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F5 Networks Reports Financial Results in Line with Company Targets

F5 Networks, Inc. (NASDAQ: FFIV) today announced fiscal third quarter results in line with targets set by the company in April. Revenue of $29.0 million for the quarter ended June 30, 2001, was comparable to $29.2 million in the third quarter of last year and up 7.1 percent from $27.1 million in the prior quarter. A net loss of $982 thousand ($0.04 per share) before taxes represented a significant improvement from a pro forma loss of $4.1 million ($0.19 per share) in the second quarter of this year.

F5 president and chief executive officer John McAdam said he was pleased that the company was able to achieve its financial goals in what continues to be an extremely challenging business environment. "Despite pervasive economic weakness, our focus on enterprise customers continued to pay off in a large number of major account wins during the quarter," McAdam said. "In the U.S. alone, new account wins included AT&T Wireless, Metro One and Dow Chemical. We also saw significant quarter-to-quarter growth in OEM revenue from Dell." Even so, McAdam cautioned that the U.S. market remains relatively lackluster and said he did not foresee any significant improvement during the current quarter.

By contrast, McAdam said prospects appear to be improving for the company's international business, which represented 33 percent of total revenue during the quarter. Sales were especially strong in Japan, and elsewhere in Asia-Pacific new enterprise wins spanned a wide range of businesses, including financial institutions, Internet service and content providers, three large Asian newspapers, and one of China's largest broadcasting networks. During the next several quarters, McAdam said he expects further strengthening of the company's business in international markets and in Europe in particular as the company's recently announced partnership with Nokia begins to ramp up.

Regarding the Nokia opportunity, McAdam said the company's agreement with the Finnish telecommunications giant will benefit the company on several levels. "In addition to broadening F5's market presence in Europe, our OEM relationship will dramatically expand the company's sales channels worldwide. Our technology partnership with a world leader in wireless communications will enable us to develop leading-edge products for the wireless Internet. And Nokia's $36.7 million investment in F5, which has more than doubled our cash position, will ensure that we have adequate resources to fund our near-term growth."

Apart from the positive impact of the Nokia investment, McAdam said he was pleased with the overall improvement in the company's cash position during the quarter. "Aggressive collections and a significant reduction in inventory helped us generate $1.7 million in cash from operations. Although we plan to use cash this quarter as we build inventory for the launch of our new BIG-IP products, we believe we can generate cash on an ongoing basis in subsequent quarters."

Commenting on the long-term outlook, McAdam said he was confident that several factors-including the continued growth of OEM business, a series of new product introductions beginning in September, and the growing appeal of the company's integrated product strategy (iControl)-will drive solid growth in fiscal 2002. In the near term, he said, financial results for the current quarter will probably be similar to those for the quarter just ended. "According to the latest Dell'Oro survey, we continue to gain market share ahead of other Layer 4/7 vendors and at the expense of our larger competitors. Without the likelihood of any improvement in the U.S. economy, however, there's little prospect of a significant upturn in our business during the remainder of this fiscal year. That said, our current organizational structure and business model have been tested against a weakening economy for the past two quarters, and I'm confident we can achieve the financial targets we have set."

Steve Coburn, senior vice president and chief financial officer, said the discrepancy between reported net income and management's guidance for the third quarter was the result of an adjustment to the company's year-to-date effective tax rate, which reduced the tax benefit for the quarter by approximately $0.04 per share.

For the company's fourth quarter, ending September 30, Coburn said he expects the company to report revenue in the range of $28 million to $30 million, and a net loss ranging from $0.03 to $0.06 per share.

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 strengthening the company's business in international markets, expansion of sales channels, the ramp of the partnership with Nokia, developing products for the wireless Internet, funding near-term growth, generating cash in subsequent quarters, gaining market share ahead of other layer 4/7 vendors, achieving financial targets 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: F5's ability to compete effectively in the internet traffic and content management market; the introduction and acceptance 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 manage its growth, F5's ability to expand in the enterprise market and 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, 2000, 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.