Segment Information

12 Months Ended

Nov. 01, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Financial decisions and the allocation of resources are based on the information from the Company’s internal management reporting system. Currently, the Company’s CODM is its Chief Executive Officer.

Prior to the second quarter of fiscal year 2014, Brocade was organized into four operating segments, and three individually reportable segments, summarized as follows:

Operating Segments	Individually Reportable Segments (1)
SAN Products	SAN Products
Global Services	Global Services
Ethernet Switching & IP Routing ADP	IP Networking Products (2)

⁽¹⁾  These reportable segments were organized principally by product category.

⁽²⁾  Ethernet Switching & IP Routing and ADP were combined to form the reportable segment: IP Networking Products.

In the second quarter of fiscal year 2014, Brocade changed its financial reporting, realigning it with the changes in Brocade’s strategic focus. As a result of this change, the number of the Company’s operating segments was reduced from four to three operating segments. Ethernet Switching & IP Routing and ADP business components were combined into the IP Networking Products operating segment, and separate discrete financial information is no longer available for either Ethernet Switching & IP Routing or ADP components. The reportable segments did not change as a result of this change in the Company’s internal financial reporting. Therefore, the restatement of previously reported segment information is not necessary.

The types of products and services from which each reportable segment derives its revenues are as follows:

• SAN Products include infrastructure products and solutions that assist customers in the development and delivery of storage and server consolidation, disaster recovery and data security, and in meeting compliance issues regarding data management. These products are used to build storage area networks and are generally used in conjunction with servers and storage subsystems, and server and storage management software applications and tools. Brocade’s family of Fibre Channel (“FC”) SAN backbones, directors, fabric and embedded switches provide interconnections, bandwidth and high-speed routing of data between servers and storage devices. Switches and directors support applications, such as data backup, remote mirroring and high-availability clustering, as well as high-volume transaction processing applications, such as enterprise resource planning and data warehousing. Additionally, Brocade offers a variety of fabric extension, switching, and routing solutions;

• IP Networking Products include Open Systems Interconnection Reference Model (“OSI”) Layer 2 and Layer 3 switches and routers that are designed to connect users in an enterprise network, enabling network connectivity, such as access to the Internet, network-based communications, and collaboration through unified messaging applications and mobility. Brocade also offers converged network products, and a portfolio of both software- and hardware-based platforms designed for service provider environments, as well as carrier Ethernet products. Additionally, the Company offers OSI Layer 4-7 solutions that are designed for application traffic management and server load balancing; and

• Global Services include break/fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support revenue.

Financial decisions and the allocation of resources are based on the information from the Company’s internal management reporting system. At this time, the Company does not track its operating expenses by operating segments because management does not include this information in its measurement of the performance of the operating segments. The Company also does not track all of its assets by operating segments. The majority of the Company’s assets as of November 1, 2014, October 26, 2013, and October 27, 2012, were attributable to its U.S. operations.

Summarized financial information by reportable segment for the fiscal years ended November 1, 2014, October 26, 2013, and October 27, 2012, based on the internal management reporting system, is as follows (in thousands):

	SAN Products		IP Networking Products		Global Services		Total
Fiscal Year Ended November 1, 2014
Net revenues	$	1,326,950	$	525,237	$	359,080	$	2,211,267
Cost of revenues	344,466		247,975		153,033		745,474
Gross margin	$	982,484	$	277,262	$	206,047	$	1,465,793
Fiscal Year Ended October 26, 2013
Net revenues	$	1,318,509	$	552,058	$	352,297	$	2,222,864
Cost of revenues	355,388		302,974		155,623		813,985
Gross margin	$	963,121	$	249,084	$	196,674	$	1,408,879
Fiscal Year Ended October 27, 2012
Net revenues	$	1,356,099	$	534,757	$	346,914	$	2,237,770
Cost of revenues	362,608		327,248		164,895		854,751
Gross margin	$	993,491	$	207,509	$	182,019	$	1,383,019

Revenues are attributed to geographic areas based on where the Company’s products are shipped. Geographic revenue and property and equipment information for the fiscal years ended November 1, 2014, October 26, 2013, and October 27, 2012 is presented below (in thousands):

	Fiscal Year Ended
	November 1, 2014		October 26, 2013		October 27, 2012
Net revenues:
United States	$	1,286,650	$	1,351,242	$	1,414,390
International
Europe, the Middle East and Africa (1)	598,196		552,734		493,979
Asia Pacific	183,035		181,461		186,244
Japan	91,062		97,259		99,887
Canada, Central and South America	52,324		40,168		43,270
Total international net revenues	924,617		871,622		823,380
Total net revenues	$	2,211,267	$	2,222,864	$	2,237,770

⁽¹⁾  Includes net revenues of $385.2 million, $339.1 million, and $259.2 million for the fiscal years ended November 1, 2014, October 26, 2013, and October 27, 2012, respectively, relating to the Netherlands.

	Fiscal Year Ended
	November 1, 2014		October 26, 2013		October 27, 2012
Property and equipment, net:
United States	$	426,941	$	457,622	$	500,744
International	18,492		15,318		18,196
Total property and equipment, net	$	445,433	$	472,940	$	518,940