UPDATE 1-Foundry, Brocade revise merger terms

(Adds background on deal, share prices)

SAN FRANCISCO, Oct 29 (Reuters) - Foundry Networks Inc FDRY.O has agreed to be bought for $400 million less than the $3 billion Brocade Communications Systems Inc (BRCD.O) initially offered for the data equipment maker, the two Silicon Valley companies said on Wednesday.

Under the revised terms, Foundry shareholders will now get $16.50 per share in cash, which amounts to a $2.6 billion price tag, the companies said in a statement.

Brocade had initially agreed to pay $18.50 in cash plus 0.0907 Brocade share for each Foundry share, valuing the company at $19.25 per share.

Brocade had said it would raise $1.5 billion in debt to finance the acquisition, paying the rest with cash and equity.

Since then, Foundry shares have fallen nearly 30 percent, closing Wednesday's session at $13 on the Nasdaq.

Brocade shares too have lost nearly half their value since the deal was announced and closed Wednesday at $3.53.

Earlier this month, Brocade announced a $1.1 billion term loan funding for its proposed acquisition and said it expects the deal to close by the fourth quarter of this year.

Foundry also has adjourned its special shareholders meeting until Nov 7 so that the two companies have time to finalize the new merger plan, according to the joint statement.

Foundry shareholders were supposed to meet on Wednesday to vote on Brocade's proposed acquisition of the Santa Clara, California-based company.

Brocade, a San Jose-based maker of network switches, announced plans to buy Foundry in July, seeking to bulk up its product line and compete better with larger rival Cisco Systems Inc (CSCO.O). (Reporting by Anupreeta Das; editing by Carol Bishopric)