UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

Commission file number: 000-26689

__________

FOUNDRY NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Delaware	77-0431154
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

     2100 Gold Street
P.O. Box 649100
San Jose, California 95164-9100
Website: www.foundrynetworks.com
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (408) 586-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value

__________

     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 than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES |X|   NO |_|

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES |X|   NO |_|

     The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $666,689,642 as of June 28, 2002 based upon the closing sale price on the Nasdaq National Market reported for such date. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

     There were 122,033,038 shares of the registrant’s Common Stock issued and outstanding as of March 24, 2003.

The Registrant hereby corrects two typographical errors which appeared in Item 8, “Consolidated Financial Statements and Supplementary Data,” of its Form 10-K for the fiscal year ended December 31, 2002 filed with the Securities and Exchange Commission on March 31, 2003, which errors were as follows:

(A) The second to final sentence of the second paragraph under the heading “1999 Directors’ Stock Option Plan” under Note 5, “Stockholders’ Equity”, of the Consolidated Financial Statements originally read: “In June 2002, the directors received their annual grants totaling 300,000 stock options at an exercise price of $18.88 per share.” This sentence is being amended and restated in its entirety to read, “In June 2002, the directors received their annual grants totaling 240,000 stock options at an exercise price of $6.86 per share.”

(B) The Registrant’s Statement of Operations Data (unaudited) which appears under the heading, “Supplementary Financial Data (Unaudited)” originally stated that the Basic net income per share for the quarter ended December 31, 2002 was $0.19 and that the Diluted net income per share for the quarter ended December 31, 2002 was $0.18. This table is being corrected to state that the Basic net income per share for the quarter ended December 31, 2002 was $0.09 and that the Diluted net income per share for the quarter ended December 31, 2002 was $0.08.

Item 8 is hereby amended and restated solely to reflect the two changes noted above, as follows:

2

Item 8. Consolidated Financial Statements And Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Ernst & Young LLP, Independent Auditors	4
Report of Arthur Andersen LLP, Independent Public Accountants	5
Consolidated Balance Sheets as of December 31, 2002 and 2001	6
Consolidated Statements of Income for the Years Ended December 31, 2002, 2001 and 2000	7
Consolidated Statements of Stockholders’ Equity as of December 31, 2002, 2001 and 2000	8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000	9
Notes to Consolidated Financial Statements	10

3

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Foundry Networks, Inc.:

We have audited the accompanying consolidated balance sheet of Foundry Networks, Inc. and subsidiaries as of December 31, 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 15(a)(2) for the year ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Foundry Networks, Inc. as of December 31, 2001 and for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations and whose report dated January 21, 2002 expressed an unqualified opinion on those statements before the reclassification adjustments described in Note 2.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Foundry Networks, Inc. and subsidiaries at December 31, 2002, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the year ended December 31, 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed above, the financial statements of Foundry Networks, Inc. as of December 31, 2001 and for each of the two years in the period ended December 31, 2001, were audited by other auditors who have ceased operations. As disclosed in Note 2, the Company changed the presentation of revenues and cost of revenues in 2001 and 2000 to conform to the presentation required in 2002 in accordance with Rule 5.03 of Regulation S-X as service revenues exceed 10% of total revenues for the year ended December 31, 2002. We audited the reclassification adjustments that impacted product revenues, cost of product revenues, service revenues, and cost of service revenues. In our opinion, all such adjustments and disclosures are appropriate and the adjustments have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole.

	/S/ ERNST & YOUNG LLP
Palo Alto, California January 23, 2003

4

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Foundry Networks Inc.’s filing on Form 10-K for the year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K. See Exhibit 23.2 for further discussion. The consolidated balance sheet as of December 31, 2000, the consolidated statements of income, redeemable convertible preferred stock and stockholders’ equity and cash flows for the year ended December 31, 1999 and the information in the schedule for 1999 referred to in this report have not been included in the accompanying financial statements or schedule.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Foundry Networks, Inc.:

We have audited the accompanying consolidated balance sheets of Foundry Networks, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of income, redeemable convertible preferred stock and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Foundry Networks, Inc. and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 15(a)(2) is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/S/ ARTHUR ANDERSEN LLP

San Jose, California
January 21, 2002

5

FOUNDRY NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

	December 31,
	2002			2001
ASSETS
Current assets:
Cash and cash equivalents	$	187,719		$	98,210
Short-term investments	138,734			176,524
Accounts receivable, net of allowances for doubtful accounts of $5,833 and $6,648 and sales returns of $1,584 and $1,501 at December 31, 2002 and 2001, respectively	51,896			51,830
Inventories	33,479			43,277
Deferred tax assets	28,560			29,656
Prepaid expenses and other current assets	3,591			4,863
Total current assets	443,979			404,360
Property and equipment:
Computers and related equipment	16,463			11,493
Leasehold improvements	1,620			1,477
Furniture and fixtures	101			214
	18,184			13,184
Less: Accumulated depreciation	(11,804		)	(6,868		)
Net property and equipment	6,380			6,316
Other long-term assets	1,176			1,462
Total assets	$	451,535		$	412,138
LIABILITIESANDSTOCKHOLDERS’EQUITY
Current liabilities:
Accounts payable	$	11,684		$	15,300
Accrued payroll and related expenses	11,748			10,932
Warranty accrual	2,305			2,499
Other accrued expenses	3,597			4,601
Income taxes payable	3,868			1,193
Deferred support revenue	20,234			15,781
Total current liabilities	53,436			50,306
Commitments and contingencies (Note 3)
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized—5,000 shares at December 31, 2002 and 2001; None issued and outstanding as of December 31, 2002 and 2001	—			—
Common stock, $0.0001 par value:
Authorized—300,000 shares at December 31, 2002 and 2001: Issued and outstanding—121,329 and 119,299 shares at December 31, 2002 and 2001, respectively	12			12
Treasury stock	—			(14,996		)
Additional paid-in capital	282,699			284,740
Note receivable from stockholder	(480		)	(480		)
Deferred stock compensation	(231		)	(1,302		)
Accumulated other comprehensive income	55			351
Retained earnings	116,044			93,507
Total stockholders’ equity	398,099			361,832
Total liabilities and stockholders’ equity	$	451,535		$	412,138

The accompanying notes are an integral part of these consolidated financial statements.

6

FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

	Year Ended December 31,
	2002		2001			2000
Net revenues:
Product	$	264,998	$	281,388		$	361,581
Service	35,744		29,788			15,575
Total net revenues	300,742		311,176			377,156
Cost of revenues:
Product	134,648		150,195			131,358
Service	5,544		7,946			2,972
Total cost of revenues	140,192		158,141			134,330
Gross margin	160,550		153,035			242,826
Operating expenses:
Research and development	34,933		33,947			27,499
Sales and marketing	82,924		90,786			67,753
General and administrative	14,451		27,185			10,493
Amortization of deferred stock compensation	1,071		2,708			6,185
Total operating expenses	133,379		154,626			111,930
Income (loss) from operations	27,171		(1,591		)	130,896
Interest income	5,025		8,746			11,235
Write-down of minority investment	—		2,500			—
Income before provision for income taxes	32,196		4,655			142,131
Provision for income taxes	9,659		1,769			54,010
Net income	$	22,537	$	2,886		$	88,121
Basic net income per share	$	0.19	$	0.02		$	0.80
Weighted average shares used in computing basic net income per share	119,482		117,360			110,141
Diluted net income per share	$	0.18	$	0.02		$	0.69
Weighted average shares used in computing diluted net income per share		123,780		125,521			127,131

The accompanying notes are an integral part of these consolidated financial statements.

7

FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

										Notes Receivable From Stockholders				Accumulated Other Comprehensive Income
								Additional Paid-in Capital				Deferred Stock Compensation					Total Stockholders’ Equity
	Common Stock			Treasury Stock												Retained Earnings			Comprehensive Income
	Shares		Amount	Shares		Amount
BALANCES AT DECEMBER 31, 1999	114,190		$      11	1,200		$        (4	)	$ 191,623		$         (755	)	$       (11,771	)	—		$    2,500	$     181,604
Issuance of common stock under stock plans	4,152		1	—		—		10,552		—		—		—		—	10,553
Exercise of stock options for notes receivable	60		—	—		—		3,270		(3,270	)	—		—		—	—
Repayment of notes receivable	—		—	—		—		—		755		—		—		—	755
Repurchase of common stock from terminated employees	(326	)	—	—		—		(121	)	—		—		—		—	(121	)
Deferred stock compensation	—		—	—		—		300		—		(300	)	—		—	—
Amortization of deferred stock compensation	—		—	—		—		—		—		6,185		—		—	6,185
Reduction in deferred stock compensation	—		—	—		—		(306	)	—		306		—		—	—
Tax benefit from stock option exercises	—		—	—		—		57,858		—		—		—		—	57,858
Foreign currency translation adjustments	—		—	—		—		—		—		—		61		—	61		61
Net income	—		—	—		—		—		—		—		—		88,121	88,121		88,121
BALANCES AT DECEMBER 31, 2000	118,076		12	1,200		(4	)	263,176		(3,270	)	(5,580	)	61		90,621	345,016		88,182
Issuance of common stock under stock plans	2,975		—	—		—		12,413		—		—		—		—	12,413
Non-cash compensation expense for terminated Employee	—		—	—		—		265		—		—		—		—	265
Repurchase of common stock from terminated employees	(230	)	—	—		—		(45	)	—		—		—		—	(45	)
Repurchase of common stock in open market	(1,522	)	—	1,522		(14,996	)	—		—		—		—		—	(14,996	)
Issuance of stock repurchased from founder	—		—	(1,200	)	4		—		—		—		—		—	4
Amortization of deferred stock compensation	—		—	—		—		—		—		2,708		—		—	2,708
Reduction in deferred stock compensation	—		—	—		—		(1,570	)	—		1,570		—		—	—
Write-down of note receivable from stockholder	—		—	—		—		—		2,790		—		—		—	2,790
Tax benefit from stock option exercises	—		—	—		—		10,501		—		—		—		—	10,501
Foreign currency translation adjustments	—		—	—		—		—		—		—		290		—	290		290
Net income	—		—	—		—		—		—		—		—		2,886	2,886		2,886
BALANCES AT DECEMBER 31, 2001	119,299		12	1,522		(14,996	)	284,740		(480	)	(1,302	)	351		93,507	361,832		3,176
Issuance of common stock under stock plans	2,067		—	—		—		8,253		—		—		—		—	8,253
Repurchase of common stock from terminated employees	(37	)	—	—		—		(106	)	—		—		—		—	(106	)
Issuance of stock repurchased from open market	—		—	(1,522	)	14,996		(14,996	)	—		—		—		—	—
Amortization of deferred stock compensation	—		—	—		—		—		—		1,071		—		—	1,071
Tax benefit from stock option exercises	—		—	—		—		4,808		—		—		—		—	4,808
Foreign currency translation adjustments	—		—	—		—		—		—		—		(296	)	—	(296	)	(296	)
Net income	—		—	—		—		—		—		—		—		22,537	22,537		22,537
BALANCES AT DECEMBER 31, 2002	121,329		$      12	—		$        —		$ 282,699		$         (480	)	$           (231	)	$               55		$116,044	$     398,099		$          22,241

The accompanying notes are an integral part of these consolidated financial statements.

8

FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Year Ended December 31,
	2002			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	22,537		$	2,886		$	88,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4,936			3,858			1,378
Amortization of deferred stock compensation	1,071			2,708			6,185
Provision for allowance for doubtful accounts	344			9,061			4,698
Provision for allowance for sales returns	1,527			3,595			3,734
Inventory provision	16,445			24,864			13,558
Deferred tax assets	1,096			(13,537		)	(5,981		)
Write-down of minority investment	—			2,500			—
Write-down of note receivable from stockholder	—			2,790			—
Non-cash compensation expense	—			265			—
Tax benefit from stock option exercises	4,808			8,097			55,344
Change in operating assets and liabilities:
Accounts receivable	(1,937		)	87			(44,073		)
Inventories	(6,647		)	(16,548		)	(48,408		)
Prepaid expenses and other assets	1,558			5,149			(10,134		)
Accounts payable	(3,616		)	(5,132		)	12,875
Accrued payroll and related expenses	816			(198		)	6,992
Warranty accrual	(194		)	(342		)	749
Other accrued expenses	(1,004		)	(1,041		)	1,629
Income taxes payable	2,675			1,193			(9,925		)
Deferred support revenue	4,453			2,376			9,236
Net cash provided by operating activities	48,868			32,631			85,978
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of minority investment	—			(2,500		)	—
Purchases of short-term investments		(295,267	)		(354,383	)		(190,486	)
Maturities of short-term investments	333,057			261,675			146,459
Purchases of property and equipment	(5,000		)	(5,308		)	(5,148		)
Net cash provided (used) by investing activities	32,790			(100,516		)	(49,175		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	8,253			12,417			10,553
Repurchases of common stock	(106		)	(15,041		)	(121		)
Repayment of notes receivable	—			—			755
Net cash provided (used) by financing activities	8,147			(2,624		)	11,187
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	89,805			(70,509		)	47,990
Effect of exchange rate changes on cash	(296		)	290			61
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	98,210			168,429			120,378
CASH AND CASH EQUIVALENTS, END OF YEAR	$	187,719		$	98,210		$	168,429
SUPPLEMENTAL CASH FLOW INFORMATION:
Issuance of common stock for notes receivable	$	—		$	—		$	3,270
Reduction in deferred stock compensation due to employee terminations	—			1,570			306
Cash paid for income taxes, net of refunds		976			1,418			12,169

The accompanying notes are an integral part of these consolidated financial statements.

9

FOUNDRY NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.DESCRIPTION OF BUSINESS:

Founded in 1996, Foundry designs, develops, manufactures and markets a comprehensive, end-to-end suite of high performance Ethernet Layer 2 and Layer 3 switches, Metro routers and Internet traffic management products for enterprises, educational institutions, government agencies, web-hosting companies, application service providers (ASPs), electronic banking and finance service providers, and Internet service providers (ISPs). Our product suite includes the NetIron family of Metro routers, FastIron family of Ethernet edge switches, EdgeIron Layer 2 Ethernet switches, BigIron family of Gigabit Ethernet core switches and ServerIron family of Ethernet Layer 4-7 Internet traffic management switches.

2.SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation and Foreign Currency Translation

The Company’s consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Assets and liabilities of foreign operations are translated to U.S. dollars at the exchange rate in effect at the applicable balance sheet date, and revenues and expenses are translated using average exchange rates prevailing during that period. Translation adjustments have not been material to date and are included as a component of stockholders’ equity.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period reported. Actual results could differ from those estimates. Estimates are used in accounting for, but not limited to, the accounting for inventory provisions, product warranty, allowances for doubtful accounts, sales returns, income taxes and depreciation. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined.

Cash Equivalents and Short-Term Investments

Foundry considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of commercial paper, government debt securities and cash deposited in checking and money market accounts.

Foundry accounts for its investments under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Investments in highly liquid financial instruments with original maturities greater than three months but less than one year are classified as short-term investments. All of Foundry’s short-term investments are stated at amortized cost and classified as held-to-maturity.

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Cash equivalents and short-term investments all mature within one year and consist of the following (in thousands):

	December 31, 2002
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market funds	$	393	$	—	$	—		$	393
Corporate debt securities	5,000		—		—			5,000
Commercial paper	91,869		—		—			91,869
Government securities	149,415		62		(35		)	149,442
	$	246,677	$	62	$	(35	)	$	246,704
Included in cash and cash equivalents	$	107,943	$	—	$	—		$	107,943
Included in short-term investments	138,734		62		(35		)	138,761
	$	246,677	$	62	$	(35	)	$	246,704

	December 31, 2001
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market funds	$	33,135	$	—	$	—		$	33,135
Commercial paper	58,807		—		—			58,807
Government securities	149,583		127		$	(27	)	149,683
	$	241,525	$	127	$	(27	)	$	241,625
Included in cash and cash equivalents	$	65,001	$	—	$	—		$	65,001
Included in short-term investments	176,524		127		(27		)	176,624
	$	241,525	$	127	$	(27	)	$	241,625

Inventories

Inventories are stated on a first-in, first-out basis at the lower of cost or market, and include purchased parts, labor and manufacturing overhead. Inventories consist of the following (in thousands):

	December 31,
	2002		2001
Purchased parts	$	12,470	$	20,305
Work-in-process	17,191		22,706
Finished goods	3,818		266
	$	33,479	$	43,277

The networking industry is characterized by rapid technological change, frequent new product introductions, changes in customer requirements, and evolving industry standards. Our inventory purchases and commitments are made in order to build inventory to meet future shipment schedules based on forecasted demand for our products. We perform a detailed assessment of inventory each period, which includes a review of, among other factors, demand requirements, product life cycle and development plans, component cost trends, product pricing and quality issues. Based on this analysis, we record adjustments to inventory for excess, obsolescence or impairment, when appropriate, to reflect inventory at net realizable value. The provision reduces inventory for excess, obsolescence or impairment, when appropriate, to reflect inventory at net realizable value. Provisions for inventory in the amounts of $16.4 million, $24.9 million, and $13.6 million were recorded for the years ended December 31, 2002, 2001, and 2000, respectively. Our inventory provisions increased in 2001 as a

11

result of the economic recession, significantly reduced telecommunications and infrastructure capital spending and a major product transition in the fourth quarter of 2001. We specifically reserved $9.3 million for excess and obsolete inventories in the fourth quarter of 2001 related to the transition from our IronCore ASICs-based products to the new and more powerful products incorporating our next generation JetCore ASIC chipset. During 2002, we physically disposed of $9.2 million of obsolete inventory that was previously reserved in the fourth quarter of 2001 related to the product transition. Total inventory write-offs were approximately $18.9 million in 2002, $8.9 million in 2001, and $4.4 million in 2000. Approximately $6.1 million and $5.2 million of the Company’s purchased parts and work-in-process inventories were consigned to contract manufacturers’ sites as of December 31, 2002 and 2001, respectively.

Concentrations

Financial instruments that potentially subject Foundry to a concentration of credit risk principally consist of cash equivalents, short-term investments and accounts receivable. Foundry seeks to reduce credit risk on financial instruments by investing almost exclusively in high credit quality issuers and, by policy, limits the amount of credit exposure to any one issuer or fund. Exposure to customer credit risk is controlled through credit approvals, credit limits, continuous monitoring procedures and establishment of an allowance for doubtful accounts when deemed necessary. We typically sell to customers for which there is a history of successful collection. New customers are subjected to a credit review process, which evaluates the customers’ financial positions and ability to pay. New customers are typically assigned a credit limit based on a formulated review of their financial position. Such credit limits are only increased after a successful collection history with the customer has been established. Specific allowances for bad debts are recorded when Foundry becomes aware of a specific customer’s inability to meet its financial obligation to us such as in the case of bankruptcy filings or deterioration of financial position. Estimates are used in determining our allowances for all other customers based on factors such as current trends, the length of time the receivables are past due and historical collection experience. Foundry mitigates some collection risk by requiring some international customers to secure letters of credit or bank guarantees prior to placing an order with the Company.

Foundry purchases several key components used in the manufacture of products from several sources and depends on supply from these sources to meet its needs. In addition, Foundry depends on several contract manufacturers for major portions of the manufacturing requirements. The inability of the suppliers or manufacturers to fulfill the production requirements of Foundry could negatively impact future results.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives of the assets. Estimated useful lives of 2 years are used on computer equipment and related software and production and engineering equipment. Estimated useful lives of 3 years are used on furniture and fixtures. Leasehold improvements are amortized over the lease term.

Impairment of long-lived assets is recognized when events or circumstances indicate that the carrying amount of the asset, or related groups of assets, may not be recoverable. Under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), which supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of “ (SFAS 121), a long-lived asset classified as “held for sale” is initially measured at the lower of its carrying amount or fair value less costs to sell. In the period that the “held for sale” criteria is met, the Company recognizes an impairment charge for any initial adjustment of the long-lived asset amount. Gains or losses not previously recognized resulting from the sale of a long-lived asset are recognized on the date of sale. To date, charges recorded by the Company for the impairment of long-lived assets have not been significant. The adoption of SFAS 144 did not have a material impact on Foundry’s consolidated financial position, results of operations or cash flows for the year ended December 31, 2002.

Minority Investment in 2001

In February 2001, Foundry made a $2.5 million minority investment in a development stage private company, who was also a customer. Foundry had no sales to this customer during 2002. Sales to this customer during 2001 and 2000 were insignificant. Foundry’s interest in the company is significantly less than 20% and, as such, the Company did not have the ability to exercise significant influence. In December 2001, the Company

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determined that the investment’s decline in fair value was other than temporary based on a number of factors including the value of the most recent round of financing, general market and industry conditions and the financial condition of and business outlook for the company. Accordingly, Foundry wrote-down the entire minority investment and recorded the expense in the accompanying consolidated statement of income for the year ended December 31, 2001.

Revenue Recognition

General.   Foundry’s revenue recognition policy follows SEC Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements.” Specifically, Foundry recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured.

Product Revenues.   Revenue is generally recorded at the time of shipment when title and risk of loss passes to the customer, unless Foundry has future obligations for installation or has to obtain customer acceptance, in which case revenue is not recorded until such obligations have been satisfied or customer acceptance has been received. For example, revenue is not recognized when undelivered products or services are essential to the functionality of delivered products. At the time revenue is recognized, Foundry establishes an accrual for estimated warranty expenses associated with its sales, recorded as a component of cost of revenues. Foundry’s standard warranty period extends 12 months from the date of sale and the warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. Foundry also provides a reserve for estimated customer returns. This reserve is based on historical returns, analysis of credit memo data and return policies. Sales to Foundry’s resellers do not provide for rights of return and the contracts with Foundry’s original equipment manufacturers do not provide for rights of return except in the event Foundry’s products do not meet specifications or there has been an epidemic failure, as defined in the agreements.

Service Revenues.   Service revenues consisted primarily of revenue from customer support contracts and, to a lesser extent, professional and educational services. Our suite of customer support programs provides customers with access to technical assistance, software updates and upgrades, hardware repair and replacement parts. Support services are offered under renewable, annual fee-based contracts or as part of multiple element arrangements. When support services are sold under multiple element arrangements, the Company allocates revenue to each element based upon its relative fair value and recognizes the revenue for each element when the revenue recognition criteria have been met for each element. Fair value is generally determined based on the price charged when the element is sold separately. Revenue from support contracts is deferred and recognized ratably over the contractual period, generally one to five years.

Service revenues were $36.2 million, $29.8 million and $15.6 million for 2002, 2001 and 2000 or 12%, 10% and 4% of net revenue, respectively. The increases were due to a larger installed base of our networking equipment as customers purchased new support contracts associated with their equipment purchases and renewed their maintenance contracts on existing equipment. A total of $20.2 million of support revenue was deferred on the accompanying balance sheet as of December 31, 2002. Revenue from training and installation services accounted for less than 1% of total revenue for each of the years ended December 31, 2002, 2001 and 2000.

Segment Reporting

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” was adopted by Foundry in 1997 and establishes standards for disclosures about operating segments, products and services, geographic areas and major customers. Foundry is organized and operates as one operating segment, the design, development, manufacturing and marketing of high performance Gigabit Ethernet switches, switching routers, server load balancing and transparent caching switches. Management uses one measurement for evaluating profitability and does not disaggregate its business for internal reporting.

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For the year ended December 31, 2002, one customer accounted for greater than 10% of our net revenue. Our reseller, Mitsui in Japan, accounted for 11% our net revenue in 2002. For the years ended December 31, 2001 and 2000, no customer individually accounted for greater than 10% of our net revenue.

Foundry sells to various countries in North and South America, Europe, Asia, and Australia. Foundry’s foreign offices conduct sales, marketing and support activities. Foundry’s export sales represented 38%, 35% and 30% of net revenue in 2002, 2001 and 2000, respectively. Outside of the United States, one country, Japan, accounted for 11% of revenue in 2002. No individual country outside of the United States accounted for greater than 10% of revenue in 2001 or 2000.

Advertising Costs

Foundry expenses all advertising costs as incurred. Advertising expenses for the years ended December 31, 2002, 2001 and 2000 were $3.8 million, $8.3 million and $7.7 million, respectively.

Software Development Costs

Foundry accounts for internally generated software development costs in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed.” Capitalization of eligible product development costs begins upon the establishment of technological feasibility, which Foundry has defined as completion of a working model. Internally generated costs which were eligible for capitalization, after consideration of factors such as realizable value, were not material for the years ended December 31, 2002, 2001 and 2000 and, accordingly, all software development costs have been charged to research and development expense in the accompanying statements of income.

Computation of Per Share Amounts

Basic and diluted net income per share (EPS) are presented in conformity with SFAS No. 128, “Earnings Per Share” (SFAS 128) for all periods presented. In accordance with SFAS 128, basic EPS has been calculated using the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase.Diluted EPS has been calculated assuming the conversion of all potentially dilutive common stock equivalents. Certain common stock equivalents were excluded from the calculation of diluted EPS because the exercise price of these options was greater than the average market price of the common shares and therefore, the effect would have been anti-dilutive. Anti-dilutive shares for the years ended December 31, 2002, 2001 and 2000 were 15.7 million, 10.4 million and 942,000 shares, respectively.

	Year Ended December 31,
	2002			2001			2000
	(In thousands, except per share data)
Net income	$	22,537		$	2,886		$	88,121
Basic:
Weighted average shares outstanding	119,861			119,331			116,259
Less: Weighted average shares subject to repurchase	(379		)	(1,971		)	(6,118		)
Weighted average shares used in computing basic EPS		119,482			117,360			110,141
Basic EPS	$	0.19		$	0.02		$	0.80
Diluted:
Weighted average shares outstanding	119,861			119,331			116,259
Add: Weighted average dilutive potential shares	3,919			6,190			10,872
Weighted average shares used in computing diluted EPS	123,780			125,521			127,131
Diluted EPS	$	0.18		$	0.02		$	0.69

Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). This accounting standard permits the use of either a fair value

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based method or the intrinsic value method defined in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion 25) to account for stock-based compensation arrangements. Companies that elect to employ the intrinsic value method provided in APB Opinion 25 are required to disclose the pro forma net income (loss) that would have resulted from the use of the fair value based method provided under SFAS 123. As permitted by SFAS 123, Foundry has elected to determine the value of stock-based compensation arrangements under the intrinsic value based method of APB Opinion 25. Accordingly, Foundry only recognizes compensation expense when options are granted with an exercise price below fair market value at the date of grant. Any resulting compensation expense is recognized ratably over the vesting period. The following table sets forth pro forma information as if compensation expense had been determined using the fair value method under SFAS No. 123. The fair value of these options was estimated using a Black-Scholes option-pricing model.

	Year Ended December 31,
	2002			2001			2000
	(in thousands, except per share data)
Net income as reported	$	22,537		$	2,886		$	88,121
Add: Total stock-based compensation expense included in reported net income, net of tax effect	750			1,679			3,835
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effect		(78,677	)		(170,614	)		(81,596	)
Pro forma net income (loss)	(55,391		)	(166,049		)	10,360
Basic net income per share as reported	0.19			0.02			0.80
Pro forma basic net income (loss) per share	(0.46		)	(1.41		)	0.09
Diluted net income per share as reported	0.18			0.02			0.69
Pro forma diluted net income (loss) per share	(0.45		)	(1.41		)	0.08

The weighted average fair value of stock options granted under all stock option plans during 2002, 2001 and 2000 was $3.41, $8.61 and $45.41 per share, respectively. Pursuant to the provisions of SFAS No. 123, the compensation cost associated with options granted in 2002, 2001 and 2000 was estimated on the grant date using the Black-Scholes model. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility. Because Foundry’s employee stock options have characteristics significantly different from those of traded shares, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the options. The following weighted-average assumptions were used to estimate fair value:

	Stock Option Plan						Employee Stock Purchase Plan
	2002		2001		2000		2002		2001		2000
Average risk free interest rate	3.15	%	3.84	%	6.23	%	2.23	%	3.36	%	5.41	%
Average expected life of option	3.6 years		4 years		4 years		0.5 years		1.3 years		1.9 years
Dividend yield	0	%	0	%	0	%	0	%	0	%	0	%
Volatility of common stock	75.0	%	111.0	%	80.0	%	81.1	%	111.0	%	80.0	%

The weighted-average fair value of shares issued under the 1999 Employee Stock Purchase Plan for 2002, 2001 and 2000 were $3.81, $10.63 and $14.92 per share, respectively.

Recent Accounting Pronouncements

Accounting for Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation -- Transition and Disclosure” (SFAS 148) that amends SFAS 123 to provide alternative methods of transition for a voluntary change to SFAS 123’s fair value method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. The Statement’s amendment of the transition and annual disclosure requirements of SFAS 123 are effective for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. We do not expect the adoption of SFAS 148 to have a material effect on our financial position, results of operations, or cash flows. Foundry has elected to continue to follow the intrinsic value method of accounting as prescribed by APB Opinion No. 25 to account for employee stock options.

Guarantor’s Accounting and Disclosure Requirements for Guarantees

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair market value of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions of FIN 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements or interim or annual periods ending after December 15, 2002 and are applicable to Foundry’s product warranty liability (see Note 3 below to the

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Consolidated Financial Statements). Foundry’s adoption of FIN 45 is not expected to have a material impact on its results of operations and financial position.

Revenue Arrangements with Multiple Deliverables

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Foundry is currently evaluating the effect that the adoption of EITF Issue No. 00-21 will have on its results of operations and financial condition.

Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. Foundry’s adoption of SFAS 146 is not expected to have a significant impact on its operating results and financial condition.

3.COMMITMENTS AND CONTINGENCIES:

Product Warranty

We provide all customers with a standard 1 year hardware and 90-day software warranty. Customers can upgrade the standard warranty and extend the warranty for 1-5 years by purchasing any of Foundry’s customer support programs. At the time revenue is recognized, Foundry establishes an accrual for estimated warranty expenses associated with its sales, recorded as a component of cost of revenues. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product liability during the period are as follows:

Balance, December 31, 2001	$	2,499
Warranties issued	1,537
Settlements made		(1,731	)
Balance, December 31 2002	$	2,305

Leases

Rent expense under operating leases was $5.3 million, $7.6 million and $2.5 million for the years ended December 31, 2002, 2001 and 2000, respectively. At December 31, 2002, future minimum lease payments under all noncancelable operating leases are as follows (in thousands):

	Operating Leases
2003	$	4,500
2004	4,033
2005	4,026
2006	2,008
2007	2,051
Thereafter	2,382
Total lease payments	$	19,000

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Purchase Commitments with Contract Manufacturers

The Company uses contract manufacturers to assemble and test our products. In order to reduce manufacturing lead times and ensure adequate inventories. The Company’s agreements with some of these contract manufacturers allow them to procure long lead-time component inventory on the Company’s behalf based upon a rolling production forecast provided by Foundry with lead times of up to 6 months. Foundry may be contractually obligated to purchase long lead-time component inventory procured by certain contract manufacturers in accordance with the forecast, unless Foundry gives notice of order cancellation at least 90 days prior to the delivery date. As of December 31, 2002, the Company was potentially committed to purchase approximately $26.1 million of such inventory.

Litigation

In December 2000, several similar shareholder class action lawsuits were filed against Foundry and certain of its officers in the United States Court for the Northern District of California, following Foundry’s announcement in December 2000 of its anticipated financial results for the fourth quarter ended December 31, 2000. The lawsuits were subsequently consolidated by the Court, under the caption In re Foundry Networks, Inc. Securities Litigation, Master File No. C-00-4823-MMC, lead plaintiffs were selected as required by law and such plaintiffs filed a consolidated amended complaint which alleged violations of federal securities laws and purported to seek damages on behalf of a class of shareholders who purchased Foundry’s common stock during the period from September 7, 2000 to December 19, 2000. On October 26, 2001, the Court granted the Company’s motion to dismiss the consolidated amended complaint without prejudice and with leave to amend. On December 13, 2001, attorneys for lead plaintiffs filed a second amended complaint. On June 6, 2002, the Court granted the Company’s motion to dismiss the second amended complaint, but without prejudice and with leave to amend. On July 8, 2002 attorneys for lead plaintiffs filed a third amended complaint. On August 5, 2002, the Company filed a motion to dismiss that complaint. On February 14, 2003, the Court dismissed the third amended complaint, once again, without prejudice and with leave to amend. On March 17, 2003, attorneys for lead plaintiffs filed a fourth amended complaint (“FAC”) which the Company is in the process of reviewing. The Company anticipates filing a motion to dismiss the plaintiff’s FAC by the April 7, 2003 deadline. The Company believes the lawsuit is without merit and intends to defend itself vigorously.

A class action lawsuit was filed on November 27, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of Foundry common stock alleging violations of federal securities laws. The case is now designated as In re Foundry Networks, Inc. Initial Public Offering Securities Litigation, No. 01-CV-10640 (SAS) (S.D.N.Y.), related to In re Initial Public Offering Securities Litigation, No. 21 MC 92 (SAS) (S.D.N.Y.). The case is brought purportedly on behalf of all persons who purchased the Company’s common stock from September 27, 1999 through December 6, 2000. The Company and its officers were served with the complaint, only after the maximum 120 days for service allowed under the Federal Rules of Civil Procedure had elapsed. On or about April 19, 2002, plaintiffs electronically served an amended complaint. The amended complaint names as defendants, the Company, three of its officers, and investment banking firms that served as underwriters for the Company’s initial public offering in September 1999. The amended complaint alleges violations of Sections 11 and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the shares of the Company’s stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of the Company’s stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of the Company’s stock in the aftermarket at pre-determined prices. The amended complaint also alleges that false analyst reports were issued following the IPO. No specific damages are claimed. We are aware that similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. Those cases have been consolidated for pretrial purposes before the Honorable Judge Shira A. Scheindlin. Motions to dismiss the case were filed on behalf of all the defendants in all of the cases. On February 19, 2003, Judge Scheindlin issued a ruling on the motions. In ruling on motions to dismiss, the Court must treat the allegations in the Complaint as if they were true solely for purposes of deciding the motions. The court denied the motion to dismiss the claims against the Company alleged under the Securities Act of 1933. The same ruling was made in all but 10 of the other cases. The Court dismissed the claims alleged under the Securities Exchange Act of 1934, Section 10(b), against the Company and one of the individual defendants and dismissed all of the “controlling person” claims alleged under that Act against all of the Foundry Networks individual defendants. The Court denied the motion to dismiss the Section 10(b) claims against the remaining Foundry Networks individual defendants on the basis that those defendants sold the Company’s stock during the class period alleged in the complaint and that those allegations were sufficient purely for pleading purposes to allow those claims to move forward. A similar ruling was made with respect to 62 of the individual defendants in the other cases.

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Management believes that the remaining allegations in the above referenced class action lawsuits against the Company and its officers are without merit and management intends to contest them vigorously. The litigation process is inherently uncertain. If the outcome of the litigation is adverse to the Company and if, in addition, the Company is required to pay significant monetary damages in excess of available insurance, its business could be significantly harmed.

From time to time the Company is subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights. In addition, from time to time, third parties assert patent infringement claims against the Company in the form of letters, lawsuits and other forms of communication. In March 2001, Nortel filed a lawsuit against Foundry in the United States District Court for the District of Massachusetts alleging that certain of the Company’s products infringe several of Nortel’s patents and seeking injunctive relief as well as unspecified damages. Nortel has also brought suit, on the same or similar patents, against a number of other networking companies. Foundry has analyzed the validity of Nortel’s claims and believes that Nortel’s suit is without merit. Foundry is committed to vigorously defending itself against these claims. On October 9, 2002, the Company filed a lawsuit against Nortel in the United States District Court, Northern District of California alleging that certain of Nortel’s products infringe a Foundry patent as well as allegations concerning breach of contract. The Company is seeking injunctive relief as well as damages. Irrespective of the merits of the Company’s position, litigation is always an expensive and uncertain proposition. In the event of a determination adverse to the Company, the Company could incur substantial monetary liability, and be required to change its business practices. Either of these could have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

4.INCOME TAXES:

Foundry accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 provides for an asset and liability approach to accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. As of December 31, 2002 and 2001, components of the Company’s net deferred income tax assets (all current) were as follows (in thousands):

	December 31,
	2002		2001
Deferred Tax Assets:
Accrued vacation pay	$	1,425	$	1,163
Inventories valuation	11,105		12,217
Warranty	924		999
Accounts receivable valuation	5,452		5,299
Research and development credits	3,677		4,525
Asset write-down	2,120		2,115
Depreciation and other temporary differences	3,857		3,338
Total deferred tax assets	$	28,560	$	29,656

Management believes that the Company will likely generate sufficient taxable income in the future to realize the tax benefits arising from its existing deferred tax assets. Therefore, no valuation allowance was required as of December 31, 2002 and 2001. As of December 31, 2002, the Company’s state tax credit carryforwards for income tax purposes were approximately $3.7 million. $3.3 million can be carried over indefinitely and $0.4 million will expire in years 2009 through 2010.

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As of December 31, 2002 and 2001, Foundry had no significant deferred tax liabilities.

The provision for income taxes consists of the following components for the years ended December 31 (in thousands):

	2002			2001			2000
Current
Federal	$	7,801		$	13,814		$	49,069
Foreign	189			218			108
State	560			1,274			10,814
Total	8,550			15,306			59,991
Deferred
Federal	1,201				(11,938	)	(5,302		)
Foreign and State	(92		)	(1,599		)	(679		)
Total	1,109			(13,537		)	(5,981		)
Total provision	$	9,659		$	1,769		$	54,010

Income before provision for income taxes consisted of the following (in thousands):

	December 31,
	2002		2001		2000
United States	$	31,748	$	4,135	$	141,819
International	448		520		312
Total	$	32,196	$	4,655	$	142,131

The actual provision for income taxes and the corresponding rate differs from the statutory U.S. federal income tax rate as follows for the years ended December 31 (in thousands):

	2002					2001					2000
Provision at U.S. statutory rate of 35%	$	11,269		35.0	%	$	1,629		35.0	%	$	49,746		35.0	%
State income taxes, net of federal benefit	1,657			5.1	%	(211		)	(4.5	)%	6,997			4.9	%
Research and development credits	(1,895		)	(5.9	)%		(1,254	)	(26.9	)%	(2,155		)	(1.5	)%
Nondeductible deferred stock compensation	424			1.3	%	1,176			25.3	%	1,757			1.2	%
Foreign Sales Corporation benefit	(620		)	(1.9	)%	(241		)	(5.2	)%	(2,318		)	(1.6	)%
Tax exempt interest	(1,126		)	(3.5	)%	(1,235		)	(26.5	)%	(814		)	(0.6	)%
Other	(50		)	(0.1	)%	1,905			40.8	%	797			0.6	%
Total	$	9,659		30.0	%	$	1,769		38.0	%	$	54,010		38.0	%

The Company’s income taxes payable for federal and state purposes have been reduced, and the deferred tax assets increased, by the tax benefits associated with taxable dispositions of employee stock options. When an employee exercises a stock option issued under a nonqualified plan or has a disqualifying disposition related to a qualified plan, the Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of the exercise and the option price, tax effected. These benefits were credited directly to stockholders’ equity and amounted to $4.8 million, $10.5 million and $57.9 million for the years ended December 31, 2002, 2001 and 2000, respectively.

5.STOCKHOLDERS’ EQUITY:

Preferred Stock

Foundry is authorized to issue up to 5,000,000 shares of preferred stock, each with a par value of $0.0001 per share. The preferred stock may be issued from time to time in one or more series. The board of directors is authorized to determine the rights, preferences, privileges and restrictions on these shares. As of December 31, 2002 and 2001, no shares of preferred stock were outstanding.

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Stock Option Exchange Program

On August 21, 2002, Foundry filed a Tender Offer Statement on Schedule TO with the Securities and Exchange Commission related to a voluntary stock option exchange program for its employees. Foundry’s executive officers and directors were not eligible to participate in this program. Under the exchange program, employees were given the opportunity to voluntarily cancel unexercised vested and unvested stock options previously granted to them in exchange for a stock option grant equal to 0.5 times the number of tendered options on or about March 21, 2003. However, participants who elected to exchange any options were also required to exchange any other options granted to him or her in the previous six months. On September 20, 2002, the Company accepted for exchange options to purchase 5,744,500 shares of Foundry common stock. The cancelled options were exchanged for 2,757,100 replacement stock options on March 24, 2003 at an exercise price of $7.76 per share. See Note 7 below for information about this subsequent event.

Stock Repurchase Program

In January 2001, the Board of Directors authorized a stock repurchase program to acquire up to a total of 5.0 million shares of its outstanding common stock in the open market from time to time until January 2002. In October 2001 Foundry repurchased and retired approximately 1,522,000 shares of its common stock for an aggregate purchase price of approximately $15.0 million. Foundry has reserved these shares for issuance to employees under the 2000 Non-Executive Stock Option Plan.

Note Receivable from Stockholder

In May 2000, Foundry allowed an employee to exercise stock options in exchange for a secured promissory note of $3.3 million. The recourse note bears interest at a rate of 6.4% per annum and is due on the earlier of (i) May 25, 2003, (ii) the date of sale of the shares or (iii) termination of employment. In December 2001, the Company wrote-down the note by $2.8 million to reflect the adverse impact of the significant decline in the Company’s stock price on the employee’s ability to sell the vested stock options at a price at or above the exercise price as well as general concerns over the collectibility of the note. The Company determined the fair value of the note was $480,000 based on the fair market value of the Company’s stock in December 2001. Accordingly, the Company recorded compensation expense of $2.8 million on the accompanying consolidated statement of income for fiscal 2001. The note is classified as a reduction of stockholders’ equity.

Common Stock

Foundry had 121,328,862 and 119,298,814 shares of common stock issued and outstanding at December 31, 2002 and 2001, respectively. Included in such outstanding shares are 32,940,000 shares issued to Foundry’s founders in 1996 (the Founders Shares). The Founders Shares vest out of the repurchase option 25% upon issuance, with the balance vesting ratably each month for the 48 months after issuance. As of December 31, 2002, all Founders Shares were fully vested. In June 1999, the Company repurchased 1,200,000 unvested shares from a founder at $0.003 per share. These treasury shares were used for stock option grants to employees in 2002.

In January 1999, Foundry granted 1,059,000 nonstatutory stock options to certain key employees outside of the 1996 Stock Plan at an exercise price of $0.83 per share. The options vest over a four-year period and expire in January 2009. During fiscal 2002 and 2001, 150,000 and 172,585 shares were exercised, respectively. As of December 31, 2002, 300,000 shares were outstanding.

20

The following shares of common stock have been reserved for future issuance as of December 31, 2002:

1996 Stock Plan	28,803,042
1999 Directors’ Stock Option Plan	3,350,000
1999 Employee Stock Purchase Plan	4,630,839
Nonstatutory stock options to key employees	512,000
2000 Non-Executive Stock Option Plan	3,686,927
	40,982,808

1996 Stock Plan

Under Foundry’s 1996 Stock Plan (the Plan), the board of directors authorized the issuance of 63,235,683 shares of common stock to employees and consultants as of December 31, 2002, including those issued as of that date. Nonstatutory options granted under the Plan must be issued at a price equal to at least 85% of the fair market value of Foundry’s common stock at the date of grant. Incentive stock options granted under the Plan must be issued at a price at least equal to the fair market value of Foundry’s common stock at the date of grant. Options under the Plan have a term of ten years and vest over a vesting schedule determined by the board of directors, generally four years. The number of shares reserved for issuance under the Plan will be increased on the first day of each fiscal year from 2000 through 2009 by the lesser of (i) 5,000,000 shares; (ii) five percent (5%) of the shares outstanding on the last day of the immediately preceding fiscal year; or (iii) such lesser amount of shares as is determined by the Board of Directors.

1999 Directors’ Stock Option Plan

The 1999 Directors’ Stock Option Plan (the Directors’ Plan) was adopted by the board of directors in July 1999. As of December 31, 2002, a total of 3,350,000 shares of common stock have been reserved for issuance under the Directors’ Plan.

Under the Directors’ Plan, each non-employee director who becomes a non-employee director after the effective date of the plan will receive an automatic initial grant of an option to purchase 225,000 shares of common stock upon appointment or election and annual grants to purchase 60,000 shares of common stock. Options granted under the plan will vest at the rate of 1/4th of the total number of shares subject to the options twelve months after the date of grant and 1/48th of the total number of shares subject to the options each month thereafter. The exercise price of all stock options granted under the Directors’ Plan shall be equal to the fair market value of a share of common stock on the date of grant of the option. Options granted under this plan have a term of ten years. In June 2002, the directors received their annual grants totaling 240,000 stock options at an exercise price of $6.86 per share. As of December 31, 2002, 1,215,000 options were outstanding at a weighted average exercise price of $47.37 per share.

21

2000 Non-Executive Stock Option Plan

The 2000 Non-Executive Stock Option Plan (the Non-Executive Plan) was adopted by the board of directors in October 2000. Under the Non-Executive Plan, the Company may issue non-qualified options to purchase common stock to employees and external consultants other than officers and directors. As of December 31, 2002, a total of 3,686,927 shares of common stock have been reserved for future issuance, of which 1,799,452 shares were outstanding at a weighted average exercise price of $10.61 per share.

The following table summarizes stock option activity under all stock option plans during the three years ended December 31, 2002:

	Options Outstanding		Weighted Average Exercise Price
Balance, December 31, 1999	15,476,708			$	4.13
Granted	10,858,400			72.45
Exercised	3,887,378			2.63
Cancelled	(661,187	)		28.73
Balance, December 31, 2000	21,786,543			37.71
Granted	10,505,050			11.43
Exercised	(2,525,213	)		2.60
Cancelled	(4,305,757	)		37.09
Balance, December 31, 2001	25,460,623			30.44
Granted	12,496,950			6.24
Exercised	(1,472,887	)		3.00
Cancelled	(9,273,434	)		57.14
Balance, December 31, 2002	27,211,252			$	11.72

As of December 31, 2002, Foundry had issued an aggregate of 68,005,522 shares of common stock to its employees, including 32,940,000 shares issued to Foundry’s four founders. Of the 68,005,522 shares of common stock issued to employees under all of the Company’s stock option plans, 57,737 shares are subject to repurchase rights at the option of Foundry at $0.83-$59.69 per share upon cessation of the employees’ employment. In 2002, 2001 and 2000, Foundry repurchased 36,769, 230,132 and 326,188 shares, respectively, of unvested common stock from terminated employees at $0.03-$4.50 per share. As of December 31, 2002, an aggregate of 7,005,716 shares were available for future option grants to only employees under all plans.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2002:

	Stock Options Outstanding						Stock Options Exercisable
Range of Exercise Prices	Shares Outstanding	Weighted- Average Remaining Contractual Life (years)		Weighted- Average Exercise Price			Shares Exercisable	Weighted- Average Exercise Price
$0.03-$6.05	6,989,201		7.24		$	3.48	4,431,848		$	2.70
$6.14-$8.75	11,564,253		9.06		6.66		3,369,720		6.69
$9.76-$14.85	6,040,624		7.97		11.31		4,941,039		11.37
$17.55-$128.00	2,617,174		7.76		57.06		1,694,262		60.30
Total	27,211,252		8.23		$	11.72	14,436,869		$	13.39

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As of December 31, 2001, there were 11,666,251 options exercisable at a weighted average exercise price of $28.09 and as of December 31, 2000, there were 11,214,058 options exercisable at a weighted average exercise price of $4.75.

1999 Employee Stock Purchase Plan

The 1999 Employee Stock Purchase Plan (the Purchase Plan) was adopted by the board of directors in July 1999. As of December 31, 2002, a total of 4,630,839 shares of common stock were reserved for issuance under the Purchase Plan. The number of shares reserved for issuance under the Purchase Plan will be increased on the first day of each fiscal year from 2000 through 2009 by the lesser of (i) 1,500,000 shares, (ii) 2% of Foundry’s outstanding common stock on the last day of the immediately preceding fiscal year or (iii) the number of shares determined by the board of directors.

The Purchase Plan enables eligible employees to purchase common stock through payroll deductions, which in any event may not exceed 20% of an employee’s compensation, at a price equal to the lower of 85% of the fair market value of the Company’s common stock at the beginning of each offering period or at the end of each purchase period. During the two purchase periods in 2002, 593,930 shares had been purchased under the Purchase Plan at an average price of $6.45 per share.

Deferred Stock Compensation

In connection with the issuance of certain stock options to employees, Foundry has recorded deferred stock compensation in the aggregate amount of approximately $17.3 million and $0.3 million in 1999 and 2000, respectively, representing the difference between the deemed fair value of Foundry’s common stock for accounting purposes and the exercise price of stock options at the date of grant. We recorded no additional deferred stock compensation in 2002 and 2001. Foundry is amortizing the deferred stock compensation expense over the vesting period, generally four years. For the years ended December 31, 2002, 2001 and 2000, amortization expense was approximately $1.1 million, $2.7 million and $6.2 million, respectively. At December 31, 2002, the remaining deferred stock compensation of approximately $0.2 million will be amortized in 2003. The amortization expense relates to options granted to employees in all operating expense categories. The amortization of deferred stock compensation has not been separately allocated to these categories. The amount of deferred stock compensation expense to be recorded in future periods could decrease if options for which accrued but unvested compensation has been recorded are forfeited. Approximately $1.6 million of deferred stock compensation expense was reversed in 2001 as a result of employee terminations. No such reversals were recorded during 2002.

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Equity Compensation Plan Information

The following table summarizes information with respect to shares of Foundry’s common stock that may be issued under the Foundry’s existing equity compensation plans as of December 31, 2002.

Plan Category	Number of securities to be issued upon exercise of outstanding options (a)	Weighted-average exercise price of outstanding options (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
1996 Stock Plan	23,896,801		$	10.13	4,906,241
1999 Employee Stock Purchase Plan	—		$	—	4,630,839
1999 Directors’ Stock Option Plan	1,215,000		$	47.37	2,135,000
Equity compensation plans not approved by security holders:
2000 Non-Executive Stock Option Plan	1,799,452		$	10.62	1,887,475

6.401(k) PLAN:

Foundry provides a tax-qualified employee savings and retirement plan which entitles eligible employees to make tax-deferred contributions. Under the 401(k) Plan, employees may elect to reduce their current annual compensation up to the lesser of 20% or the statutorily prescribed limit, which was $11,000 in calendar year 2002. Employees age 50 or over may elect to contribute an additional $1,000. The Plan provides for discretionary contributions as determined by the board of directors each year. As of December 31, 2002, Foundry has made no matching or discretionary contributions.

Effective January 1, 2003, employees may elect to reduce their current annual compensation up to the lesser of 100% or the statutorily prescribed limit, which is $12,000 for calendar year 2003. In January 2003, the board of directors approved a matching contribution program whereby Foundry will match dollar for dollar contributed by each employee up to $1,250 per employee for the 2003 calendar year. All matching contributions vested effective January 1, 2003.

7.SUBSEQUENT EVENT (unaudited):

In connection with the Tender Offer filed on August 21, 2002, the Company granted replacement stock options totaling 2,757,100 shares on March 24, 2003 to employees who relinquished underwater stock options totaling 5,744,500 shares on September 20, 2002 in exchange for a stock option grant equal to 0.5 times the number of tendered options. The replacement stock options were granted with an exercise price equal to the fair market value of Foundry’s stock on March 24, 2003, which was $7.76 per share . In order to receive the replacement stock option grant, an employee was required to remain employed with Foundry or one of its subsidiaries until March 24, 2003. The replacement options vest on a three-year schedule with a six month cliff, meaning 1/6th of the new option shares will vest six months from March 24, 2003, and the remaining shares will vest 1/36th per month for the remaining 30 months. The stock option exchange program did not result in stock compensation expense or variable accounting for replacement awards.

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FOUNDRY NETWORKS, INC.

Supplementary Financial Data (Unaudited)

The following tables set forth our consolidated statement of operations data for each of the eight quarters ended December 31, 2002, including such amounts expressed as a percentage of net revenues. This unaudited quarterly information has been prepared on the same basis as our audited financial statements and, in the opinion of management, reflects all adjustments, consisting only of normal recurring entries, necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	Quarter Ended
	Mar.31, 2001			Jun.30, 2001			Sep.30, 2001			Dec. 31, 2001			Mar.31, 2002			Jun.30, 2002			Sep.30, 2002			Dec. 31, 2002
	(in thousands)
Statement of Operations Data (unaudited):
Revenues, net	$	82,551		$	88,569		$	74,654		$	65,403		$	62,420		$	75,008		$	76,596		$	86,718
Cost of revenues	38,888			41,318			37,152			40,784			29,841			35,462			35,543			39,346
Gross margin	43,663			47,251			37,502			24,619			32,579			39,546			41,053			47,372
Operating expenses:
Research and development	7,900			8,251			8,436			9,360			8,528			8,855			8,907			8,643
Sales and marketing	24,817			23,266			22,130			20,573			20,590			22,571			18,492			21,271
General and administrative	5,947			5,095			5,290			10,854			3,011			3,351			4,662			3,427
Amortization of deferred stock compensation	1,135			833			592			147			382			306			212			171
Total operating expenses	39,799			37,445			36,448			40,934			32,511			35,083			32,273			33,512
Income (loss) from operations	3,864			9,806			1,054			(16,315		)	68			4,463			8,780			13,860
Interest income	2,865			2,304			2,023			1,555			1,475			1,284			1,184			1,082
Write-down of minority investment	—			—			—			2,500			—			—			—			—
Income (loss) before provision for income taxes	6,729			12,110			3,077			(17,260		)	1,543			5,747			9,964			14,942
Income tax (expense) benefit	(2,557		)	(4,602		)	(1,169		)	6,559			(494		)	(1,724		)	(2,959		)	(4,482		)
Net income (loss)	$	4,172		$	7,508		$	1,908		$	(10,701	)	$	1,049		$	4,023		$	7,005		$	10,460
Basic net income (loss) per share	$	0.04		$	0.06		$	0.02		$	(0.09	)	$	0.01		$	0.03		$	0.06		$	0.09
Diluted net income (loss) per share	$	0.03		$	0.06		$	0.02		$	(0.09	)	$	0.01		$	0.03		$	0.06		$	0.08

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	Mar.31, 2001		Jun.30, 2001		Sep.30, 2001		Dec. 31, 2001		Mar.31, 2002		Jun.30, 2002		Sep.30, 2002		Dec. 31, 2002
	(in thousands)
Percentage of Revenue (unaudited):
Revenues, net	100.00	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	47.1		46.7		49.8		62.4		47.8		47.2		46.4		45.4
Gross margin	52.9		53.3		50.2		37.6		52.2		52.8		53.6		54.6
Operating expenses:
Research and development	9.6		9.3		11.3		14.3		13.7		11.8		11.6		10.0
Sales and marketing	30.0		26.3		29.6		31.5		33.0		30.1		24.1		24.5
General and administrative	7.2		5.8		7.1		16.6		4.8		4.5		6.1		3.9
Amortization of deferred stock compensation	1.4		0.9		0.8		0.2		0.6		0.4		0.3		0.2
Total operating expenses	48.2		42.3		48.8		62.6		52.1		46.8		42.1		38.6
Income (loss) from operations	4.7		11.0		1.4		(25.0	)	0.1		6.0		11.5		16.0
Interest income	3.5		2.6		2.7		2.4		2.4		1.7		1.5		1.2
Write-down of minority investment	—		—		—		3.8		—		—		—		—
Income (loss) before provision for income taxes	8.2		13.6		4.1		(26.4	)	2.5		7.7		13.0		17.2
Income tax (expense) benefit	(3.1	)	(5.2	)	(1.6	)	10.0		(0.8	)	(2.3	)	(3.9	)	(5.2	)
Net income (loss)	5.1	%	8.4	%	2.5	%	(16.4	)	1.7	%	5.4	%	9.1	%	12.0	%

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FOUNDRY NETWORKS, INC.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Column A	Column B	Column C	Column D	Column E
Description	Balance at Beginning of Period	Charged to Costs and Expenses	Deductions(1)	Balance at End of Period
Year ended December 31, 2000:
Allowance for doubtful accounts	1,354	4,698	1,791	4,261
Allowance for sales returns	615	3,734	2,848	1,501
Year ended December 31, 2001:
Allowance for doubtful accounts	4,261	9,061	6,674	6,648
Allowance for sales returns	1,501	3,595	3,595	1,501
Year ended December 31, 2002:
Allowance for doubtful accounts	6,648	344	1,160	5,833
Allowance for sales returns	1,501	1,527	1,444	1,584

______________

(1)Deductions for allowance for doubtful accounts refers to write-offs and deductions for allowance for sales returns refers to actual returns.

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Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this Form 10-K:

     (1) Consolidated Financial Statements and Report of Independent Auditors and Public Accountants

     (2) Financial Statement Schedules

     See “Item 8. Financial Statements and Supplementary Data–Schedule II–Valuation and Qualifying Accounts.” Other schedules are omitted because they are not applicable, or because the information is included in the Financial Statements or the Notes thereto.

     (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)

Number	Description
3.1	Amended and Restated Certificate of Incorporation of Foundry Networks, Inc. (Amended and Restated Certificate of Incorporation filed as Exhibit 3.2 to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-82577) and incorporated herein by reference; Certificate of Amendment to the foregoing filed as Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference.)
3.2	Amended and Restated Bylaws of Foundry Networks, Inc. (Filed as Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference.)
10.1	1996 Stock Plan. (1)
10.2	1999 Employee Stock Purchase Plan. (2)
10.3	1999 Directors’ Stock Option Plan. (3)
10.5	OEM Purchase Agreement dated January 6, 1999 between Foundry Networks, Inc. and Hewlett-Packard Company, Workgroup Networks Division. (4)
10.6	Reseller Agreement dated July 1, 1997 between Foundry Networks, Inc. and Mitsui & Co., Ltd. (4)
10.7	2000 Non-Executive Stock Option Plan. (5)
10.11	Lease agreement dated September 28, 1999, between Foundry Networks, Inc., and Legacy Partners Commercial Inc., for offices located at 2100 Gold Street, San Jose, CA 95002. (6)
16.1	Letter from Arthur Andersen LLP to the Securities and Exchange Commission dated June 25, 2002. (7)
21.1	List of Subsidiaries. (8)
23.1	Consent of Ernst & Young LLP, Independent Auditors.
23.2	Notice Regarding Consent of Arthur Andersen LLP.
99.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

28

(1)	Copy of original 1996 Stock Plan incorporated herein by reference to the exhibit filed with the Company’s Registration Statement on Form S-1 (Commission File No. 333-82577). Copy of 1996 Stock Plan reflecting the amendments approved at the 2000 Annual Meeting of Stockholders incorporated by reference to the Company’s Definitive Proxy Statement for such meeting (Commission File No. 000-26689). Copy of 1996 Stock Plan reflecting the amendments for approval at the 2002 Annual Meeting of Stockholders incorporated by reference to the Company’s Definitive Proxy Statement for such meeting (Commission File No. 000-26689).
(2)	Incorporated herein by reference to the exhibit filed with the Company’s Registration Statement on Form S-1 (Commission File No. 333-82577).
(3)	Incorporated herein by reference to the exhibit filed with the Company’s Registration Statement on Form S-1 (Commission File No. 333-82577). Copy of Directors’ Plan reflecting the amendment for approval at the 2002 Annual Meeting of Stockholders incorporated by reference to the Company’s Definitive Proxy Statement for such meeting (Commission File No. 000-26689).
(4)	Incorporated herein by reference to the exhibit filed with the Company’s Registration Statement on Form S-1 (Commission File No. 333-82577); Confidential treatment has been granted by the Securities and Exchange Commission with respect to this exhibit.
(5)	Incorporated herein by reference to the exhibit filed with the Company’s Registration Statement on Form S-8 filed on October 25, 2000 (Commission File No. 333-48560).
(6)	Incorporated herein by reference to the exhibit filed with the Company’s Form 10-Q for the quarter ended September 30, 1999 (Commission File No. 000-26689).
(7)	Incorporated by reference from Foundry’s Report on Form 8-K filed on July 3, 2002.
(8)	Incorporated by reference to the exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, filed on March 31, 2003.

(b) Reports on Form 8-K.
None.

29

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FOUNDRY NETWORKS, INC.
By:	/s/ Timothy D. Heffner
	Timothy D. Heffner Vice President, Finance & Administration, Chief Financial Officer

Date: June 4, 2003

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Bobby R. Johnson, Jr. Bobby R. Johnson, Jr.	President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)	June 4, 2003
/s/ Timothy D. Heffner Timothy D. Heffner	Vice President, Finance & Administration, Chief Financial Offcer (Principal Financial and Accounting Officer)	June 4, 2003
/s/ Andrew K. Ludwick Andrew K. Ludwick	Director	June 4, 2003
/s/ Alfred J. Amoroso Alfred J. Amoroso	Director	June 4, 2003
/s/ C. Nicholas Keating C. Nicholas Keating	Director	June 4, 2003
/s/ J. Steven Young J. Steven Young	Director	June 4, 2003

30

CERTIFICATIONS

I, Bobby R. Johnson, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Foundry Networks, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluations as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 4, 2003

/s/ Bobby R. Johnson, Jr.

Bobby R. Johnson, Jr.
Chief Executive Officer
and President

31

CERTIFICATIONS

I, Timothy D. Heffner, certify that:

1. I have reviewed this annual report on Form 10-K of Foundry Networks, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluations as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 4, 2003

/s/ Timothy D. Heffner
Timothy D. Heffner
Vice President, Finance and Administration,
Chief Financial Officer

32