Foundry Networks(TM) Reports Third Quarter Financial Results

21 October 2005

Foundry Networks(TM),
Inc. (Nasdaq: FDRY), today reported financial results for its third quarter
ended September 30, 2005.
Revenue for the third quarter of 2005 was $107.1 million, up from $96.6
million in the second quarter of 2005, and $102.5 million in the third quarter
of 2004. Net income was $16.3 million, or $0.11 per diluted share, in the
third quarter of 2005, compared to net income of $9.6 million, or $0.07 per
diluted share, in the second quarter of 2005, and a net loss of $3.6 million,
or $0.03 loss per diluted share, in the third quarter of 2004. Included in
the Company's results for the third quarter of 2005 was a $2.6 million expense
related to a patent cross-license agreement with IBM Corporation.
Revenue for the first nine months of 2005 was $288.3 million, compared to
$304.4 million for the same period in 2004. Net income for the first nine
months of 2005 was $35.8 million, or $0.25 per diluted share, compared to net
income of $31.3 million, or $0.22 per diluted share, for the same period in
2004.
Foundry's third quarter results reflect the investments made over the last
several quarters, particularly in the Company's product portfolio and sales
footprint. Revenue from Foundry's new products including the BigIron(R) RX
and FastIron(R) SuperX LAN switching families and the NetIron(R) IMR router
family increased significantly during the period. In particular, units of the
BigIron RX, which began shipping in July, ramped quickly throughout the
remainder of the quarter and were deployed in high profile, mission-critical
locations, including U.S. Government research labs, premier universities and
leading service providers.
Foundry's U.S. Federal Government revenue was seasonally strong,
representing 22% of the Company's total revenue in the third quarter compared
to 15% in the second quarter. The level of business activity from domestic
enterprise and Europe also increased during the period. Overall, business
from Asia was comparable to the prior quarter.
"As demonstrated by our financial results this quarter, the investment in
our business is strengthening Foundry's competitive position," said Bobby
Johnson, President and CEO of Foundry Networks. "This quarter we achieved
solid improvements in our revenue, gross margin and profitability. We have
increased our sales force, our technical and sales partnerships, and the depth
and breadth of our product portfolio to drive long-term growth and
profitability," concluded Johnson.

Conference Call
Foundry Networks will host a conference call today to further discuss
these results at 2:00 p.m. Pacific Time. The call can be accessed via a
webcast at http://www.foundrynetworks.com. A Web replay will also be available for
approximately 90 days at this same Web address.

About Foundry Networks
Foundry Networks, Inc. is a leading provider of high-performance
enterprise and service provider switching, routing and Web traffic management
solutions including Layer 2/3 LAN switches, Layer 3 Backbone switches, Layer
4-7 application switches, wireless LAN and access points, access routers and
Metro routers. Foundry's 8,900 customers include the world's premier ISPs,
Metro service providers, and enterprises including e-commerce sites,
universities, entertainment, health and wellness, government, financial, and
manufacturing companies. For more information about the company and its
products, call 1.888.TURBOLAN or visit http://www.foundrynetworks.com.

Safe Harbor Statement
This press release contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, and is subject to the
safe harbor created by that section. These forward-looking statements include
statements by Mr. Johnson regarding business trends, the Company's continued
focus on investing in its business, its strengthening competitive position,
and potential long-term growth and profitability. The forward-looking
statements in this press release are subject to a number of risks and
uncertainties which could cause actual results to differ materially,
including, without limitation, our dependence on large purchases of products
from certain customers/resellers, unpredictable demand from the United States
government, the strength of the overall economy and the high-technology market
in particular, competition, product development efforts, continued expansion
of our sales force, and acceptance of Foundry's current and future products.
Actual results could differ materially from those projected in our forward-
looking statements. Investors should review the risk factors described in
more detail in our most recent Annual Report on Form 10-K, 10-Q and other SEC
reports available free of charge from Foundry at http://www.foundrynetworks.com or
from the SEC at http://www.sec.gov. Foundry assumes no obligation to update the
forward-looking statements contained in this press release.

FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004

Net revenues:
Product $90,858 $87,450 $240,039 $260,239
Service 16,211 15,061 48,254 44,115
Total net revenues 107,069 102,511 288,293 304,354

Cost of revenues:
Product 37,810 33,194 100,894 95,630
Service 2,726 3,785 9,374 10,477
Total cost of revenues 40,536 36,979 110,268 106,107
Gross profit 66,533 65,532 178,025 198,247

Operating expenses:
Research and development 12,387 11,686 39,055 31,701
Sales and marketing 25,786 23,228 78,706 71,490
General and administrative 9,550 10,204 20,034 21,897
Litigation settlement -- 30,193 -- 30,193
Total operating expenses 47,723 75,311 137,795 155,281

Income (loss) from operations 18,810 (9,779) 40,230 42,966

Interest and other income, net 4,752 2,568 12,421 6,095

Income (loss) before provision for
income taxes 23,562 (7,211) 52,651 49,061

Provision (benefit) for income
taxes 7,260 (3,593) 16,859 17,790

Net income (loss) $16,302 $(3,618) $35,792 $31,271

Basic net income (loss) per share $0.12 $(0.03) $0.26 $0.23

Weighted average shares used in
computing basic net income
(loss) per share 139,581 136,038 138,711 134,975

Diluted net income (loss) per share $0.11 $(0.03) $0.25 $0.22

Weighted average shares used in
computing diluted net income
(loss) per share 144,087 136,038 142,213 142,730

FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30, December 31,
2005 2004
ASSETS (unaudited) (2)
Assets:
Cash and investments (1) $698,926 $617,441
Accounts receivable, net 77,570 91,502
Inventories 31,094 38,743
Deferred tax assets 43,693 42,278
Prepaid expenses and other current assets 6,400 6,865
Property and equipment, net 9,046 8,852
Other long-term assets 6,946 5,511
$873,675 $ 811,192

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $20,741 $18,238
Accrued payroll and related expenses 16,835 21,682
Income taxes payable 9,138 --
Other accrued expenses 9,607 8,700
Deferred support revenue 33,293 38,621
Total current liabilities 89,614 87,241

Deferred support revenue 18,840 17,613

Stockholders' equity 765,221 706,338
$873,675 $811,192

(1) Includes $152.2 million of long-term marketable securities at
September 30, 2005 and $174.0 million at December 31, 2004.

(2) Derived from audited condensed consolidated financial statements as of
December 31, 2004.

FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

Nine Months Ended
September 30,
2005 2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $35,792 $31,271
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,682 5,434
Provision for doubtful accounts 154 --
Inventory provisions 12,058 12,671
Tax benefit from stock option exercises 2,538 20,772
Changes in operating assets and liabilities:
Accounts receivable 13,778 1,782
Inventories (4,409) (21,355)
Prepaid expenses, deferred taxes and other assets (3,285) (13,807)
Accounts payable 2,503 5,250
Accrued payroll and related expenses (4,847) (1,716)
Income taxes payable 9,535 (62)
Other accrued expenses 510 4,762
Litigation settlement payable -- 35,000
Deferred support revenue (4,101) 8,404
Net cash provided by operating activities 66,908 88,406

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short and long-term investments (208,317) (525,019)
Maturities of short-term investments 258,935 386,001
Purchases of property and equipment, net (5,976) (6,891)
Net cash provided by (used in) investing
activities 44,642 (145,909)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note receivable -- 480
Issuances of common stock under employee stock plans 20,148 33,017
Net cash provided by financing activities 20,148 33,497

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 131,698 (24,006)
Effect of exchange rate changes on cash 405 (222)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 112,274 161,718
CASH AND CASH EQUIVALENTS, END OF PERIOD $244,377 $137,490

SUPPLEMENTAL CASH FLOW INFORMATION;
Cash paid for income taxes, net of refunds received $(6,225) $(5,415)