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F5 Networks Announces Change in Content Management Strategy, Pro Forma Third Quarter Results In Line with Management Guidance

F5 Networks, Inc. (NASDAQ: FFIV), a leading provider of Internet traffic and content management solutions, today announced plans to revamp its content management strategy. The focus of the company's new content strategy will be on leveraging its iControlTM architecture to interface with cache products from leading vendors via F5's traffic management products. As part of the new strategy, the company plans to discontinue manufacturing its EDGE-FX® cache appliance, which accounts for less than 3% of the company's revenue. The company will continue to provide full service and support for existing EDGE-FX customers. However, in lieu of manufacturing its own cache product, the company plans to partner with other manufacturers of cache appliances to deliver fully integrated traffic and content management solutions across the network.

F5 president and chief executive officer John McAdam said the company's decision was spurred by increasing commoditization of cache appliances and by growing market acceptance of iControl, which allows Internet-enabled applications to monitor and control network functions without human intervention. "During the past two years, enterprise customers have increasingly come to view cache appliances as commodity products. Over the same period our efforts to add value and deliver a differentiated content management solution have increasingly centered on the ability of our products to communicate with one another and with enterprise applications by means of iControl. By expanding that capability through partnerships with multiple makers of cache products, we believe we can create a broader market for iControl and our traffic management products, generating a better return on our investment in the caching market and reducing our operating costs."

In conjunction with its decision to exit the cache appliance business, the company announced that it will write down certain assets and reduce its current headcount by 9 percent. In addition, the company will consolidate its operations and write down other assets related to the consolidation. These actions are expected to result in a combined one-time charge of approximately $4.0 million. It is anticipated that $3.5 million of these costs will be recorded in the third quarter, with the remaining $0.5 million related to employee separation costs in the fourth quarter ending September 30.

For the fiscal third quarter, ended June 30, the company expects pro forma results, excluding non-recurring items, of $27.3 million in revenue and a loss of $0.05 to $0.06 per share. This compares to management's guidance of $26 million to $28 million in revenue and a loss of $0.06 to $0.08 per share provided in the company's April 24th press release and conference call. Including the non-recurring items for the current quarter, the company expects results of $27.1 million in revenue and a loss of $0.17 to $0.18 per share. Non-recurring items include a charge against revenue related to anticipated product returns resulting from discontinuation of the cache appliance business.

McAdam said he believes the change in strategy and the reduction in operating expenses will accelerate F5's return to profitability. "Before deciding to restructure our content business, we estimated that we could achieve breakeven results in a quarterly revenue range of $30 million to $33 million, depending on the percentage of software revenue in our sales mix. As a result of the restructuring, we believe we can break even with quarterly revenue in a range of $28 million to $28.5 million."

McAdam said management will discuss results of the quarter in detail and provide revenue and earnings guidance for the company's fiscal fourth quarter, ending September 30, at its regularly scheduled conference call on July 24.

Today at 1:30 p.m. Pacific Time the company will hold a conference call to discuss its content management strategy, including the operational and financial implications of exiting the cache appliance business. A replay of the call will be available from 3:30 p.m. Pacific Time today until noon Pacific Time on Friday, July 12. Following is the information for the call and replay:

Live Dial In Info:

US/Canada # = 888-736-5896
International # = 706-634-0855

Call Leader = John McAdam
Conference ID = 4832222

Replay Dial In Info:

US/Canada # = 800-642-1687
International # = 706-645-9291

Conference ID = 4832222

About F5 Networks

F5 Networks is the leader in Internet Traffic and Content Management (iTCM), and delivers application aware networks through its open Internet Control Architecture. F5 features the industry's leading set of integrated products and services that manage, control and optimize Internet traffic and content. Our solutions automatically and intelligently deliver the best possible Internet performance, availability and content distribution for service providers, enterprises and e-businesses. 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. Our solutions 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

Forward Looking Statements

Statements in this press release concerning F5's new content strategy focusing on leveraging its iControl architecture, plans to partner with other manufacturers of cache appliances, growing market acceptance of iControl, creating a broader market for iControl and F5's traffic management products by partnering with multiple makers of cache products, F5's expected reduction in operating expenses related to exiting the cache appliance business and a reduction in headcount, achieving profitability sooner than expected, break even with quarterly revenues of $28.0 million to $28.5 million and F5's expected revenue and loss per share for the third quarter of fiscal 2002 and other statements that 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, competitive pricing pressures, increased sales discounts, the introduction of new products by F5 or its competitors or other factors; F5's ability to sustain or develop distribution relationships; F5's ability to timely develop new products and features; F5's ability to attract, train and retain qualified marketing and sales and professional services and customer support personnel; F5's ability to expand in the international markets and the unpredictability of F5's sales cycle. More information about potential risk factors that could affect F5's business and financial results is included in the company's annual report on Form 10K for the fiscal year ended September 30, 2001, and other public filings with the Securities and Exchange Commission.

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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.