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Press Release

F5 Networks Announces Results of Fiscal Fourth Quarter and Year 2002

F5 Networks, Inc. (NASDAQ: FFIV) today announced pro forma breakeven results (net income of $80,000 or $0.00 per share) on revenue of $27.1 million for the fourth quarter of fiscal 2002, ended September 30. Including a restructuring charge related to a previously announced headcount reduction at the beginning of July, the company reported a net loss of $423,000 ($0.02 per share). In the fourth quarter of fiscal 2001, the company reported a pro forma loss of $2.5 million ($0.10 per share) and a net loss of $11.5 million ($0.46 per share) on revenue of $26.6 million.

For fiscal 2002, the company reported a pro forma loss of $5.1 million ($0.20 per share) and a net loss of $8.6 million ($0.34 share) on revenue of $108.3 million, compared to a pro forma loss of $13.9 million ($0.62 per share diluted) and a net loss of $30.8 million ($1.36 per share) on revenue of $107.4 million in fiscal 2001.

"In a year when many technology companies experienced declining revenues and deteriorating fundamentals, F5's ability to hold revenues flat, gain market share, and continuously improve our operating model reflects the strength of our product offerings, the success of our partnership strategy and the caliber of our people," said John McAdam, F5 president and chief executive officer.

Following the introduction of the BIG-IP® 5000 Application Switch a little over a year ago, McAdam said F5's share of the Layer 4/7 fixed switch market grew from zero to 15 percent in the quarter ended June 30, according to the latest Dell'Oro survey. During the same period, the company's share of the Layer 4/7 fixed switch and appliance market grew from 16 percent to just over 27 percent, primarily at the expense of larger competitors. In September, Infonetics Research reported that F5 increased its revenue share of the market for Layer 4/7 devices with SSL (Secure Socket Layer) encryption to 79 percent during the first half of calendar 2002. "These gains have clearly strengthened the F5 and BIG-IP brands and positioned the company for significant growth as the rollout of IP-enabled enterprise applications gains momentum and drives demand for secure traffic management solutions," McAdam said.

While quarterly revenues were essentially flat throughout the year, the company's efforts to control expenses and increase operating efficiency resulted in sequential improvements on its income statement and balance sheet. Over the past four quarters, F5's gross margin increased more than 10 percentage points, from 66.0 percent in the fourth quarter of 2001 to 76.3 percent in the quarter just ended, while operating expenses remained essentially flat. Within the same period, days sales outstanding (DSO) fell from 77 days to 70 days in the first quarter of 2002 and has been in the high 60s ever since. For the past six quarters, the company has had positive cash flow from operations, contributing to an increase in cash, equivalents and investments from $69.8 million in the fourth quarter a year ago to $80.3 million in the fourth quarter of 2002.

Alongside its successful effort to manage expenses, McAdam said the company continued to invest in new technology throughout fiscal 2002. "Early in the year, we expanded our application switch family and our share of the Layer 4/7 switch market with the introduction of the BIG-IP 2000. In March, we introduced BIG-IP Link Controller, which enables customers with more than one link to the Internet to monitor and control traffic for optimal performance and guaranteed availability. In May, we announced the delivery of BIG-IP Blade Controller, our unique software-only product designed to manage IP (Internet Protocol) traffic within a blade server chassis. And just last week, we announced several new products, including an enhanced and expanded line of application switches and a new version of the BIG-IP software with groundbreaking features and capabilities.

"With the introduction of these new products, we continued to differentiate F5 from our competitors. Our application switch products are currently the only devices on the market that offer advanced Layer 7 functionality with integrated, ASIC-based Layer 2 - 4 switching and SSL acceleration. In addition, the latest release of our BIG-IP software includes features-such as the Universal Inspection Engine (UIE), which can identify any value in a TCP/IP header or payload, and iRules, which can direct, persist, or filter traffic based on values identified by UIE-that take Layer 7 traffic management to a new level. As we move ahead into fiscal 2003, we will continue to pursue an ambitious technology roadmap that we believe will extend our differentiation and enable us to continue expanding our market share.

"That said, we face a number of challenges in the coming year, not the least of which is lingering economic uncertainty with little promise of a near-term improvement in capital spending. However, our core business remains strong, and I am confident that we can meet those challenges. I am also confident that we can continue to expand both our market share and our market presence by leveraging our technology in emerging markets for blade servers, Web services and wireless communications.

"As a result, I believe we can maintain quarterly revenue in a range between $26 million and $27.5 million and achieve bottom-line results at or slightly below breakeven for the quarter ending December 31, 2002," McAdam said.

About F5 Networks

F5 Networks is the Industry leader in Application Traffic Management, enabling enterprises and service providers to optimize any mission-critical application or web service, providing secure and predictable delivery of application traffic in an unpredictable environment. Through F5's unique open iControl® API, third party applications and network devices can take an active role in shaping network traffic, delivering application aware networks that allow customers to direct traffic based on their exact business requirements. Our solutions optimize the availability, security and speed of mission-critical servers and applications, including enterprise applications, web services, mobile IP applications, web publishing, content delivery, e-commerce, caching, firewalls and more. F5's 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, Japan and Asia Pacific. F5 Networks is located on the web at

Forward Looking Statements

Statements in this press release concerning positioning the company for significant growth, the rollout of IP-enabled enterprise applications, demand for secure traffic management solutions, pursuit of an ambitious technology roadmap, extending our differentiation, meeting the challenges in the coming year, expanding our market share and market presence, leveraging our technology in emerging markets for blade servers, Web services and wireless communication, the revenue and bottom line results for the quarter ending December 31, 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: the acceptance of the new BIG-IP® application switch products and the company's iControl® architecture; competitive pricing pressures; increased sales discounts; the timely development and introduction of additional new products and features by F5 or its competitors or other factors; F5's ability to sustain or develop distribution relationships; 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.