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F5 Completes Restructuring, Announces First Quarter Results

In line with its December 27 announcement, F5 Networks, Inc. (NASDAQ: FFIV) today reported revenue of $24.7 million for the first quarter of fiscal 2001, ended December 31, 2000. The company also reported a loss of $10.3 million ($0.47 per share) before tax benefits and a one-time restructuring charge of $1.1 million related to headcount reductions and other measures aimed at streamlining the company's operations. Including the restructuring charge and tax benefits, the net loss for the quarter was $8.9 million ($0.41 per share).

Robert Chamberlain, senior vice president and chief financial officer, said that all of the actions related to the company's restructuring charge reflected in the December quarter were completed in January. As a result of those actions, which included a 17 percent reduction in the company's workforce, Chamberlain said the company expects to reduce its operating expenses by $7 million to $8 million over the remainder of the current fiscal year. In addition, he said the company is pursuing other means to reduce its expense structure and improve its operational efficiency.

John McAdam, president and chief executive officer, emphasized that reducing the company's cost structure is just one element of management's plans to reposition the company and enable it to compete successfully in a slower-growing economy.

"It's painfully obvious to everyone, including our customers and partners, that the business climate today is very different from what it was a year or even six months ago," McAdam said. "At that time, F5's biggest challenge was to acquire the people and resources necessary to stay ahead of demand for our products and services.

"In the December quarter, the sudden economic downturn and the resulting drop-off in revenue forced us to re-examine our entire business model and address issues that had arisen. Our just-completed restructuring-both the reduction in headcount and the subsequent realignment of groups and priorities within the remaining organization-resolved many of those issues. In addition, we are taking a number of other steps to adapt our business model to the realities of the current economic environment and position the company to catch the first wave of economic recovery.

"During the next six months our product initiatives will be aimed at improving the functionality of our current offerings and delivering complementary products that will enable us to sell into a broader segment of the market. We are also turning up our investments in product integration that will allow us to enhance functionality across our entire suite of traffic and content management products.

"Despite the slowdown in our sales growth, the company's relative market position remains strong and we continue to win significant business against our larger competitors. With several product upgrades scheduled to roll out over the next two quarters, we believe we can continue to widen our competitive edge and further strengthen our market position. As we shift the focus of our sales and marketing efforts to large enterprise customers, we also believe the superior functionality and reliability of our products will become an even more important differentiator against our competition.

"With that in mind, I'm confident the company is well-positioned to succeed in the current market and show steady improvement throughout the remainder of this year. Our target is to break even in Q3 of the current fiscal year and return to solid profitability in Q4. For the current quarter, our goal is revenue in the range of $26 million to $28 million with a loss before taxes and any one-time charges of $0.22.

About F5 Networks

F5 Networks is the leader in Internet Traffic and Content Management (iTCM). Our award winning integrated suite of high-performance best of breed products provides an end-to-end solution for automatically and intelligently managing Internet content and traffic - globally. Our products remove bandwidth congestion and optimize the availability and speed of mission-critical Internet servers and applications, including web publishing, content delivery, e-commerce, caching, firewalls and more. F5 Networks helps companies avoid the risk of being burdened with ill-performing networks that do not meet end user expectations, while enabling network administrators to better control and predict the performance of their e-Business infrastructure. Our products are widely deployed in large enterprises, the top service providers, financial institutions, government agencies, healthcare, and portals throughout the world. The company is headquartered in Seattle, Washington, and has offices throughout North America, Europe and Asia Pacific. F5 Networks is located on the web at www.f5.com.

Forward Looking Statements

Statements in this press release concerning future reductions in operating expenses, increasing operating efficiency, repositioning the company, improving product functionality, delivering complementary products, winning business against larger competitors, selling to large enterprise customers and other statements which are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may 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, among others: the company's limited operating history; variability of the company's operating results; market acceptance of the company's Internet traffic operating results; market acceptance of the company's Internet Traffic and Content Management products; the company's timely development of new products and features; the company's ability to manage its growth; the company's ability to maintain and develop distribution relationships; competition in the Internet traffic and content market; the company's ability to expand in the international markets; unpredictability of the company's sales cycle and other risk factors referenced in the company's public filings with the Securities and Exchange Commission (SEC). In particular, see the section entitled "Risk Factors" in the company's annual report on Form 10-K filed with the SEC on December 13, 2000.

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This press release may contain forward looking statements relating to future events or future financial performance that involve risks and uncertainties. Such statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or comparable terms. These statements are only predictions and actual results could differ materially from those anticipated in these statements based upon a number of factors including those identified in the company's filings with the SEC.

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