MILBERG WEISS BERSHAD HYNES & LERACH LLP PATRICK J. COUGHLIN (111070) RANDI D. BANDMAN (145212) JOHN K. GRANT ( 169813) 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone : 415/288-4545 415/288-4534 (fax) - and WILLIAM S. LERACH (68581) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone : 619/231-1058 619/231-7423 (fax)

BERNSTEIN LIEBHARD & LIFSHITZ, LLP SANDY A. LIEBHARD 10 East 40th Street New York, NY 10016 Telephone : 212/779-1414 212/779-3218 (fax)

Co-Lead Counsel for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re FOUNDRY NETWORKS, Master File No. C-00-4823-MMC INC. SECURITIES LITIGATION CLASS ACTION

This Document Relates To: CONSOLIDATED AMENDED COMPLAINT FOR VIOLATION OF ALL ACTIONS. THE FEDERAL SECURITIES LAWS SUMMARY OF THE ACTION

1. This is a securities fraud class action on behalf of persons who purchased Foundry Networks, Inc. ("Foundry" or the "Company") common stock between September 6, 2000 and December 19, 2000 (the "Class Period"), against Foundry and its top officers for violations of the federal securities laws arising out of defendants' dissemination of false and misleading statements concerning the Company's business and its prospects for 2000 and beyond.

2. Foundry designs, develops, manufactures and markets an end-to-end suite of high performance networking products for enterprises, educational institutions, government agencies, web-hosting companies, Application Service Providers, electronic banking and finance service providers, and Internet Service Providers. Foundry relied heavily on Internet Service Providers ("ISPs") to purchase its products and grow its sales . Whereas much of Foundry's early sales growth was fueled by sales to more established Internet companies such as America Online ("AOL"), by mid-2000, most of the growth was the result of sales to smaller, newer and less established ISPs. Many of these companies were new and were suffering from a downturn in Internet-related funding which began in the spring of 2000. By September 2000, the problems many of these companies were having raising money had reached crisis levels . Defendants knew this would severely impair Foundry's future revenue growth. However, defendants wanted to unload additional shares before the bottom fell out of Foundry's stock price. Thus, defendants continued to make positive but false statements about Foundry's business and future revenues during October and November 2000. As a result, Foundry's stock traded as high as $90-3/8.W

3. In addition to having actual knowledge of the falsity of their statements, each of the defendants had the motive and the opportunity to perpetrate the fraudulent scheme and course of business described herein, in order to sell $113 million worth of their own Foundry shares at prices as high as $89 per share or 580% higher than the price to which Foundry shares dropped at the end of the Class Period, as Foundry's true prospects began to reach the market. In mid-November 2000, after defendants had completed the bulk of their sales, Foundry issued a Form 10-Q which contained many new disclosures about the problems many of its customers might experience in raising money and that Foundry had provided vendor financing to fuel some of its growth. However, Foundry's stock continued to trade at artificially inflated levels as defendants continued to make public statements that demand was strong and that Foundry's biggest problem was keeping up with demand. At least two defendants took advantage of this continued inflation and either sold or filed to sell additional Foundry stock.

4. On December 19, 2000, after the market closed, Foundry announced that in the fourth quarter 2000 it would post revenue and EPS declines from the prior quarter. This was directly contrary to what Foundry's CEO had told The Wall Street Transcript just weeks before.

5. This disclosure shocked the market, causing Foundry's stock to decline to less than $12-1/8 per share before closing at $13 per share on December 20, 2000, on record volume of more than 29 million shares, inflicting hundreds of millions of dollars of damage on plaintiffs and the Class. Defendants' misconduct has wiped out over $2 billion in market capitalization as Foundry stock has fallen 84% from its Class Period high of over $90 per share as the truth about Foundry, its operations and prospects began to reach the market.

6. Foundry's poor fourth quarter 2000 results, however, did not surprise Foundry's insiders, but were in fact anticipated. In July 2000, Foundry had conducted its three-day, semi-annual National Sales Conference, which was attended by upper management, including defendants Bobby Johnson and Robert Shackleton, sales and engineering personnel and marketing and research and development employees. During the July 2000 conference, Johnson and Shackleton both admitted that Foundry was experiencing slowing sales trends and softening demand. This softening of demand was due, moreover, to funding difficulties, particularly with ISPs, and to an excess of available used equipment, as companies were seeking to reduce their debt load. On or about July 20, 2000, Johnson circulated a Company-wide e-mail that recognized and discussed the poor month-to-date sales results and the decline in Foundry's stock price, which implored employees not to overreact to bad news and instructed employees not to sell stock. These concerns were further confirmed, as Foundry's internal actual-to-plan July 2000 reports revealed that Foundry was failing to make its internal monthly plan for the first time and was suffering a 30% miss during July 2000. In November 2000, Foundry held another National Sales Conference, during which the participants further discussed the impact of Foundry's smaller customers' inability to obtain funding and the resulting weakening demand for Foundry's products.

JURISDICTION AND VENUE

7. The claims asserted herein arise under §§10(b) and 20(a) of the Securities Exchange Act of 1934 ("1934 Act"), 15 U.S.C. §§78j(b) and 78t(a), and Rule lOb-5. Jurisdiction is conferred by §27 of the 1934 Act, 15 U.S.C. §78aa.

8. Venue is proper here pursuant to §27 of the 1934 Act. Acts and transactions giving rise to the violations of law complained of occurred here.

THE PARTIES

9. On April 6, 2001, the Court appointed Cyrous Gheyri, John Svigos, Chuan-Wen Chou and Licia Leslie as lead plaintiffs, pursuant to §21D(a)(3)(B) of the 1934 Act. Lead plaintiffs each purchased shares of Foundry common stock during the Class Period and were injured thereby. The purchases of the lead plaintiffs are identified in the papers filed in support of the motion for appointment of lead plaintiffs.

10. Defendant Foundry maintains its headquarters at San Jose, California. Foundry develops and markets high-performance, end-to-end switching and routing solutions, including Internet routers, Layer 3 switches and Layer 4-7 Internet traffic and content management switches. During the Class Period, Foundry had approximately 117 million shares of common stock outstanding, which shares traded in an efficient market on the Nasdaq National Market System.

11. (a) Defendant Bobby R. Johnson, Jr. ("Johnson") was, during the Class Period, President, Chief Executive Officer, and Chairman of the Board of the Company. During the Class Period, while in possession of confidential Foundry data, defendant Johnson sold 850,000 shares of Foundry stock at artificially inflated prices as high as $85 per share, for proceeds of more than $70 million. Johnson was the largest shareholder of Foundry having acquired his shares in 1996 for a split adjusted one-third of a penny each.

(b) Defendant Lee Chen ("Chen") was, during the Class Period, Vice President-Software Engineering, Quality and Assurance of the Company. During the Class Period, while in possession of confidential Foundry data, Chen sold 220,000 shares of Foundry stock at artificially inflated prices as high as $89 per share, for proceeds of more than $16.1 million.

(c) Defendant Robert W. Shackleton ("Shackleton"), was, during the Class Period, Vice- President North American Sales of the Company. During the Class Period, while in possession of confidential Foundry data, Shackleton sold 150,000 shares of Foundry stock at an artificially inflated price of $84-15/16 per share, for proceeds of more than $12.7 million.

(d) Defendant Ken K. Cheng ("Cheng") was, during the Class Period, Vice President- Marketing and Product and Program Management of the Company. During the Class Period, while in possession of confidential Foundry data, Cheng sold 70,000 shares of Foundry stock at artificially inflated prices as high as $89 per share, for proceeds of more than $6.2 million. Cheng also filed to sell an additional 50,000 shares on November 29, 2000, just three weeks before Foundry disclosed the devastating news.

(e) Defendant H. Earl Ferguson ("Ferguson") was, during the Class Period, Vice President-Hardware Engineering of the Company. During the Class Period, while in possession of confidential Foundry data, Ferguson sold 100,000 shares of Foundry stock at artificially inflated prices as high as $89 per share, for proceeds of more than $8.1 million. Ferguson also distributed 25,000 shares of Foundry stock while the stock price was inflated thereby benefitting from the inflation.

(f) Defendant Timothy D. Heffner ("Heffner") was, during the Class Period, Vice President-Finance and Administration and Chief Financial Officer of the Company.

12. The parties listed in ¶11 (a)-(f) are referred to as the "Individual Defendants." They are liable for the false statements pleaded herein at ¶126 and 36, as those statements were each "group-published" information for which they were collectively responsible. The Individual Defendants, by reason of their stock ownership and positions with Foundry, were controlling persons of Foundry. Foundry controlled each of the Individual Defendants. These controlling persons are liable under §20(a) of the 1934 Act. SCIENTER AND SCHEME ALLEGATIONS

13. The Individual Defendants are Foundry's top executives. They ran Foundry as "hands-on" managers, dealing with important issues facing Foundry's business, i.e., its customer base, the ISPs (some of whom were having difficulty surviving), Foundry's market share position, and its ability to achieve growth in its business during fiscal 2000 in light of the dramatic adverse developments which had been affecting Foundry's core customers' ISPs since the spring of 2000.

14. Foundry was founded in 1996 and went public in 1999. The Initial Public Offering was a hot offering and the stock price went up dramatically in connection with the markets' appetite for Internet-related companies. In mid-April 2000, the Nasdaq suffered a significant decline. Foundry's stock recovered by June 2000 as it successfully convinced the market that its business was strong and revenues and earnings would continue to grow rapidly.

15. By September 2000, the problems the ISPs were having raising money had reached crisis proportions. In late September 2000, one large customer, Exodus Communications, suffered a large stock decline and was going further into debt. Other Foundry customers were also having trouble raising money. The defendants knew, from their frequent conversations with customers and other Foundry employees, that many of these customers were cutting capital expenditures which would cause Foundry's future revenues to decline.

16. Thus, at the time Foundry reported its third quarter 2000 results, it faced increasingly bleak short-term and long-term prospects. Nevertheless, defendants wanted to sell more of their shares before the truth began to be revealed about Foundry's true prospects. Thus, defendants disseminated false information about Foundry's business and prospects, concealing the fact that, even in October 2000, customers were cutting back on capital expenditures which would hurt future results.

17. Each of the defendants was personally familiar with Foundry's fourth quarter 2000 revenues as they monitored Foundry's sales, closely monitoring the performance of Foundry's operations via reports from Foundry's Finance Department which were generated and provided to management on a regular basis. The reports summarized orders, dollar volume and product type. As a result of the Individual Defendants' monitoring, each defendant was aware that Foundry would be unable to meet its projected results, as its ISP business was slowing and its customers were unable to continue the capital expenditure programs at the levels previously conveyed to defendants in light of the dramatic adverse developments of 2000. However, because the "appearance" of future growth was so critical to defendants' plan to inflate the price of Foundry shares, defendants continued to maintain throughout the Class Period that Foundry would post 2000 revenue and EPS of at least $400 million and $.80, respectively, when, in reality, defendants knew that Foundry could not possibly achieve such results. 18. Foundry made a concerted effort to control the flow of information disseminated to the market. When one analyst out of 18 that covered the Company issued a hold on the Company's stock due to concerns as to Foundry's position in relation to its competitors (, Juniper and ), this analyst was cut off. On December 20, 2000, after the bad news was disclosed, Bloomberg reported:

For most of this year, Gina Sockolow was the only analyst of the 18 who follow Foundry Networks Inc. to discourage investors from buying shares of the network-equipment maker. Foundry executives didn't make her research any easier, she said.

"Foundry has tried to cut me off from clients and they haven't let me ask questions on the conference calls," the Brean Murray & Co. analyst said from seat 6A on a flight to Vail, Colorado, for a three-day skiing vacation. "They've been very unprofessional."

19. In addition to having actual knowledge of the falsity of their statements, each of the defendants had the motive and the opportunity to perpetrate the fraudulent scheme and course of business described herein, in order to sell $113 million worth of their own Foundry shares at prices as high as $89 per share, or 580% higher than the price to which Foundry shares dropped at the end of the Class Period, as Foundry's true prospects began to reach the market.

BACKGROUND TO CLASS PERIOD

20. Foundry designs, develops, manufactures and markets an end-to-end suite of high performance networking products for enterprises, educational institutions, government agencies, web-hosting companies, Application Service Providers, electronic banking and finance service providers, and ISPs.

21. On July 18, 2000, Foundry reported strong second quarter 2000 results and made the following statements:

"We are excited to post the sixth quarter of sequentially increasing profitability for Foundry," commented Bobby Johnson, Chairman, CEO and President of Foundry Networks. "We witnessed strong demand across all of our product lines, especially in our new Internet backbone routing products, which we believe is indicative of Foundry's growing reputation as a leader in the high-performance network infrastructure market. As a result of our dedicated team of engineers, we were able to ship the Netlron family of Internet Core Routing products ahead of schedule. We remain focused on leveraging our core technology into opportunities that will strategically position Foundry at the forefront of both Internet and enterprise networking infrastructure."

"The combination of high re-order rates among current customers and rapid deployments by new customers yielded rapid top-line growth," stated Tim Heffner, Chief Financial Officer of Foundry Networks. "Gross margins for the second quarter were a very healthy 65.7% compared to 64.5% in the first quarter, driven by a favorable mix of higher margin products. In spite of our increasing investments in sales and marketing and research and development, we still experienced an improved bottom line. Overall, our financial performance this quarter was exceptionally strong."

22. By July 2000, however, defendants recognized that demand for Foundry products had substantially weakened. During July, Foundry conducted its three-day, semi-annual National Sales Conference, which was attended by upper management, including Johnson and Shackleton, sales and engineering personnel and marketing and research and development employees. During the conference, Johnson and Shackleton both admitted that Foundry was experiencing slowing sales trends and softening demand. This softening of demand was due to funding difficulties, particularly with ISPs, and to an excess of available used equipment, as companies were seeking to reduce their debt load. These concerns were further confirmed, as Foundry's internal actual-to-plan July 2000 reports revealed that Foundry was failing to make its internal July plan for the first time and was suffering a 30% miss for that month. On or about July 20, 2000, moreover, Johnson circulated a Company-wide e-mail that recognized and discussed the poor month-to-date sales results and the decline in Foundry's stock price, which implored employees not to overreact to bad news and instructed employees not to sell stock. Johnson again circulated a memorandum discussing the slowing ISP sales in late September 2000. In November 2000, Foundry held another National Sales Conference, during which the participants further discussed the impact of Foundry's smaller customers' inability to obtain funding and the resulting weakening demand for Foundry's products. These allegations represent information obtained from a Foundry Systems Engineer who attended the National Sales Conferences referenced above and received the e-mail referenced above and whose employment responsibilities include providing sales and technical support to the sales department.

23. Due to continued deterioration in the financial condition of many of Foundry's customers during the late summer and early fall of 2000, by July 2000 at the latest, defendants knew that re-order rates would not continue to be strong and future results would be adversely affected.

FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD

24. On or about September 6, 2000, Foundry executives met with Mark Sue, a financial analyst for Lehman Brothers, Inc. Foundry represented that its business fundamentals remained solid, that strong demand for the modular switching and Layer 4-7 products were driving positive business trends and that Foundry had enjoyed strong sales in July and better than expected sales in August. This information was published and circulated in a September 6, 2000 Lehman Brothers analyst report.

25. On September 7, 2000, Foundry conducted a conference call during which Heffner and Iburg, Foundry's CFO and Treasurer, denied that demand during the quarter was soft or that profit margins were under pressure due to price discounting due to softening demand. Heffner and Iburg further represented that Foundry's business was on track and that Foundry was being presented with more business opportunities than ever before. 26. On October 17, 2000, after the close of the market, Foundry announced record revenue and net income for the third quarter 2000, stating:

The Company generated record net revenue of $113.2 million for the third quarter, compared to $88.8 million in the second quarter of 2000 and $38.9 million in the third quarter of 1999, increases of 28% and 191%, respectively. Net income for the third quarter, excluding non-cash charges for amortization of deferred stock compensation, was $28.5 million or $0.22 per diluted share, compared with $23.5 million or $0.19 per share in the second quarter of 2000, an increase of 21 %.

***

"Foundry continues to grow rapidly as deployment of our end-to-end IP infrastructure solutions accelerates," commented Bobby Johnson, President and CEO of Foundry Networks. "We are delighted to gain increased traction with our NetIron product family in the Internet market while aggressively ramping shipments of our high port density Layer 3 Gigabit Ethernet switches. Particularly encouraging during the quarter was the fact that an increasing percentage of customers began accepting and deploying all three product lines in their networks. As a result, we ended the quarter with over 60 Internet router customers. We are also pleased with the success rate of our expanding global sales force in penetrating new accounts while continuing to serve repeat customers. Foundry remains firmly committed to rapid growth and high profitability, and this quarter was no exception."

"Overwhelming demand for our high-end Internet routers and Layer 3 Gigabit Ethernet switches led the way to record revenues this quarter," stated Tim Heffner, Chief Financial Officer of Foundry Networks. "Several elements contributed to Foundry's record breaking third quarter. For example, we maintained industry-leading gross margins of greater than 65% and added nearly 100 new employees."

27. On October 17, 2000, defendants Johnson and Heffner conducted a nationwide conference call for Foundry shareholders and securities analysts. During the conference call and in follow-up one-on-one conversations, defendants made representations which they intended to be reported to the market: o The strong results were due to strong demand and the only limitation on growth was how fast the Company grew its sales and distribution force. o Foundry was strengthening its research and development function which would make it more competitive. o Ethernet-related sales would be a rapidly growing portion of Foundry's business. o Foundry was on track to report EPS of $.81 and $1.06 in 2000 and 2001, respectively.

28. As a result of these statements, analysts covering Foundry issued a series of analyst reports over the following days: (a) On October 17, 2000, Epoch Partners issued a report on Foundry forecasting 2000 and 2001 EPS of $.81 and $1.17, respectively, and stating:

Foundry's balance sheet is showing signs of maturity, however days sales outstanding (DSOs) reached 63, up from 54 in Q2, 51 in Q1, and 47 in Q4 of last year. Management accredited this to increased international sales. While we see no reason for concern this quarter, a continued increase in future quarters' DSOs may suggest problems in the channel.

Business Highlights

Internet-router customers are growing steadily, with significant customer wins in Telecom Italia, Savvis, and GlobalCenter. Service providers accounted for 65% of sales. The challenge in coming weeks will be determining which deployments are actually in core networks (and thus displace Cisco and Juniper's potential business). Internet routers (the Netlron product line) experienced 100% sequential growth - a function of the law of small numbers, as internet routers accounted for less than $11 million in sales this quarter. We continue to believe that Ethernet will become an important transport platform in Metro Area Networks (MANs) and even Wide Area Networks (WANs), riding the benefits of the cost curve driven by commoditization in the enterprise market. Foundry management indicates that this opportunity, while still insignificant in terms of gross revenue, is growing at a rapid pace. We will be keenly interested in competitors' (particularly Extreme's) exploitation of this emerging opportunity.

(b) On October 18, 2000, Deutsche Banc Alex. Brown issued a report on Foundry which forecasted 2000 and 2001 EPS of $.81 and $1.15, respectively, and stated in part: We are increasing our 2000 revenue estimate from $367.6 million to $400 million and our EPS estimate from $0.77 to $0.81. We are increasing our 2001 revenue estimate from $559 million to $670 million and our EPS estimate from $0.98 to $1.15. We reiterate our STRONG BUY rating on the company's shares.

***

Internet router revenue, as a percentage of the total, doubled to comprise 9%-10% of overall revenue and was significantly ahead of management's initial guidance of 5% to 7% revenue. We believe that this percentage could exceed 15% of total revenue by the end of 2001 and we are encouraged by the very strong growth reported during 3Q. Similarly, Layer 3 Gigabit Ethernet Backbone ports grew 54% sequentially reflecting continued strong demand during the quarter. Foundry had the leading market share in this market based on number of ports shipped. In addition, management is seeing an increasing percentage of new and existing customers install all three of the company's product lines in their networks. We believe that this further validates Foundry's strategy as an end to end provider and should continue to pay dividends going forward.

(c) On October 18, 2000, Lehman Brothers issued a report on Foundry which forecast 2000 and 2001 EPS of $0.80 and $1.12, respectively, and stated in part: * With accelerating revenues and increased penetration of routing devices Foundry handily beat our high end estimate of $100. 8M. Gross margins also remain healthy at 65.1 %. As we move into a seasonally strong networking quarter we are raising our revenue & earnings estimates. CYOO moves from $372.5M and $0.76 to $402.3M and $0.80; CY01 moves from $591.OM and $1.02 to $679.6M and $1.12. We continue to view these estimates to be conservative.

***

Foundry reported solid revenues of $113.2 million, +27.5% QoQ, beating our high end estimate of $100.8 million. The impressive growth was driven primarily by strong demand for the company's modular switching products and Internet routers. During the quarter, sales of Layer 3 Gigabit Ethernet backbone ports grew 54% sequentially showing healthy signs of improvement. More significant was the strong performance by the company's Internet router platform. Having only entered the market earlier this year with the introduction of the Netlron line in March 2000, the company has already seen very positive customer acceptance. During the quarter, revenues from the company's Internet routers have grown from only 5% of sales in 2Q00 to nearly 10% of total sales coming in ahead of our target of 7%. We note that Foundry now has over 60 paying Netlron customers (up from 20 at the end of June). With software additions such as IS-IS and MPLS along with high-speed interfaces such as OC-192c being added in 4Q00/1QO1, the company should remain well situated to grow its share of this strategic market. Management has set its sights on obtaining 10% of this strategic market by year end 2001. Over time, we look for boundaries to blur between multi-gigabit Ethernet devices and routing platforms which bode well for vendors such as Foundry.

The company continues to see strong repeat business from existing customers such as AOL, AT&T, Cable & Wireless, PSINet, Qwest, and Verio. In addition, Foundry has announced a number of significant customer wins over the last few months including Earthlink, Yahoo!, and Korea Thrunet. We note Foundry added 411 new accounts (89 Service Providers and 322 enterprises) in 3Q00, expanding their customer base to approximately 2700. The company ended the quarter with a strong book-to-bill above 1.0, providing further visibility into 4Q00 and into the new year.

(d) On October 18, 2000, SG Cowen Securities issued a report on Foundry forecasting 2000 and 2001 EPS of $.80 and $1.13, respectively, and stating in part: Strong New Product Cycle in Q4 and beyond:

New products, listed below should continue to drive revenue momentum and help gross margins remain in the mid-sixty level, described below. o Revenue to be recognized in Q4 on the following products: chassis-based Serverlron 400 and 800, targeted at the higher-end content hosters; and an ATM interface for the NetIron, where it previously only shipped with packet over SONET capabilities. o Products to ship in Q4: Fastlron III, higher density/better cost performance 10/100 switch; the Netlron 1500 and Biglron 15000. o Product introductions expected in Q1: ServerIron 4802 with new high-performance ASICs, and MPLS functionality for the Netlron. o Product enhancements expected in 1 HO 1: 10 gigabit Ethernet for both the full rate version and the 0C192-compatible version.

Forecast and Outlook:

Q4 and F2000: For Q4, we are increasing our revenue estimate from $111MM to $130MM (+15 Q/Q and +135% Y/Y) and our pro forma EPS estimate from $0.21 to $0.24. The EPS is based on gross margins of 64.8%, operating margins of 35.8% and a tax rate of 38%. For the year, total revenue is expected to be $402MM (+201% Y/Y) and EPS of $0.80 (+186% Y/Y).

F2001: We project revenue growth of 108% to reach $677MM (our previous estimate as $565MM, a 20% increase). We are modeling gross margin to remain near 64% during the year and operating margins to decline to approximately 33% from 38%. The decline is based on continued investment in product development and its sales force. While a decline, its operating margins still remain above that of many of its peers. This results in a 22% net margin for the year and a pro forma EPS estimate of $1.13 per share.

29. On or about November 1, 2000, Foundry management spoke with analysts regarding Foundry's business and prospects with the intention that the statements would be repeated to the market. Analysts issued reports over the next few days.

30. On November 1, 2000, ABN AMRO issued a report by Kenneth Leon which stated in part:

Our EPS estimates for calendar 2000 and 2001 are $.80 and $1.14 per share. These estimates are slightly above the First Call consensus of $0.79 and $1.09. Our 2002 estimate is $1.56. For long term earnings growth, we are forecasting 35%-50% CAGR. We estimate revenue growth to be 70% in 2000-01 driven by strong sales in Layer 4-7 switches, Layer 3 core switches and the high-end router market. We forecast Foundry sales of $404 million in 2000, $686 million in 2001, and $950 million in 2002. We estimate revenue by geographic region to be 70% from the US in 2001 and 60% by 2002.

***

Tight labor market could dampen sales expansion and technological advances. With a strong emphasis on direct sales, Foundry needs to recruit more sales and sales support personnel along with R&D in the right areas. Hiring personnel in is challenging to say the least. Component shortages and contract manufacturing may effect [sic] order flow and revenue recognition. Foundry subcontracts all of its manufacturing. Compared to Cisco Systems, Foundry does not have the same market muscle to get top priority from outside contract component suppliers and manufacturers.

31. On November 1, 2000, SG Cowen Securities issued a report by Christin Armacost which stated in part: Yesterday, we visited the management of three companies in our universe - Riverstone (Cabletron), Foundry and Juniper - to discuss general business and industry trends. Based on our discussions throughout the day, it appears that demand across the industry remains strong, with network buildouts continuing to take place among service providers.

***

The company's goal in the market is to reach a 10% share on a unit basis by 2001. The company plans to penetrate this $4-$6B market with a price performance comparable to a LAN switch, which would be about one-third of today's price points.

Pricing of 10/100 and Gigabit Ethernet ports remains stable. Foundry's exposure to 10/100 pricing is low, given that 75% of the switches that Foundry sells are chassis- based, which are usually populated with Gigabit Ethernet ports or higher. And even with its stackable switch sales (25%), a portion of those are for Layer 4-7 server load balancing switches, which are not experiencing any pricing pressures. We believe that foundry's position remains favorable, given the stable pricing situation and the company's focus on higher-speed interfaces.

32. On November 2, 2000, Lehman Brothers issued a report by Mark Sue which stated in part: In light of recent concerns surrounding funding difficulties and challenging business plans of many emerging service providers, we thought it would be appropriate to address Foundry's exposure particularly given that 65% of its revenues come from Internet service providers. We highlight that Foundry continues to see strong demand trends from healthy service providers such as AOL, Mindspring, and Cable & Wireless. We further note that Foundry has declined business with Tier 3 customers who requested vendor financing. Although the company does provide some vendor financing through a third party, Heller Financing, the amount is not material (3-7%) and not likely to trend higher despite continued funding challenges experienced by some weaker service providers.

***

As Foundry continues to ramp its sales & marketing efforts, improve international initiatives, and introduce new products, we believe the broadening market for IP devices are likely to provide positive opportunities for the company. We reiterate our 1 Buy rating and our price target of $120 or 22 times our CYO1 revenue estimate of $680 million. We continue to view these estimates as conservative. 33. Thus, while Foundry management specifically addressed the issue of customer financing, the only risks to sales growth communicated to the analysts were labor and component shortages, and the public continued to be unaware of the severe negative impact the problems ISPs were having raising capital would have on Foundry's business. Foundry also stated any vendor financing it provided was not material.

34. On November 13 , 2000, The Wall Street Transcript ("TWST") published an interview with Johnson. Johnson made his statements with the intention they would be repeated to the market. The report stated in part:

We are very focused on growing in all three of our market sectors: Internet routers, LAN switches, and Layer 4 through 7 Web switches. The unknown for us is how much of the Internet router market can we capture. We sell higher performing Internet routers at approximately one-half the price of the competition, and we now have 67 Internet router customers. So there is some potential upside as we go after more and more of the Internet router infrastructure.

***

TWST: What are the major concerns or risks facing the company?

Mr. Johnson: Obviously, every business contains risks, but we continue to see good overall demand. Our biggest challenge is to continually stay in front of our competitors and continue to meet the demand.

***

TWST: What specific achievements would lead you to characterize the next two to three years as successful for Foundry?

Mr. Johnson: We certainly would like to pass $1 billion in revenues. We'd like to gain double-digit percentages of the Internet router market while still keeping high percentages in our other two markets. We plan to continually increase quarterly profits each and every quarter like we've done for the last seven quarters.

TWST: How do you feel about your current stock price?

Mr. Johnson: Right now, I think the stock market doesn't know quite how to value all the different market sectors. By historical standards, almost all of the networking companies are trading above traditional valuations, but some sectors have larger market opportunities and some players are getting lower multiples even though they have greater revenues and greater profitability. So there's an imbalance in valuation. In general, the companies that are playing in larger markets and that have larger revenues and greater profitability should have higher valuations than the companies that are in smaller markets. That's not always the case. So we're not unhappy with our stock price but I believe, when the marketfully values markets as well as companies, our stock price could go even higher.

35. On November 14, 2000, the day after The Wall Street Transcript article was published, Foundry's stock increased from $66.75 to $74.

36. On November 14, 2000, Foundry filed its Form 10-Q for the quarter ended September 30, 2000. The 10-Q included new risk disclosures not included in Foundry's prior 10-Q:

Our revenue may be adversely affected by a reduction in outside financing made available to many of our customers.

Our customer base includes emerging enterprise, telecommunications and Internet companies who rely on venture capital firms and other similar financing sources to fund their operations and growth. Many of these customers are finding it increasingly difficult to obtain such financing on attractive terms, if at all. If these companies are unable to raise adequate capital, they may significantly reduce or even cease their purchases of our products or may be unable to pay or delay payment for products they had previously purchased. Such reductions in spending or payment defaults could have a material adverse effect on our operating results, which could cause our stock price to decline. Some of our revenue may be derived through vendor financing programs which may be difficult to administer and may expose us to increased credit risks.

Our existing and potential customers may increasingly demand vendor financing programs through which they can finance their purchase of networking equipment. We currently have one such program in place, but only on a limited basis. Several of our large competitors, in contrast, currently offer vendor financing programs on a broad basis. In the future, we may also offer them on a broad basis in order to meet increased demand and remain competitive. Although vendor financing programs can increase customer opportunities, they can also be difficult and costly to administer and may be utilized by customers who carry heightened credit risk. If we are unable to effectively administer vendor financing programs on a broad basis, or if we incur material losses due to customer defaults under the programs, our business could be harmed which could cause our stock price to decline.

37. Thus, only after the insiders had unloaded almost 1.39 million shares did Foundry disclose the enormous risk to its revenues caused by newer ISP companies' financing problems. Even then, Foundry continued to conceal that its revenues were slowing as customers could not raise money to purchase Foundry's products. Moreover, per Johnson's Wall Street Transcript interview, investors were still under the false impression that Foundry was seeing good overall demand. As a result, Foundry's stock continued to trade at artificially inflated levels. Chen took advantage of this inflation, selling 40,000 shares on November 30, 2000 for $1.475 million. Defendant Cheng also filed to sell an additional 50,000 shares of his Foundry stock on November 29, 2000, although no record of the actual sale has yet been filed. 38. On December 19, 2000, Foundry revealed that, contrary to prior assurances by defendants of Foundry's continuing "strong" revenue and EPS growth, including defendant Johnson's assurances just five weeks earlier that demand remained strong, Foundry would post revenue and EPS declines, stating:

Based on current sales information reflecting reduced capital expenditures by Internet Service Providers and E-commerce Sites, the Company anticipates fourth quarter net revenue of $100 million to $110 million. Gross margins remain strong and are expected to be in the 62-64% range. Pretax operating profits are expected to be in the $20 million to $26 million range. Earnings per share for the fourth quarter, excluding non-cash charges for amortization of deferred stock compensation, are expected to be in the range $0.11 to $0.14 per diluted share, subject to final audit.

"These latest projections, modified from earlier higher projections, reflect a shift over the last few weeks in the pattern of communications infrastructure capital spending," said Bobby Johnson, Chief Executive Officer. "However, despite recent challenges in the industry, we think Foundry is very well positioned to build upon the price/performance benefits of our end-to-end IP infrastructure solutions. Foundry maintains industry-leading gross margins, which we believe will remain solid as the Company continually introduces innovative new products."

39. Analysts were extremely surprised by this news, immediately reducing their 2000 and 2001 earnings estimates and ratings on Foundry:

Firm Rating 2000 EPS 2001 EPS

Merrill Lynch to Neutral from $ . 78 to $ . 69 from $1.15 to $.83

Brean Murray to Hold from $.77 to $. 68 under review

Needham raised to from $.77 to $.67 from $1.22 to $.94 Strong Buy First Security to Buy under review under review

SG Cowen to Neutral from $.80 to $.68 from $1.13 to $.66

J.P. Morgan recommends "caution" from $.81 to $.70 no change

Deutsche Banc to Buy to $.69 from $1.15 to $.70

40. Merrill Lynch wrote on December 20, 2000: o Foundry Networks disclosed it expects December quarter results to be below expectations. Revenues are now expected to be between $100 - $110 million, below our forecast of $128 million. Gross margins are now expected to be in the 62% - 64% range, which would be down from 65.1% in 3Q00 and below our 65.0% estimate. *** o At the mid-point of the new range, revenues would be down about 7% from 3Q00. Management blamed the shortfall on capital spending issues primarily at the emerging Internet Service Providers . Business at the top-tier companies (such as AOL) appears to be on track, at least for now. Foundry generates about 65% of its revenues from Service Providers, with the balance coming from the Enterprise segment. o We believe that the capex issues impacted Foundry's entire product line, from Internet Core Routers to Layer 2/3 switches to Layer 4/7 traffic management solutions . Foundry's pre-announcement represents the first acknowledgment that capital spending issues are also impacting suppliers of next generation switching solutions. o We also believe that Foundry is seeing increased competitive pressures from several new products recently introduced by Cisco. o There is much uncertainty on Foundry's near-term outlook, but we don't expect trends with the emerging providers, or the competitive environment, to change any time soon. As a result, we are reducing our 2001 EPS estimate from $1.15 to $0.83, based on a revised revenue estimate of $550 million.

41. First Security Van Kasper wrote on December 20, 2000: o Potential market share erosion in Layer 2/3 and Layer 4/7. Since we initiated coverage in January 2000, Foundry has let its Layer 2/3 and Layer 4/7 peers match price performance and minimize Foundry's early lead. Since Foundry has yet to prove itself in the Internet router market, it is facing mediocrity. o Modest initial success in penetrating router market. We believe Foundry continues to have some initial success in the router market, gaining 60 customers in its first two quarters, but the company has slightly delayed key upgrades such as OC192 and MPLS. Foundry has also seen only modest recurring revenue.

42. This disclosure shocked the market, causing Foundry's stock to decline to less than $12-1/8 per share before closing at $13 per share on record volume of more than 29 million shares, inflicting millions of dollars of damage on plaintiffs and the Class. Defendants' misconduct has wiped out over $2 billion in market capitalization as Foundry stock has fallen 86% from its Class Period high of over $90 per share as the truth about Foundry, its operations and prospects began to reach the market.

43. Each of the statements made by defendants between September 6, 2000 and December 19, 2000 were false or misleading when issued. The true facts, which were known to defendants, were: (a) By July 2000, defendants recognized that demand for Foundry products had substantially weakened. During July 2000, Foundry had conducted its three-day, semi- annual National Sales Conference, which was attended by upper management, including Johnson and Shackleton, sales and engineering personnel and marketing and research and development employees. During the conference, Johnson and Shackleton both admitted that Foundry was experiencing slowing sales trends and softening demand. This softening of demand was due to funding difficulties, particularly with ISPs, and to an excess of available used equipment, as companies were seeking to reduce their debt load;

(b) Foundry's internal actual-to-plan July 2000 reports revealed that Foundry was failing to make its internal July plan for the first time and was suffering a 30% miss for that month;

(c) On or about July 20, 2000, Johnson circulated a Company-wide e-mail that recognized and discussed the poor month-to-date sales results for July and the decline in Foundry's stock price, which implored employees not to overreact to bad news and instructed employees not to sell stock;

(d) In November 2000, Foundry held another National Sales Conference, during which the participants further discussed the impact of Foundry's smaller customers' inability to obtain funding and the resulting weakening demand for Foundry's products;

(e) Foundry's sales to ISPs had begun slowing dramatically due to problems these companies were having raising capital;

(f) Foundry's newer ISPs were demanding increasing vendor financing to fund purchases and Foundry's reticence to provide such financing was causing Foundry competitive problems;

(g) Foundry, in order to show positive current earnings, was underspending on research and development, such that by the time of the Class Period, Foundry's products were not competitive, as many competitors, including Cisco, Juniper and Extreme Networks, had multi-protocol label switching ("MPLS") which Foundry did not have which was causing Foundry to suffer competitively;

(h) Demand for Foundry's products was not nearly as healthy as represented due to the inability of much of Foundry's customer base to pay for products;

(i) Labor shortages and component shortages were not the biggest risk to sales, but rather, it was declining demand due to Foundry's competitors developing superior products and having superior sales force; and

(j) As a result of (a)-(i) above, it was impossible for defendants to achieve 2000 and 2001 EPS of $.77-$.81 and $1.13-$1.22, respectively.

DEFENDANTS' INSIDER TRADING 44. During the Class Period, defendants sold the following amount of their Foundry stock despite adverse information about Foundry's business which they knew had not been disclosed to the public:

Insider Date Shares Price $ Value

Lee Chen 11/03/00 60,000 $89.00 $5,340,000 11/08/00 60,000 81.78 4,906,872 11/14/00 60,000 74.06 4,443,750 11/30/00 40,000 36.88 1,475,000 220,000 $16,165,622

Ken K. Cheng 11/03/00 50,000 89.00 4,450,000 11/07/00 20,000 88.81 1,776,250 70,000 $6,226,250

H. Earl Ferguson 10/27/00 20,000 75.19 1,503,750 11/01/00 20,000 75.94 1,518,750 11/02/00 30,000 83.63 2,508,750 11/03/00 15,000 89.00 1,335,000 11/07/00 15,000 88.81 1,332,188 100,000 $8,198,438

Bobby R. Johnson 10/20/00 323,000 84.94 27,434,813 10/23/00 160,000 85.88 13,740,000 10/24/00 41,000 79.00 3,239,000 10/26/00 92,500 73.38 6,787,188 10/27/00 100,000 75.19 7,518,750 11/06/00 133,500 84.69 11,305,781 850,000 $70,025,532

Robert W. 10/20/00 150,000 84.94 12,740,625 Shackleton 150,000 $12,740,625

TOTAL: 1,390,000 $113,356,467

45. Despite large insider sales prior to the Class Period, the Individual Defendants' insider sales during the Class Period were highly suspicious given their proximity to the date of the bad news and the fact that they occurred after the stock had dropped and while defendants were making positive statements.

46. At the time of Foundry's IPO in September 1999, the officers of the Company had entered into a lock-up agreement which prevented them from selling their shares for a period of 180 days from the offering. However, in February 2000, Foundry was able to have its lead underwriter, Deutsche Banc Alex. Brown, release 5.1 million shares early making them freely tradeable. Thus, defendants began in February to unload large amounts of their stock. Defendants sold large amounts of stock during the following months. However, during the Class Period these Foundry executives continued to sell large amounts of their Foundry stock, and even though Johnson had told The Wall Street Transcript that "when the market fully values markets as well as companies, our stock price could go even higher." Moreover, defendants' sales were as large as they could be without adversely affecting Foundry's stock price:

(a) Johnson and Shackleton sold 473,000 shares on October 20, 2000 or 6.5% of all the shares traded on a more active day than usual for Foundry stock.

(b) Johnson sold 160,000 shares on October 23, 2000, or 5% of all the shares traded that day.

(c) Johnson and Ferguson sold 3% of Foundry's total volume on October 27, 2000.

47. Johnson's sales of 850,000 shares during the Class Period approached one of the potential limitations of Rule 144 which is one percent of Foundry's outstanding shares of 117.7 million shares. In all practicality, if he had sold more shares it would have had an adverse effect of the Company's stock price.

CLASS ACTION ALLEGATIONS

48. This is a class action on behalf of purchasers of Foundry common stock between September 6, 2000 and December 19, 2000, excluding defendants (the "Class"). Excluded from the Class are officers and directors of the Company, as well as their families and the families of the defendants. Class members are so numerous that joinder of them is impracticable.

49. Common questions of law and fact predominate and include whether defendants: (i) violated the 1934 Act; (ii) omitted and/or misrepresented material facts; (iii) knew or recklessly disregarded that their statements were false; and (iv) artificially inflated Foundry's stock price and the extent of and appropriate measure of damages.

50. Plaintiffs' claims are typical of those of the Class. Prosecution of individual actions would create a risk of inconsistent adjudications. Plaintiffs will adequately protect the interests of the Class. A class action is superior to other available methods for the fair and efficient adjudication of this controversy.

CLAIM FOR RELIEF

51. Defendants violated § 10(b) and Rule 1 Ob-5 by:

(a) Employing devices, schemes and artifices to defraud;

(b) Making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and

(c) Engaging in acts, practices and a course of business that operated as a fraud or deceit upon the Class in connection with their purchases of Foundry stock. 52. Class members were damaged as they paid artificially inflated prices for Foundry common stock in reliance on the integrity of the market.

PRAYER

WHEREFORE, plaintiffs, on behalf of themselves and the Class, pray for judgment as follows:

A. Declaring this action to be a class action properly maintained pursuant to Rule 23 of the Federal Rules of Civil Procedure;

B. Awarding plaintiffs and other members of the Class damages together with interest thereon;

C. Awarding plaintiffs and other members of the Class costs and expenses of this litigation, including reasonable attorneys' fees, accountants' fees and experts' fees and other costs and disbursements; and

D. Awarding plaintiffs and other members of the Class such equitable/injunctive or other and further relief as may be just and proper under the circumstances.

JURY DEMAND

Plaintiffs demand a trial by jury.

DATED: May 21, 2001 MILBERG WEISS BERSHAD HYNES & LERACH LLP PATRICK J. COUGHLIN RANDI D. BANDMAN JOHN K. GRANT

PATRICK J. COUGHLIN

100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax)

MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)

BERNSTEIN LIEBHARD & LIFSHITZ, LLP SANDY A. LIEBHARD 10 East 40th Street New York, NY 10016 Telephone : 212/779-1414 212/779-3218 (fax)

Co-Lead Counsel for Plaintiffs

DECLARATION OF SERVICE BY DELIVERY

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Francisco, over the age of 18 years, and not a party to or interest in the within action; that declarant's business address is 100 Pine Street, Suite 2600, San Francisco, California 24111.

2. That on May 21, 2001 , declarant served by, next day delivery, the CONSOLIDATED AMENDED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at: http://securities.milberg.com.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 21st day of May, 2001, at San Francisco, California.

DEBORAH R. DASH

1. Unless otherwise noted, all share and per-share amounts reflect a 2-for-1 stock split in January 2000.