F5 Networks Announces Results for Third Quarter of Fiscal 2008

22nd Consecutive Quarter of Sequential Revenue Growth; VIPRION
Helps Spur Growth of ADC Product Revenue
SEATTLE--(Business Wire)--
For the third quarter of fiscal 2008, F5 Networks, Inc. (NASDAQ:
FFIV) announced revenue of $165.6 million, up 4 percent from $159.1
million in the prior quarter and 25 percent from $132.4 million in the
third quarter of fiscal 2007.

GAAP net income was $19.1 million ($0.23 per diluted share),
compared to $17.7 million ($0.21 per diluted share) in the prior
quarter and $21.8 million ($0.26 per diluted share) in the third
quarter a year ago.

Excluding the impact of stock-based compensation net of tax,
non-GAAP net income was $30.2 million ($0.37 per diluted share),
compared to $28.9 million ($0.35 per diluted share) in the prior
quarter and $30.3 million ($0.36 per diluted share) in the third
quarter of fiscal 2007.

A reconciliation of GAAP net income to non-GAAP net income is
included on the attached Consolidated Statements of Operations.

"During the third quarter, we saw continued strengthening in our
core application delivery controller (ADC) business," said John
McAdam, F5 president and chief executive officer.

"As we anticipated, our chassis-based VIPRION controller was a key
driver of product revenue growth. Sales of VIPRION were especially
robust among large Internet content and service providers, and we
continue to see strong demand heading into the close of fiscal 2008.
With VIPRION contributing to strong sales at the high end of our
product line, we believe our new entry-level ADC products, announced
today, will have a positive impact on our low-end sales. BIG-IP 1600
and BIG-IP 3600 represent the first phase of a complete platform
refresh that will roll out during fiscal 2009, delivering higher
performance and more functionality across our ADC product line."

Along with solid revenue and earnings growth, balance sheet
highlights for the third quarter included a 13 percent increase in
deferred revenue to $139 million and $56 million in cash flow from
operations. After repurchasing another $50 million of the company's
outstanding common stock, F5 ended the quarter with $447 million in
cash and investments.

Despite continuing uncertainty in the macroeconomic environment,
McAdam said he is encouraged by the company's solid third quarter
results and the prospect of further improvement driven by new
products. For the current quarter, management has set a revenue goal
of $172 million to $174 million with a GAAP earnings target of $0.19
to $0.20 per diluted share. Management's GAAP earnings target includes
a charge of $5.3 million related to a loss on facility exit and
sublease ($3.3 million net of tax). Excluding this charge and
stock-based compensation expense, the company's non-GAAP earnings
target is $0.38 to $0.39 per diluted share. A reconciliation of the
company's expected GAAP and non-GAAP earnings is provided in the
following table:

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*T
Three months ended
September 30, 2008

Reconciliation of Expected Non- Low High
GAAP Fourth Quarter Earnings
----------------------------------------------------------------------

Net income $ 15.5 $ 16.3
Stock-based compensation expense,
net of tax 11.9 11.9
Loss on facility exit and
sublease, net of tax 3.3 3.3
---------------- -----------------
Pro forma net income $ 30.7 $ 31.5
================ =================

Net income per share - diluted $ 0.19 $ 0.20
================ =================
Pro forma net income per share -
diluted $ 0.38 $ 0.39
================ =================
*T

About F5 Networks

F5 Networks is the global leader in Application Delivery
Networking. F5 provides solutions that make applications secure, fast
and available for everyone. By adding intelligence and manageability
into the network to offload applications and optimize the data storage
layer, F5 extends the power of intelligent networking to all levels of
application delivery. F5's extensible architecture intelligently
integrates application optimization, protects the application and the
network, and delivers application reliability. Over 16,000
organizations and service providers worldwide trust F5 to keep their
applications running. The company is headquartered in Seattle,
Washington with offices worldwide. For more information, go to
www.f5.com.

Forward Looking Statements

Statements in this press release concerning the continuing
strength of F5's business, sequential growth, the target revenue and
earnings range, share amount and share price assumptions, demand for
application delivery networking and storage virtualization products
and other statements that are not historical facts are forward-looking
statements. Such forward-looking statements involve risks and
uncertainties, as well as assumptions and other factors that, if they
do not fully materialize or prove correct, could cause the actual
results, performance or achievements of the company, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited
to: customer acceptance of our new traffic management, security,
application delivery, WAN optimization and storage virtualization
offerings; the timely development, introduction and acceptance of
additional new products and features by F5 or its competitors;
competitive pricing pressures; increased sales discounts; F5's ability
to sustain, develop and effectively utilize distribution
relationships; F5's ability to attract, train and retain qualified
product development, marketing, sales, professional services and
customer support personnel; F5's ability to expand in international
markets; the unpredictability of F5's sales cycle; the share
repurchase program; future prices of F5's common stock; and other
risks and uncertainties described more fully in our documents filed
with or furnished to the Securities and Exchange Commission. All
forward-looking statements in this press release are based on
information available as of the date hereof and qualified in their
entirety by this cautionary statement. F5 assumes no obligation to
revise or update these forward-looking statements.

GAAP to non-GAAP Reconciliation

F5's management evaluates and makes operating decisions using
various operating measures. These measures are generally based on the
revenues of its products, services operations and certain costs of
those operations, such as cost of revenues, research and development,
sales and marketing and general and administrative expenses. One such
measure is net income excluding stock-based compensation, which is a
non-GAAP financial measure under Section 101 of Regulation G under the
Securities Exchange Act of 1934, as amended. This measure consists of
GAAP net income excluding, as applicable, stock-based compensation.
Net income excluding stock-based compensation (non-GAAP) is adjusted
by the amount of additional taxes or tax benefit that the company
would accrue if it used non-GAAP results instead of GAAP results to
calculate the company's tax liability. Stock-based compensation is a
non-cash expense that F5 has accounted for since July 1, 2005 in
accordance with the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123(R), "Share-Based Payment."

Management believes that net income excluding stock-based
compensation (non-GAAP) provides useful supplemental information to
management and investors regarding the performance of the company's
business operations and facilitates comparisons to the company's
historical operating results. Although F5's management finds this
non-GAAP measure to be useful in evaluating the performance of the
business, management's reliance on this measure is limited because
items excluded from such measures could have a material effect on F5's
earnings and earnings per share calculated in accordance with GAAP.
Therefore, F5's management will use its non-GAAP earnings and earnings
per share measures, in conjunction with GAAP earnings and earnings per
share measures, to address these limitations when evaluating the
performance of the company's business. Investors should consider these
non-GAAP measures in addition to, and not as a substitute for,
financial performance measures in accordance with GAAP.

The reconciliation of the company's expected GAAP and non-GAAP
fourth quarter earnings also excludes a loss on facility exit and
sublease from net income (non-GAAP). This loss will be incurred during
the quarter ending September 30, 2008 in connection with the closure
of the company's office in Bellevue, Washington and the subleasing of
a portion of the office space in the 333 Elliott West building in
Seattle, Washington.

F5 believes that presenting its non-GAAP measure of earnings and
earnings per share provides investors with an additional tool for
evaluating the performance of the company's business, which management
uses in its own evaluation of the company's performance. Investors are
encouraged to look at GAAP results as the best measure of financial
performance. For example, stock-based compensation is an obligation of
the Company that should be considered and each line item is important
to financial performance generally. However, while the GAAP results
are more complete, the company provides investors this supplemental
measure since, with reconciliation to GAAP, it may provide additional
insight into its operational performance and financial results.

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*T
F5 Networks, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

June 30, September 30,
2008 2007
------------- -------------

Assets
Current assets
Cash and cash equivalents $ 109,184 $ 54,296
Short-term investments 158,112 204,169
Accounts receivable, net of allowances of
$4,455 and $3,161 98,064 91,774
Inventories 9,662 10,672
Deferred tax assets 5,591 5,305
Other current assets 27,446 20,434
------------- -------------
Total current assets 408,059 386,650
------------- -------------

Restricted cash, long-term 2,774 3,959
Property and equipment, net 47,632 36,024
Long-term investments 179,592 216,366
Deferred tax assets 38,909 38,036
Goodwill 231,892 233,997
Other assets, net 25,615 29,256
------------- -------------
Total assets $ 934,473 $ 944,288
============= =============

Liabilities and Shareholders' Equity

Current liabilities
Accounts payable $ 13,159 $ 25,525
Accrued liabilities 37,393 39,990
Deferred revenue 118,693 87,895
------------- -------------
Total current liabilities 169,245 153,410
------------- -------------

Other long-term liabilities 12,461 7,679
Deferred revenue, long-term 20,273 12,622
------------- -------------
Total long-term liabilities 32,734 20,301
------------- -------------

Commitments and contingencies

Shareholders' equity
Preferred stock, no par value; 10,000
shares authorized, no shares outstanding - -
Common stock, no par value; 200,000
shares authorized 80,232 and 84,379
shares issued and outstanding 510,676 598,436

Accumulated other comprehensive loss (5,517) (564)
Retained earnings 227,335 172,705
------------- -------------
Total shareholders' equity 732,494 770,577
------------- -------------
Total liabilities and shareholders'
equity $ 934,473 $ 944,288
============= =============
*T

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*T
F5 Networks, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
------------------- -------------------

Net revenues
Products $114,786 $ 97,751 $337,139 $285,939
Services 50,799 34,674 141,771 94,121
--------- --------- --------- ---------
Total 165,585 132,425 478,910 380,060
--------- --------- --------- ---------

Cost of net revenues (1)
Products 26,158 20,770 75,816 60,411
Services 12,020 8,867 34,289 24,565
--------- --------- --------- ---------
Total 38,178 29,637 110,105 84,976
--------- --------- --------- ---------
Gross Profit 127,407 102,788 368,805 295,084

Operating expenses (1)
Sales and marketing 60,483 45,158 176,714 127,390
Research and development 26,277 17,476 77,027 49,101
General and administrative 13,459 12,375 41,369 38,060
--------- --------- --------- ---------
Total 100,219 75,009 295,110 214,551
--------- --------- --------- ---------

Income from operations 27,188 27,779 73,695 80,533
Other income, net 3,716 7,175 15,437 20,836
--------- --------- --------- ---------
Income before income taxes 30,904 34,954 89,132 101,369
Provision for income taxes 11,770 13,145 34,502 37,251
--------- --------- --------- ---------
Net Income $ 19,134 $ 21,809 $ 54,630 $ 64,118
========= ========= ========= =========

Net income per share - basic $ 0.24 $ 0.26 $ 0.66 $ 0.77
Weighted average shares - basic 81,096 83,614 83,218 82,834
========= ========= ========= =========

Net income per share - diluted $ 0.23 $ 0.26 $ 0.65 $ 0.76
Weighted average shares -
diluted 81,951 85,310 84,308 84,832
========= ========= ========= =========

Non-GAAP Financial Measures

Net income as reported $ 19,134 $ 21,809 $ 54,630 $ 64,118
Stock-based compensation
expense, net of tax (2) 11,037 8,481 33,310 24,689
--------- --------- --------- ---------
Net income excluding stock-
based compensation $ 30,171 $ 30,290 $ 87,940 $ 88,807

Net income per share excluding
stock-based compensation (non-
GAAP) - diluted $ 0.37 $ 0.36 $ 1.04 $ 1.05
========= ========= ========= =========

Weighted average shares -
diluted 81,951 85,310 84,308 84,832
========= ========= ========= =========

(1) Includes stock-based
compensation as follows:
Cost of net revenues $ 1,065 $ 622 $ 3,170 $ 1,815
Sales and marketing 5,846 4,040 18,438 11,877
Research and
development 4,116 2,562 12,220 7,541
General and
administrative 3,790 3,349 11,992 9,774
Tax effect of stock
based compensation (3,780) (2,092) (12,510) (6,318)
--------- --------- --------- ---------
11,037 8,481 33,310 24,689
========= ========= ========= =========

(2) Stock-based compensation is accounted for in accordance with
Financial Accounting Standards Board Statement No. 123(R), "Share-
Based Payments" using the attribution method for recognizing
compensation expense.

GAAP to non-GAAP Reconciliation
---------------------------------------------------------------

F5's management evaluates and makes operating decisions using various
operating measures. These measures are generally based on the
revenues of its products, services operations and certain costs of
those operations, such as costs of revenues, research and
development, sales and marketing and general and administrative
expenses. One such measure is net income excluding stock-based
compensation, which is a non-GAAP financial measure under Section 101
of Regulation G under the Securities and Exchange Act of 1934, as
amended. This measure consists of GAAP net income excluding, as
applicable, stock-based compensation. Net income excluding stock-
based compensation (non-GAAP) is adjusted by the amount of additional
taxes or tax benefit that the company would accrue if it used non-
GAAP results instead of GAAP results to calculate the company's tax
liability. Stock-based compensation is a non-cash expense that F5 has
accounted for since July 1, 2005 in accordance with the fair value
recognition provisions of Statement of Financial Accounting Standards
No. 123(R), "Share-Based Payment."

Management believes that net income excluding stock-based compensation
(non-GAAP) provides useful supplemental information to management and
investors regarding the performance of the company's business
operations and facilitates comparisons to the company's historical
operating results. Although F5's management finds this non-GAAP
measure to be useful in evaluating the performance of the business,
management's reliance on this measure is limited, because items
excluded from such measures could have a material effect on F5's
earnings and earnings per share calculated in accordance with GAAP.
Therefore, F5's management will use its non-GAAP earnings and
earnings per share measures, in conjunction with GAAP earnings and
earnings per share measures, to address these limitations, when
evaluating the performance of the company's business. Investors
should consider these non-GAAP measures in addition to, and not as a
substitute for, financial performance measures in accordance with
GAAP.

F5 believes that presenting its non-GAAP measure of earnings and
earnings per share provides investors with an additional tool for
evaluating the performance of the company's business, which
management uses in its own evaluation of the company's performance.
Investors are encouraged to look at GAAP results as the best measure
of financial performance. For example, stock-based compensation is an
obligation of the company that should be considered and each line
item is important to financial performance generally. However, while
the GAAP results are more complete, the company provides investors
this supplemental measure since, with reconciliation to GAAP, it may
provide additional insight into its operational performance and
financial results.
*T

F5 Networks, Inc.
Investor Relations
John Eldridge, 206-272-6571
j.eldridge@f5.com
or
Public Relations
Alane Moran, 206-272-6850
a.moran@f5.com

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