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F5 Networks Announces Third Quarter 2002 Results

F5 Networks, Inc. (NASDAQ: FFIV), In line with preliminary results announced on July 8, F5 Networks today reported a pro forma net loss of $1.3 million ($0.05 per share)1 on pro forma revenue of $27.3 million for the third quarter of fiscal 2002, ended June 30, up slightly from a net loss of $1.8 million ($0.07 per share) on revenue of $27.1 million from the prior quarter, ended March 31. In the third quarter of fiscal 2001, the company reported a net loss of $1.6 million ($0.07 per share) on revenue of $29.0 million. On a GAAP basis, including non-recurring items related to the discontinuation of its EDGE-FXTM cache business and the consolidation of its operations announced on July 8, the company reported revenue of $27.1 million and a net loss of $4.3 million ($0.17 per share) for the third quarter of 2002.

F5 president and chief executive officer John McAdam said the company's modest revenue growth reflected strong sales in North America and continued improvement in the company's European business, offset by weakness in Japan. "Domestic sales were the strongest we've seen in six quarters and represented nearly 72 percent of total sales," McAdam said. "In addition, our recent investments in Europe continued to return solid growth. As we warned in our second quarter conference call, our Japanese business was down sequentially and sales there were below our original expectations. Despite that, the improvement in Europe and strengthening in the U.S. market put us slightly above the middle of our target revenue range."

"Along with the pickup in Europe and North America, we saw a slight increase in software sales through our OEM partners Dell and Nokia, which accounted for 6 percent of sales during the quarter. We also began shipping our blade server software, BIG-IP Blade Controller, near the end of the quarter. However, we don't anticipate significant sales of this product until the beginning of fiscal 2003."

"Operationally, our continuing efforts to fine-tune our business model resulted in further sequential improvements across the company's financial statements. On a pro forma basis, gross margin increased to 73.4 percent during the quarter, while operating expenses grew less than 2 percent. A further reduction in days sales outstanding (DSO) to 67 days contributed to $2.8 million in cash flow from operations, which in turn helped increase cash and investments to $78.9 million. As a result of these improvements, combined with the headcount reduction and other cost-cutting measures we announced earlier this month, I believe the company is well-positioned to achieve sustained profitability on relatively modest revenue growth."

For the fourth quarter of fiscal 2002, ending September 30, McAdam said he anticipates flat revenue from the company's continuing operations. Following F5's exit from the content management business, the company's fourth quarter revenue target is $26.0 million to $27.5 million with a pro forma net loss of $0.01 to $0.03 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 Management (ITM) 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 and availability 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 revenues and loss for the fourth quarter of fiscal 2002 ending September 30, 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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