginning balance
|
$
|
(1,539
|
)
|
|
$
|
(23,463
|
)
|
|
$
|
(25,002
|
)
|
|
$
|
(1,907
|
)
|
|
$
|
(16,907
|
)
|
|
$
|
(18,814
|
)
|
Change in unrealized gains and losses
|
(336
|
)
|
|
(133
|
)
|
|
(469
|
)
|
|
(1,918
|
)
|
|
(5,289
|
)
|
|
(7,207
|
)
|
||||||
Net gains and losses reclassified into earnings
|
1,350
|
|
|
—
|
|
|
1,350
|
|
|
1,713
|
|
|
—
|
|
|
1,713
|
|
||||||
Net current-period other comprehensive income (loss)
|
1,014
|
|
|
(133
|
)
|
|
881
|
|
|
(205
|
)
|
|
(5,289
|
)
|
|
(5,494
|
)
|
||||||
Ending balance
|
$
|
(525
|
)
|
|
$
|
(23,596
|
)
|
|
$
|
(24,121
|
)
|
|
$
|
(2,112
|
)
|
|
$
|
(22,196
|
)
|
|
$
|
(24,308
|
)
|
|
SAN Products
|
|
IP Networking Products
|
|
Global Services
|
|
Total
|
||||||||
Three months ended April 30, 2016
|
|
|
|
|
|
|
|
||||||||
Net revenues
|
$
|
296,627
|
|
|
$
|
131,566
|
|
|
$
|
95,113
|
|
|
$
|
523,306
|
|
Cost of revenues
|
71,972
|
|
|
60,236
|
|
|
40,787
|
|
|
172,995
|
|
||||
Gross margin
|
$
|
224,655
|
|
|
$
|
71,330
|
|
|
$
|
54,326
|
|
|
$
|
350,311
|
|
Three months ended May 2, 2015
|
|
|
|
|
|
|
|
||||||||
Net revenues
|
$
|
313,512
|
|
|
$
|
144,731
|
|
|
$
|
88,332
|
|
|
$
|
546,575
|
|
Cost of revenues
|
73,768
|
|
|
63,844
|
|
|
36,754
|
|
|
174,366
|
|
||||
Gross margin
|
$
|
239,744
|
|
|
$
|
80,887
|
|
|
$
|
51,578
|
|
|
$
|
372,209
|
|
Six months ended April 30, 2016
|
|
|
|
|
|
|
|
||||||||
Net revenues
|
$
|
643,685
|
|
|
$
|
265,675
|
|
|
$
|
188,230
|
|
|
$
|
1,097,590
|
|
Cost of revenues
|
153,176
|
|
|
123,129
|
|
|
82,159
|
|
|
358,464
|
|
||||
Gross margin
|
$
|
490,509
|
|
|
$
|
142,546
|
|
|
$
|
106,071
|
|
|
$
|
739,126
|
|
Six months ended May 2, 2015
|
|
|
|
|
|
|
|
||||||||
Net revenues
|
$
|
666,911
|
|
|
$
|
277,570
|
|
|
$
|
178,333
|
|
|
$
|
1,122,814
|
|
Cost of revenues
|
159,493
|
|
|
128,045
|
|
|
73,384
|
|
|
360,922
|
|
||||
Gross margin
|
$
|
507,418
|
|
|
$
|
149,525
|
|
|
$
|
104,949
|
|
|
$
|
761,892
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Basic net income per share
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
43,085
|
|
|
$
|
77,040
|
|
|
$
|
136,731
|
|
|
$
|
164,307
|
|
Weighted-average shares used in computing basic net income per share
|
400,554
|
|
|
420,718
|
|
|
404,228
|
|
|
424,627
|
|
||||
Basic net income per share
|
$
|
0.11
|
|
|
$
|
0.18
|
|
|
$
|
0.34
|
|
|
$
|
0.39
|
|
Diluted net income per share
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
43,085
|
|
|
$
|
77,040
|
|
|
$
|
136,731
|
|
|
$
|
164,307
|
|
Weighted-average shares used in computing basic net income per share
|
400,554
|
|
|
420,718
|
|
|
404,228
|
|
|
424,627
|
|
||||
Dilutive potential common shares in the form of stock options
|
1,428
|
|
|
1,826
|
|
|
1,380
|
|
|
1,780
|
|
||||
Dilutive potential common shares in the form of other share-based awards
|
6,766
|
|
|
10,690
|
|
|
6,309
|
|
|
9,788
|
|
||||
Weighted-average shares used in computing diluted net income per share
|
408,748
|
|
|
433,234
|
|
|
411,917
|
|
|
436,195
|
|
||||
Diluted net income per share
|
$
|
0.11
|
|
|
$
|
0.18
|
|
|
$
|
0.33
|
|
|
$
|
0.38
|
|
Antidilutive potential common shares in the form of:
(1)
|
|
|
|
|
|
|
|
||||||||
Warrants issued in conjunction with the 2020 Convertible Notes
(2)
|
36,240
|
|
|
36,095
|
|
|
36,220
|
|
|
21,618
|
|
||||
Stock options
|
1,374
|
|
|
1,117
|
|
|
1,624
|
|
|
847
|
|
||||
Other share-based awards
|
316
|
|
|
—
|
|
|
650
|
|
|
—
|
|
(1)
|
These amounts are excluded from the computation of diluted net income per share.
|
(2)
|
In connection with the issuance of the 2020 Convertible Notes, the Company entered into convertible note hedge and warrant transactions as described in Note
8
, “
Borrowings
.” The 2020 Convertible Notes have no impact on diluted earnings per share until the average quarterly price of the Company’s common stock exceeds the adjusted conversion price of
$15.87
per share. If the common stock price exceeds this adjusted conversion price, then, prior to conversion, the Company will calculate the effect of the additional shares that may be issued using the treasury stock method. If the average price of the Company’s common stock exceeds
$20.57
per share for a quarterly period, the Company’s weighted-average shares used in computing diluted net income per share will be impacted by the effect of the additional potential shares that may be issued related to the warrants using the treasury stock method. The convertible note hedge is not considered for purposes of the diluted earnings per share calculation, as its effect would be antidilutive.
|
Assets acquired:
|
|
||
Cash and cash equivalents
|
$
|
59,714
|
|
Restricted cash
|
5,000
|
|
|
Short-term investments
|
166,934
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $800
|
80,256
|
|
|
Inventories
|
64,000
|
|
|
Prepaid expenses and other current assets
|
9,185
|
|
|
Property and equipment, net
|
27,888
|
|
|
Identifiable intangible assets
|
422,000
|
|
|
Non-current deferred tax assets
|
70,944
|
|
|
Other assets
|
1,767
|
|
|
Total assets acquired
|
907,688
|
|
|
Liabilities assumed:
|
|
||
Accounts payable
|
23,074
|
|
|
Accrued employee compensation
|
17,100
|
|
|
Deferred revenue
|
13,947
|
|
|
Other accrued liabilities
|
11,209
|
|
|
Non-current deferred revenue
|
10,420
|
|
|
Non-current deferred tax liability
|
172,265
|
|
|
Other non-current liabilities
|
3,274
|
|
|
Total liabilities assumed
|
251,289
|
|
|
Net assets acquired, excluding goodwill (a)
|
656,399
|
|
|
Total preliminary estimated purchase price (b)
|
1,245,090
|
|
|
Estimated goodwill (b) - (a)
|
$
|
588,691
|
|
Intangible Asset
|
Approximate Fair Value
|
|
Estimated Useful Life
(in years)
|
||
Trade name/trademark
|
$
|
48,000
|
|
|
12.50
|
Customer relationships
|
117,000
|
|
|
6.50
|
|
Developed technology
|
223,000
|
|
|
5.50
|
|
IPR&D
(1)
|
34,000
|
|
|
N/A
|
|
Total intangible assets
|
$
|
422,000
|
|
|
|
(1)
|
IPR&D will be accounted for as an indefinite-lived intangible asset until the underlying projects are completed or abandoned.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Unaudited pro forma consolidated results:
|
|
|
|
|
|
|
|
||||||||
Pro forma revenues
|
$
|
623,143
|
|
|
$
|
627,917
|
|
|
$
|
1,296,807
|
|
|
$
|
1,276,670
|
|
Pro forma net income
|
$
|
31,203
|
|
|
$
|
60,324
|
|
|
$
|
115,421
|
|
|
$
|
88,107
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Total net revenues
|
$
|
523,306
|
|
|
$
|
546,575
|
|
|
$
|
1,097,590
|
|
|
$
|
1,122,814
|
|
Gross margin
|
$
|
350,311
|
|
|
$
|
372,209
|
|
|
$
|
739,126
|
|
|
$
|
761,892
|
|
Gross margin, as a percentage of total net revenues
|
66.9
|
%
|
|
68.1
|
%
|
|
67.3
|
%
|
|
67.9
|
%
|
||||
Income from operations
|
$
|
82,665
|
|
|
$
|
114,205
|
|
|
$
|
203,631
|
|
|
$
|
253,610
|
|
Income from operations, as a percentage of total net revenues
|
15.8
|
%
|
|
20.9
|
%
|
|
18.6
|
%
|
|
22.6
|
%
|
||||
Net income
|
$
|
43,085
|
|
|
$
|
77,040
|
|
|
$
|
136,731
|
|
|
$
|
164,307
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Net Revenues
|
|
% of Net
Revenues |
|
Net Revenues
|
|
% of Net
Revenues |
|
Increase/(Decrease)
|
|
%
Change |
|||||||||
SAN Products
|
$
|
296,627
|
|
|
56.7
|
%
|
|
$
|
313,512
|
|
|
57.3
|
%
|
|
$
|
(16,885
|
)
|
|
(5.4
|
)%
|
IP Networking Products
|
131,566
|
|
|
25.1
|
%
|
|
144,731
|
|
|
26.5
|
%
|
|
(13,165
|
)
|
|
(9.1
|
)%
|
|||
Global Services
|
95,113
|
|
|
18.2
|
%
|
|
88,332
|
|
|
16.2
|
%
|
|
6,781
|
|
|
7.7
|
%
|
|||
Total net revenues
|
$
|
523,306
|
|
|
100.0
|
%
|
|
$
|
546,575
|
|
|
100.0
|
%
|
|
$
|
(23,269
|
)
|
|
(4.3
|
)%
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Net Revenues
|
|
% of Net
Revenues
|
|
Net Revenues
|
|
% of Net
Revenues
|
|
Increase/(Decrease)
|
|
%
Change
|
|||||||||
SAN Products
|
$
|
643,685
|
|
|
58.6
|
%
|
|
$
|
666,911
|
|
|
59.4
|
%
|
|
$
|
(23,226
|
)
|
|
(3.5
|
)%
|
IP Networking Products
|
265,675
|
|
|
24.2
|
%
|
|
277,570
|
|
|
24.7
|
%
|
|
(11,895
|
)
|
|
(4.3
|
)%
|
|||
Global Services
|
188,230
|
|
|
17.2
|
%
|
|
178,333
|
|
|
15.9
|
%
|
|
9,897
|
|
|
5.5
|
%
|
|||
Total net revenues
|
$
|
1,097,590
|
|
|
100.0
|
%
|
|
$
|
1,122,814
|
|
|
100.0
|
%
|
|
$
|
(25,224
|
)
|
|
(2.2
|
)%
|
•
|
The decrease in SAN product revenues was caused by a decrease in director product revenues and embedded and fixed-configuration switch product revenues, primarily due to softer industry storage demand. The number of ports shipped decreased by 10.7% during
the three months ended April 30, 2016
, due to the decrease in embedded and fixed-configuration switch sales, the effect of which was partially offset by a 6.0% increase in the average selling price per port;
|
•
|
The decrease in IP Networking product revenues primarily reflects lower revenues from our routing products, primarily due to weaker demand from large network carrier and federal customers as a result of recent market softness. The decrease is partially offset by the increase in switch product revenues due to stronger enterprise customer demand for fixed data center switches and growth in the vADC software product line acquired in the second quarter of fiscal year 2015; and
|
•
|
The increase in Global Services revenues was primarily due to an increase in SAN and IP hardware support renewal contracts, higher vADC software support revenue, and higher professional services revenues.
|
•
|
The decrease in SAN product revenues was caused by a decrease in embedded and fixed-configuration switch product revenues, primarily due to softer industry storage demand, partially offset by a slight increase in director product revenues. The number of ports shipped decreased by 9.5% during
the six months ended April 30, 2016
, due to the decrease in embedded and fixed-configuration switch sales, the effect of which was partially offset by a 6.6% increase in the average selling price per port;
|
•
|
The decrease in IP Networking product revenues primarily reflects lower revenues from our routing products, primarily due to weaker demand from large network carrier and federal customers. This decrease was partially offset by increases in campus switching, data center switching, and software networking products. Campus switch revenue growth is attributed to the education vertical market, particularly the stimulus from the U.S. federal government funding of technology improvements for schools, commonly known as the E-Rate program. Data center switching revenues increased due to stronger enterprise customer demand for fixed switches. Software networking revenues increased primarily due to the vADC software product line acquired in the second quarter of fiscal year 2015; and
|
•
|
The increase in Global Services revenues was primarily due to an increase in support revenue related to our vADC software product line acquired in the second quarter of fiscal year 2015, an increase in renewal support contracts for our SAN and IP hardware products, as well as an increase in professional services revenues.
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Net Revenues
|
|
% of Net
Revenues |
|
Net Revenues
|
|
% of Net
Revenues |
|
Increase/(Decrease)
|
|
%
Change |
|||||||||
United States (“U.S.”)
|
$
|
275,250
|
|
|
52.6
|
%
|
|
$
|
306,474
|
|
|
56.0
|
%
|
|
$
|
(31,224
|
)
|
|
(10.2
|
)%
|
Europe, the Middle East and Africa
(1)
|
150,059
|
|
|
28.7
|
%
|
|
144,582
|
|
|
26.5
|
%
|
|
5,477
|
|
|
3.8
|
%
|
|||
Asia Pacific
|
64,433
|
|
|
12.3
|
%
|
|
52,775
|
|
|
9.7
|
%
|
|
11,658
|
|
|
22.1
|
%
|
|||
Japan
|
25,646
|
|
|
4.9
|
%
|
|
25,371
|
|
|
4.6
|
%
|
|
275
|
|
|
1.1
|
%
|
|||
Canada, Central and South America
|
7,918
|
|
|
1.5
|
%
|
|
17,373
|
|
|
3.2
|
%
|
|
(9,455
|
)
|
|
(54.4
|
)%
|
|||
Total net revenues
|
$
|
523,306
|
|
|
100.0
|
%
|
|
$
|
546,575
|
|
|
100.0
|
%
|
|
$
|
(23,269
|
)
|
|
(4.3
|
)%
|
(1)
|
Includes net revenues of
$97.3 million
and
$93.4 million
for
the three months ended April 30, 2016
, and
the three months ended May 2, 2015
, respectively, relating to the Netherlands.
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Net Revenues
|
|
% of Net
Revenues
|
|
Net Revenues
|
|
% of Net
Revenues
|
|
Increase/(Decrease)
|
|
%
Change
|
|||||||||
U.S.
|
$
|
591,601
|
|
|
53.9
|
%
|
|
$
|
637,568
|
|
|
56.7
|
%
|
|
$
|
(45,967
|
)
|
|
(7.2
|
)%
|
Europe, the Middle East and Africa
(1)
|
303,114
|
|
|
27.6
|
%
|
|
305,149
|
|
|
27.2
|
%
|
|
(2,035
|
)
|
|
(0.7
|
)%
|
|||
Asia Pacific
|
131,011
|
|
|
11.9
|
%
|
|
107,701
|
|
|
9.6
|
%
|
|
23,310
|
|
|
21.6
|
%
|
|||
Japan
|
50,231
|
|
|
4.6
|
%
|
|
45,703
|
|
|
4.1
|
%
|
|
4,528
|
|
|
9.9
|
%
|
|||
Canada, Central and South America
|
21,633
|
|
|
2.0
|
%
|
|
26,693
|
|
|
2.4
|
%
|
|
(5,060
|
)
|
|
(19.0
|
)%
|
|||
Total net revenues
|
$
|
1,097,590
|
|
|
100.0
|
%
|
|
$
|
1,122,814
|
|
|
100.0
|
%
|
|
$
|
(25,224
|
)
|
|
(2.2
|
)%
|
(1)
|
Includes net revenues of
$201.5 million
and
$204.2 million
for
the six months ended April 30, 2016
, and
the six months ended May 2, 2015
, respectively, relating to the Netherlands.
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Gross Margin
|
|
% of Net
Revenues
|
|
Gross Margin
|
|
% of Net
Revenues
|
|
Increase/(Decrease)
|
|
% Points
Change
|
|||||||||
SAN Products
|
$
|
224,655
|
|
|
75.7
|
%
|
|
$
|
239,744
|
|
|
76.5
|
%
|
|
$
|
(15,089
|
)
|
|
(0.8
|
)%
|
IP Networking Products
|
71,330
|
|
|
54.2
|
%
|
|
80,887
|
|
|
55.9
|
%
|
|
(9,557
|
)
|
|
(1.7
|
)%
|
|||
Global Services
|
54,326
|
|
|
57.1
|
%
|
|
51,578
|
|
|
58.4
|
%
|
|
2,748
|
|
|
(1.3
|
)%
|
|||
Total gross margin
|
$
|
350,311
|
|
|
66.9
|
%
|
|
$
|
372,209
|
|
|
68.1
|
%
|
|
$
|
(21,898
|
)
|
|
(1.2
|
)%
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
|
Gross Margin
|
|
% of Net
Revenues
|
|
Gross Margin
|
|
% of Net
Revenues
|
|
Increase/(Decrease)
|
|
% Points
Change
|
|||||||||
SAN Products
|
$
|
490,509
|
|
|
76.2
|
%
|
|
$
|
507,418
|
|
|
76.1
|
%
|
|
$
|
(16,909
|
)
|
|
0.1
|
%
|
IP Networking Products
|
142,546
|
|
|
53.7
|
%
|
|
149,525
|
|
|
53.9
|
%
|
|
(6,979
|
)
|
|
(0.2
|
)%
|
|||
Global Services
|
106,071
|
|
|
56.4
|
%
|
|
104,949
|
|
|
58.9
|
%
|
|
1,122
|
|
|
(2.5
|
)%
|
|||
Total gross margin
|
$
|
739,126
|
|
|
67.3
|
%
|
|
$
|
761,892
|
|
|
67.9
|
%
|
|
$
|
(22,766
|
)
|
|
(0.6
|
)%
|
•
|
SAN gross margins relative to net revenues decreased 0.8% primarily due to a one-time benefit resulting from the favorable use of manufacturing capacity in the second quarter of fiscal year 2015 and lower revenue absorption as a result of lower revenue;
|
•
|
IP Networking gross margins relative to net revenues decreased 1.1% due to amortization of IP Networking-related intangible assets acquired in the second quarter of fiscal years 2015 and 2016. In addition, IP Networking gross margins also decreased 0.8% relative to net revenues primarily due to the shift in product mix towards campus and data center switching products, which carry a lower product margin than data center routing products; and
|
•
|
Global Services gross margins relative to net revenues decreased primarily due to higher salaries and other compensation due to increased staffing to support our customer installed base, partially offset by lower variable incentive compensation.
|
•
|
SAN gross margins relative to net revenues increased 0.1% primarily due to product cost reductions;
|
•
|
IP Networking gross margins relative to net revenues decreased 1.5% due to amortization of IP Networking-related intangible assets acquired in the second quarter of fiscal years 2015 and 2016. In addition, IP Networking gross margins decreased 0.3% relative to net revenues primarily due to higher excess and obsolete inventory charges, which included a one-time benefit from the shipment of previously reserved product in the second quarter of fiscal year 2015, as well as nonrecurring favorable supplier pricing in the second quarter of fiscal year 2015. The decreases in IP Networking gross margins were partially offset by a 1.3% increase relative to net revenues related to a favorable shift in mix towards higher margin software networking products and data center switching products, and favorable product transitions to higher margin campus switching products; and
|
•
|
Global Services gross margins relative to net revenues decreased primarily due to higher salaries for increased staffing related to our continued focus on customer satisfaction and our software business, partially offset by increased revenue absorption as a result of increased revenue.
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
R&D expenses:
|
Expense
|
|
% of Net
Revenues
|
|
Expense
|
|
% of Net
Revenues
|
|
Increase/(Decrease)
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
89,263
|
|
|
17.1
|
%
|
|
$
|
91,870
|
|
|
16.8
|
%
|
|
$
|
(2,607
|
)
|
|
(2.8
|
)%
|
Six months ended
|
$
|
182,520
|
|
|
16.6
|
%
|
|
$
|
177,101
|
|
|
15.8
|
%
|
|
$
|
5,419
|
|
|
3.1
|
%
|
|
Increase/(Decrease)
|
||
Salaries and other compensation
|
$
|
(2,096
|
)
|
Expenses related to legal, IT, facilities, and other shared functions
|
(1,403
|
)
|
|
Engineering expenses
|
(664
|
)
|
|
Various individually insignificant items
|
(487
|
)
|
|
Stock-based compensation
|
2,043
|
|
|
Total change
|
$
|
(2,607
|
)
|
|
Increase/(Decrease)
|
||
Salaries and other compensation
|
$
|
7,118
|
|
Stock-based compensation
|
2,586
|
|
|
Expenses related to legal, IT, facilities, and other shared functions
|
(2,051
|
)
|
|
Outside services expense
|
(924
|
)
|
|
Engineering expenses
|
(754
|
)
|
|
Various individually insignificant items
|
(556
|
)
|
|
Total change
|
$
|
5,419
|
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
S&M expenses:
|
Expense
|
|
% of Net
Revenues
|
|
Expense
|
|
% of Net
Revenues
|
|
Increase
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
148,933
|
|
|
28.5
|
%
|
|
$
|
143,078
|
|
|
26.2
|
%
|
|
$
|
5,855
|
|
|
4.1
|
%
|
Six months ended
|
$
|
300,760
|
|
|
27.4
|
%
|
|
$
|
283,316
|
|
|
25.2
|
%
|
|
$
|
17,444
|
|
|
6.2
|
%
|
|
Increase/(Decrease)
|
||
Salaries and other compensation
|
$
|
4,012
|
|
Stock-based compensation expense
|
3,845
|
|
|
Outside services and other marketing expense
|
(1,955
|
)
|
|
Various individually insignificant items
|
(47
|
)
|
|
Total change
|
$
|
5,855
|
|
|
Increase/(Decrease)
|
||
Salaries and other compensation
|
$
|
13,544
|
|
Stock-based compensation expense
|
5,080
|
|
|
Outside services and other marketing expense
|
(901
|
)
|
|
Various individually insignificant items
|
(279
|
)
|
|
Total change
|
$
|
17,444
|
|
|
Increase
|
||
Stock-based compensation expense
|
$
|
1,281
|
|
Various individually insignificant items
|
788
|
|
|
Total change
|
$
|
2,069
|
|
|
Increase/(Decrease)
|
||
Salaries and other compensation
|
$
|
(580
|
)
|
Various individually insignificant items
|
407
|
|
|
Total change
|
$
|
(173
|
)
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
Amortization of intangible assets:
|
Expense
|
|
% of Net
Revenues
|
|
Expense
|
|
% of Net
Revenues
|
|
Increase
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
902
|
|
|
0.2
|
%
|
|
$
|
627
|
|
|
0.1
|
%
|
|
$
|
275
|
|
|
43.9
|
%
|
Six months ended
|
$
|
1,804
|
|
|
0.2
|
%
|
|
$
|
765
|
|
|
0.1
|
%
|
|
$
|
1,039
|
|
|
135.8
|
%
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
Acquisition and integration costs:
|
Expense
|
|
% of Net
Revenues
|
|
Expense
|
|
% of Net
Revenues
|
|
Increase
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
5,757
|
|
|
1.1
|
%
|
|
$
|
2,344
|
|
|
0.4
|
%
|
|
$
|
3,413
|
|
|
145.6
|
%
|
Six months ended
|
$
|
5,757
|
|
|
0.5
|
%
|
|
$
|
2,344
|
|
|
0.2
|
%
|
|
$
|
3,413
|
|
|
145.6
|
%
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
Interest expense:
|
Expense
|
|
% of Net
Revenues
|
|
Expense
|
|
% of Net
Revenues
|
|
Increase
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
(9,955
|
)
|
|
(1.9
|
)%
|
|
$
|
(10,552
|
)
|
|
(1.9
|
)%
|
|
$
|
597
|
|
|
5.7
|
%
|
Six months ended
|
$
|
(19,820
|
)
|
|
(1.8
|
)%
|
|
$
|
(35,976
|
)
|
|
(3.2
|
)%
|
|
$
|
16,156
|
|
|
44.9
|
%
|
|
April 30, 2016
|
|
May 2, 2015
|
|
|
|
|
|||||||||||||
Interest and other income (loss), net:
|
Income
|
|
% of Net
Revenues
|
|
Income/(Loss)
|
|
% of Net
Revenues
|
|
Increase
|
|
%
Change
|
|||||||||
Three months ended
|
$
|
1,091
|
|
|
0.2
|
%
|
|
$
|
466
|
|
|
0.1
|
%
|
|
$
|
625
|
|
|
134.1
|
%
|
Six months ended
|
$
|
1,760
|
|
|
0.2
|
%
|
|
$
|
(93
|
)
|
|
—
|
%
|
|
$
|
1,853
|
|
|
*
|
|
* Not meaningful
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
April 30,
2016 |
|
May 2,
2015 |
|
April 30,
2016 |
|
May 2,
2015 |
||||||||
Income tax expense
|
$
|
30,716
|
|
|
$
|
27,079
|
|
|
$
|
48,840
|
|
|
$
|
53,234
|
|
Effective tax rate
|
41.6
|
%
|
|
26.0
|
%
|
|
26.3
|
%
|
|
24.5
|
%
|
|
April 30,
2016 |
|
October 31,
2015 |
|
Decrease
|
||||||
|
(In thousands)
|
||||||||||
Cash and cash equivalents
|
$
|
1,427,643
|
|
|
$
|
1,440,882
|
|
|
$
|
(13,239
|
)
|
Percentage of total assets
|
36
|
%
|
|
36
|
%
|
|
|
•
|
Incur certain liens and enter into certain sale-leaseback transactions;
|
•
|
Create, assume, incur, or guarantee additional indebtedness of our subsidiaries without such subsidiaries guaranteeing the 2023 Notes on a pari passu basis; and
|
•
|
Enter into certain consolidation or merger transactions, or convey, transfer, or lease all, or substantially all of our or our subsidiaries’ assets.
|
|
Total
|
|
Less Than
1 Year
|
|
1–3 Years
|
|
3–5 Years
|
|
More Than
5 Years
|
||||||||||
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Convertible senior unsecured notes due 2020
(1)
|
$
|
603,975
|
|
|
$
|
7,906
|
|
|
$
|
15,813
|
|
|
$
|
580,256
|
|
|
$
|
—
|
|
Senior unsecured notes due 2023
(1)
|
393,237
|
|
|
13,875
|
|
|
27,750
|
|
|
27,750
|
|
|
323,862
|
|
|||||
Non-cancellable operating leases
(2)
|
73,598
|
|
|
19,851
|
|
|
18,952
|
|
|
13,955
|
|
|
20,840
|
|
|||||
Non-cancellable capital leases
(1)
|
102
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchase obligations
(1)
|
16,413
|
|
|
3,221
|
|
|
4,066
|
|
|
4,056
|
|
|
5,070
|
|
|||||
Purchase commitments, gross
(3)
|
205,349
|
|
|
205,349
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
1,292,674
|
|
|
$
|
250,304
|
|
|
$
|
66,581
|
|
|
$
|
626,017
|
|
|
$
|
349,772
|
|
Other Commitments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Standby letters of credit
|
$
|
141
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
||||
Unrecognized tax benefits and related accrued interest
(4)
|
$
|
145,376
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
(1)
|
Amount reflects total anticipated cash payments, including anticipated interest payments.
|
(2)
|
Amount excludes contractual sublease income of
$5.8 million
, which consists of
$5.3 million
to be received in less than one year,
$0.4 million
to be received in one to three years, and
$0.1 million
to be received in three to five years.
|
(3)
|
Amount reflects total gross purchase commitments under our manufacturing arrangements with a third-party contract manufacturer. Of this amount, we have accrued reserves of
$1.3 million
for estimated purchase commitments that we do not expect to utilize in normal operations within the next 12 months, in accordance with our policy.
|
(4)
|
As of
April 30, 2016
, we had a gross liability for unrecognized tax benefits of
$142.1 million
and an accrual for the payment of related interest and penalties of
$3.2 million
.
|
•
|
Our operating forecasts;
|
•
|
Our forecasted revenue growth rates; and
|
•
|
Risk-commensurate discount rates and costs of capital.
|
|
Change
|
|
Approximate
Impact on Fair
Value
(In millions)
|
|
Excess of
Fair Value over
Carrying Value
(In millions)
|
Discount rate
|
±1%
|
|
$(44) - 47
|
|
$37 - 128
|
DCF terminal value multiplier
|
±0.5x
|
|
$(34) - 34
|
|
$46 - 115
|
•
|
Difficulties in successfully integrating the acquired businesses and realizing any expected synergies;
|
•
|
Failure to communicate to customers the capabilities of the combined company;
|
•
|
Unanticipated costs, litigation, and other contingent liabilities, including liabilities associated with acquired intellectual property;
|
•
|
Diversion of management’s attention from Brocade’s daily operations and business;
|
•
|
Adverse effects on existing business relationships with suppliers and customers, including delays or cancellations of customer purchases, as well as revenue attrition in excess of anticipated levels if existing customers alter or reduce their historical buying patterns;
|
•
|
Risks associated with entering into markets in which Brocade has limited or no prior experience, including the potential for a lower level of understanding of specific market dynamics;
|
•
|
Inability to attract and retain key employees;
|
•
|
Inability to successfully develop new products and services on a timely basis to address the market opportunities of the combined company;
|
•
|
Inability to compete effectively against companies already serving the broader market opportunities expected to be available to the combined company;
|
•
|
Inability to qualify the combined company’s products with OEM partners on a timely basis, or at all;
|
•
|
Inability to successfully integrate financial reporting and IT systems;
|
•
|
Inability to develop software-oriented back office systems and processes necessary to sell and support a variety of software-based offerings;
|
•
|
Failure to successfully manage additional business locations, including the infrastructure and resources necessary to support and integrate such locations;
|
•
|
Assumption or incurrence of debt and contingent liabilities and related obligations to service such liabilities and potential limitations on Brocade’s operations in order to satisfy financial and other negative operating covenants;
|
•
|
Additional costs, such as increased costs of manufacturing and service; costs associated with excess or obsolete inventory; costs of employee redeployment, relocation, and retention, including salary increases or bonuses; accelerated amortization of deferred equity compensation, severance payments, reorganization, or closure of facilities; taxes; advisor and professional fees; and termination of contracts that provide redundant or conflicting services;
|
•
|
Incurrence of acquisition- and integration-related costs, goodwill or in-process research and development impairment charges, or amortization costs for acquired intangible assets, that could negatively impact Brocade’s operating results and financial condition; and
|
•
|
The target market for the acquired products may not develop within the expected time frame or may evolve in a different technical direction.
|
•
|
Properly predict the market for new products, services, and support offerings, including features, cost-effectiveness, scalability, and pricing—all of which can be particularly challenging for initial product offerings in new markets;
|
•
|
Differentiate Brocade’s new products, services, and support offerings from its competitors’ offerings;
|
•
|
Address the interoperability complexities of Brocade’s products with its OEM partners’ server and storage products and Brocade’s competitors’ products;
|
•
|
Determine which route(s) to market will be most effective; and
|
•
|
Manage product transitions, including forecasting demand, managing excess and obsolete inventories, addressing product cost structures, and managing different sales and support requirements.
|
•
|
Compliance with U.S. and other applicable government regulations prohibiting certain end-uses and restricting trade with embargoed or sanctioned countries, such as Iran and Russia, and with denied parties;
|
•
|
Difficulty in conducting due diligence with respect to business partners in certain international markets;
|
•
|
Exposure to economic instability or fluctuations in international markets, such as China, that could cause reductions in IT spending;
|
•
|
Exposure to inflationary risks and/or wage inflation in certain countries, such as India;
|
•
|
Increased exposure to foreign currency exchange rate fluctuations, including currencies such as the British pound, the Chinese yuan, the euro, the Indian rupee, the Japanese yen, the Singapore dollar, and the Swiss franc;
|
•
|
Exposure to sovereign debt risk and political and economic instability in certain regions of Europe, including Russia, and certain emerging countries, including China and Brazil;
|
•
|
Multiple potentially conflicting and changing governmental laws, regulations, and practices, including differing environmental, data privacy, export, import, trade, manufacturing, tax, labor, and employment laws;
|
•
|
Compliance with U.S. and other applicable government regulation of exports and imports, and associated licensing requirements, particularly in the area of encryption technology;
|
•
|
Reduced or limited protection of intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes, such as China and India;
|
•
|
Commercial laws and business practices that favor local competition;
|
•
|
In certain international regions, particularly those with rapidly developing economies, it may be common to engage in business practices that are prohibited by anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act;
|
•
|
Increased complexity, time, and costs of managing international operations;
|
•
|
Managing research and development and sales teams in geographically diverse locations, including teams divided between the United States, the United Kingdom, and India;
|
•
|
Effective communications across multiple geographies, cultures, and languages;
|
•
|
Recruiting sales and technical support personnel with the skills to design, manufacture, sell, and support Brocade’s products in international markets;
|
•
|
Longer sales cycles and manufacturing lead times;
|
•
|
Increased complexity and cost of providing customer support and maintenance for international customers;
|
•
|
Difficulties in collecting accounts receivable;
|
•
|
Increased complexity of logistics and distribution arrangements; and
|
•
|
Increased complexity of accounting rules and financial reporting requirements.
|
•
|
Actual or anticipated changes in Brocade’s operating results;
|
•
|
Whether Brocade’s operating results or forecasts meet the expectations of securities analysts or investors;
|
•
|
Actual or anticipated changes in the expectations of securities analysts or investors;
|
•
|
Recommendations by securities analysts or changes in their earnings estimates;
|
•
|
The announcement or timing of announcement of Brocade’s quarterly or annual operating results;
|
•
|
Announcements of actual or anticipated operating results by Brocade’s competitors, Brocade’s OEM partners, and other companies in the IT industry;
|
•
|
Speculation, coverage or sentiment in the media or the investment community about, or actual changes in, Brocade’s business, strategic position, competitive position, market share, operations, prospects, future stock price performance, or Brocade’s industry in general;
|
•
|
The announcement of new, planned, or contemplated products; services; commercial relationships; technological innovations; acquisitions; divestitures; or other significant transactions by Brocade or its competitors;
|
•
|
Brocade’s level of success, or perceived level of success, in integrating acquisitions, including the Ruckus acquisition;
|
•
|
Adverse changes to Brocade’s relationships with any of its OEM partners;
|
•
|
Changes in the business strategy or execution of any of Brocade’s OEM partners;
|
•
|
Departures of key employees;
|
•
|
Litigation or disputes involving Brocade, Brocade’s industry, or both;
|
•
|
General economic conditions and trends;
|
•
|
Sales of Brocade’s stock by Brocade’s officers, directors, or significant stockholders; and
|
•
|
The timing and amount of dividends and stock repurchases.
|
•
|
Authorizing the issuance of preferred stock without stockholder approval;
|
•
|
Prohibiting cumulative voting in the election of directors;
|
•
|
Limitations on who may call special meetings of stockholders and when special meetings of stockholders may be called; and
|
•
|
Prohibiting stockholder actions by written consent.
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Program
(1)
|
|
Approximate Dollar
Value of Shares That
May Yet Be
Purchased Under
the Program
(1)
|
||||||
January 31, 2016 to February 27, 2016
|
|
2,112
|
|
|
$
|
8.34
|
|
|
2,112
|
|
|
$
|
858,825
|
|
February 28, 2016 to March 26, 2016
|
|
1,270
|
|
|
$
|
10.25
|
|
|
1,270
|
|
|
$
|
845,801
|
|
March 27, 2016 to April 30, 2016
|
|
570
|
|
|
$
|
10.04
|
|
|
570
|
|
|
$
|
1,640,086
|
|
Total
|
|
3,952
|
|
|
$
|
9.20
|
|
|
3,952
|
|
|
|
(1)
|
As of
April 30, 2016
, Brocade’s Board of Directors had authorized a stock repurchase program for an aggregate amount of up to approximately
$3.5 billion
(consisting of an original $100 million authorization on August 18, 2004, plus subsequent authorizations of an additional $200 million on January 16, 2007, $500 million on November 29, 2007, $500 million on May 16, 2012, $692 million on September 25, 2013, $700 million on September 25, 2015, and $800 million on April 3, 2016), which was used for determining the amounts in these columns. The number of shares purchased and the timing of purchases are based on the level of the Company’s cash balances, general business and market conditions, the trading price of the Company’s common stock, and other factors, including alternative investment opportunities.
|
|
|
Brocade Communications Systems, Inc.
|
|
|
|
|
|
Date:
|
June 3, 2016
|
By:
|
/s/ Daniel W. Fairfax
|
|
|
|
Daniel W. Fairfax
Senior Vice President and Chief Financial Officer
|
1 Year Brocade Communications Systems, Inc. Chart |
1 Month Brocade Communications Systems, Inc. Chart |
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