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F5 Networks Announces Second Quarter 2002 Results

F5 Networks, Inc. (NASDAQ: FFIV), In line with preliminary results announced on April 5, F5 Networks today reported a net loss of $1.8 million ($0.07 per share) on revenue of $27.1 million for the second quarter of fiscal 2002, ended March 31, up slightly from a net loss of $2.1 million ($0.08 per share) on revenue of $27.0 million from the prior quarter, ended December 31, 2001. In the second quarter of fiscal 2001, the company reported a pro forma1 loss-excluding taxes and one-time charges-of $4.1 million ($0.19 per share) and a reported net loss of $8.7 million ($0.40 per share) on revenue of $27.1 million.

"As we indicated in our April 5 release and conference call, constrained capital spending by enterprise customers and lower than expected OEM revenue from Nokia prevented us from achieving the revenue growth we targeted for the quarter," said John McAdam, F5 president and chief executive officer. "On a regional basis, the slight strengthening we saw in North America during the prior quarter didn't carry over into the second quarter, resulting in lower sales. And despite relatively strong sales in Japan, results from the rest of Asia-Pacific reflected the continued softening we had anticipated at the outset of the quarter.

"On a positive note, our recent investments in Europe resulted in stronger sales there, and we hope to see continued improvement in our European business over the next several quarters," McAdam said. "In addition, we continued to see strong demand for our recently-introduced application switches, which accounted for nearly 47 percent of total systems revenue during the quarter. We also scored another significant win for our blade server initiative with the announcement of our agreement with Fujitsu-Siemens Computers as the traffic management software of choice for their blade server offerings. As a result of this relationship and our previously announced relationships with Compaq and Hewlett Packard, we believe F5 is well-positioned to benefit from this emerging market."

Along with the success of F5's new products, McAdam said he was pleased with the continued operational improvements reflected on the company's income statement and balance sheet. During the quarter, the company's gross margin increased sequentially from 68 percent to 71 percent. Balance sheet improvements included a further reduction in days sales outstanding (DSOs) to 69 days and $1.9 million in positive cash flow from operations, which helped increase the company's cash and short-term investment balances to $75.5 million at March 31, 2002. "The company's strong financial position and operational efficiency are noteworthy achievements, particularly during this difficult economic cycle," McAdam said. "At the same time, they represent a solid foundation for growth when the economy turns."

In view of the company's lower expectations for software licensing revenue and the likelihood that a thaw in capital spending could be slower and farther out than originally anticipated, McAdam said that management's original targets for fiscal 2002 revenue and earnings were no longer achievable. For the third quarter, ending in June, he said he expects results to be essentially flat with the second quarter, with revenue in the range of $26 million to $28 million and a net loss of $0.06 to $0.08 per share.

1 A reconciliation of reported net loss to pro forma net loss is provided in the accompanying income statement.

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 www.f5.com.

Forward Looking Statements

Statements in this press release concerning improvement in F5's European business, positioning to benefit from the emerging blade server market, foundation for growth when the economy turns, expectations for software licensing revenue, a thaw in capital spending 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: acceptance of the Company's BIG-IP application switch and iControl architecture, success of its blade server initiative, 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 and marketing relationships and its ability to attract, train and retain qualified marketing, sales, professional services, customer support and development 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.

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