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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the transition period from                 to                

Commission File Number 000-31257

McDATA CORPORATION

380 Interlocken Crescent, Broomfield, Colorado 80021
(Address of principal executive offices)(zip code)

(303) 460-9200
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year,
if changed since last report)

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 that 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 [   ]

At October 28, 2002, 81,000,000 shares of the registrant’s Class A Common Stock were outstanding and 32,728,774 shares of the registrant’s Class B Common Stock were outstanding.

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McDATA CORPORATION

FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002

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Special Note Regarding Forward-Looking Statements

     Some of the information presented in this Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Although McDATA Corporation (“McDATA” or the “Company”, which may also be referred to as “we,” “us” or “our”) believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its businesses and operations, there can be no assurance that actual results will not differ materially from our expectations. Factors that could cause actual results to differ materially from expectations include:

•		changes in our relationship with EMC Corporation, or EMC, and International Business Machines Corporation, or IBM, and the level of their orders;
•		our ability to successfully ramp sales of SANavigator software;
•		the impact of the continued general economic slowdown on purchasing decisions by customers and capital spending;
•		our ability to complete the manufacturing review plan and the successful implementation of an “outsourcing-focused” manufacturing model;
•		additional manufacturing and component costs and production delays that we may continue to experience as we continue the transition to new products and multiple product lines;
•		a loss of any of our key customers (and our OEMs’ key customers), distributors, resellers or our manufacturers;
•		our ability to expand our product offerings and any transition to new products (including even higher port density products and multi-protocol products);
•		the impact and uncertainty of typically having most of our sales volume occur in the last month, and a significant amount in the last two weeks and even days, of each fiscal quarter;
•		any change in business conditions, our sales strategy or product development plans;
•		competition in the storage area network (SAN) and director, software and switch markets (including competitive pricing pressures by current competitors and possible new entrants from the IP and multi-protocol switch industry);
•		continued market acceptance of our products, name recognition of our products and changes in customer buying patterns;
•		delays and changes in the development of new products and new technology and component quality and availability;
•		any industry or technology changes that cause obsolescence of our products or components of those products; and
•		one-time events and other important risks and factors disclosed previously and from time to time in our filings with the U.S. Securities and Exchange Commission, including the risk factors discussed in this Quarterly Report.

     You should not construe these cautionary statements as an exhaustive list or as any admission by us regarding the adequacy of the disclosures made by us. We cannot always predict or determine after the fact what factors would cause actual results to differ materially from those indicated by our forward-looking statements or other statements. In addition, you are urged to consider statements that include the terms “believes,” “belief,” “expects,” “plans,” “objectives,” “anticipates,” “intends,” or the like to be uncertain and forward-looking. All cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. We do not undertake any obligation to publicly update or revise any forward-looking statements.

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PART I — FINANCIAL INFORMATION

McDATA CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

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

1

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McDATA CORPORATION

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

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

2

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McDATA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)