58141_13_Cover 1/18/00 2:14 PM Page 1
C
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CM MY CY CMY K
S
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W
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2 0 0 1 s t A v e n u e W e s t # 5 0 0
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Composite
58141_13_Cover 1/18/00 2:14 PM Page 2
C
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CM MY CY CMY K
1 9 9 9 F I N A N C I A L H I G H L I G H T
C O R P O R AT E A N D S H A R E H O L D E R I N F O R M AT I O N
C USTOMER G ROWT H
750
479
339
217
145
91
Quarter
Ended
6/98
9/98
12/98
3/99
6/99
9/99
R EVEN UE
$13.8M
$7.6 M
$3.8 M
$2.7 M
$1.9 M
$.8 M
$1 M
$1.1 M
D I R E C T O R S
Jeffrey S. Hussey
Chairman of the Board
F5 Networks, Inc .
Carlton G. Amdahl
Technology Consultant
Keith Grinstein
Vice–Chairman
Nextel International, Inc .
Karl D. Guelich
Certified Public Accountant
Alan J. Higginson
Consultant
Quarter
Ended
FYE 9/30
12/97
3/98
6/98
9/98
12/98
3/99
6/99
9/99
N O T I C E O F A N N U A L M E E T I N G
Our annual shareholders meeting
will be held:
February 17, 2000, 9:00AM
The Sheraton Hotel & Towers
1400 6th Avenue
Seattle, Washington
S ELECTED F INA NCIAL D ATA
Net revenues
Loss from operations
Net loss
1999
1999
1998
1998
1997
1997
$ 27,825
$ 4,889
$
229
(4,878)
(3,668)
(1,428)
(4,344)
(3,672)
(1,456)
Net loss per share – basic and diluted
( 0.42)
( 0.60)
( 0.24)
Weighted average shares – basic and diluted
10,238
6,086
6,000
Cash and cash equivalents
$ 24,797
6,206
Total employees at year end
187
80
143
20
Composite
O F F I C E R S
Jeffrey S. Hussey
President and Chief Executive Officer
Robert J. Chamberlain
Vice President of Finance - Chief Financial
Officer and Treasurer
Steven Goldman
Senior Vice President Sales,
Marketing & Services
Brett L. Helsel
Vice President of Product Development
Chief Technology Officer
C O R P O R AT E H E A D Q U A R T E R S
F5 Networks
200 – 1st Avenue West,
Seattle, WA. 98119
(206) 505-0800
N A S D A Q L I S T I N G
NASDAQ Symbol – FFIV
I N V E S T O R R E L AT I O N S
Michael Newman
Street Connect
(206) 320-1231
I N D E P E N D E N T A U D I T O R S
PricewaterhouseCoopers LLP
Seattle, Washington
L E G A L C O U N S E L
Heller Ehrman White & McAuliffe
Seattle, Washington
T R A N S F E R A G E N T A N D R E G I S TA R
American Stock Transfer
40 Wall Street
New, York, NY 10005
(212) 936-5100
58141_12_Inside 1/18/00 2:11 PM Page 1
C
M
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CM MY CY CMY K
F 5 N E T W O R K S M I L E S T O N E S
T O O U R S H A R E H O L D E R S
S e p t . 9 9
7 5 0 +
C u s t o m e r s
S e p t . 9 9
1 8 0 +
E m p l o y e e s
S e p t . 9 9
1 s t P r o f i t a b l e
Q u a r t e r
J u n . 9 9
I P O
$ 4 M i l l i o n
D o l l a r M o n t h
Dear Shareholders:
This has been a remarkable year for F5. During the past fiscal year we completed two successful public offerings,
raising over $56,000,000. We increased our net revenue by 469% over the prior year and reported a profit in
the fourth quarter. We also tripled the size of our staff to 187 employees, developed a strong presence in key
international markets, particularly Europe and Asia Pacific, and introduced two major new products into the
marketplace.
During the past fiscal year our customer base grew to over 750 customers, including leading companies in a
variety of industries that rely on the internet as a fundamental component of their business. We also developed
important strategic partnerships with major resellers and original equipment manufacturers to help leverage
our market reach and increase sales worldwide.
Nearly four years ago, when the internet was still in its infancy, F5 embarked on its mission to enhance the
reliability and scalability of networked servers. Since that time, there has been dramatic growth of internet-
based commerce and communications, and more organizations are recognizing the value of F5’s products and
services in helping to optimize the reliability, scalability and manageability of their mission-critical Internet
infrastructure.
We are proud of our achievements to date, and believe the best is yet to come. To meet our customers’ rapidly
evolving requirements we continue to develop our product portfolio. We continually strive to enhance the
performance, management and security functionality of our products through internal development and by
leveraging the complementary products of our strategic partners. We are also increasing our direct sales and
marketing presence world-wide, and enhancing our sales and marketing channels by developing new relationships
with strategic partners in Internet traffic and content management.
At F5, we remain committed to the goal of becoming the definitive standard for Internet traffic and content
management products and services.
Thank you for your support.
Sincerely,
Jeffrey S. Hussey
President, Chief Executive Officer and Chairman
D e c . 9 8
1 s t M i l l i o n
D o l l a r M o n t h
F e b . 9 6
C o m p a n y F o u n d e d
Composite
58141_12_Inside 1/18/00 2:11 PM Page 2
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What We Do
If you think about it, most things in life are predictable. Pick up the
phone and you get a dialtone. Flip a switch and the lights turn on.
Go to a web site and … oops … perhaps not everything is
predictable.
What is Internet Quality Control?
Businesses need control over the availability and performance of
Businesses want – and need – control over their web sites. Revenue
their web sites. Is the web site available and working properly and
and profitability depend on being able to control web site availability
can the web server respond to ever–increasing customer demands?
and performance. But while we’ve come to expect a certain Quality
The level of control a company has over their web site is called
of Service (QoS) from services such as the telephone and power,
Internet Quality Control.
no such standard exists for web sites.
When F5 first started, we talked with dozens of companies and
Not only is QoS required for networks, but also control over the
developed a model showing how different types of companies define
resources (servers, networks, and content) that ultimately deliver
Internet Quality Control.
the QoS users expect. Additionally, you need the tools to manage
these areas in order to enforce your company’s Internet policies.
That’s where F5 Networks, Inc. comes in. As pioneers in the field
of high availability and Internet Quality Control, F5 develops turnkey
solutions that increase the availability and performance of Internet
Protocol (IP)–based servers and network devices such as firewalls,
routers, cache servers, proxy servers, and more.
For example, while all web sites care about availability, e-commerce
sites have the greatest need. Similarly, multimedia sites and mega-
websites have the greatest performance demands.
F5 saw early on that it was not enough to focus on just one attribute
– either availability or performance. The majority of companies F5
spoke with said they needed both.
Our products act like air traffic controllers, routing client requests
Based on this insight, F5 developed the first true high-availability
to the most available server and re-routing requests away from
load-balancing product line. Looking at some of the most successful
downed servers – or servers that are not responding accurately.
web sites today, it is clear that this vision was correct.
Founded in 1996, F5 has grown to more than 180 employees and
Successful web sites are those that address all elements of Internet
boasts an impressive customer list of more than 750 of the top
Quality Control, including high availability, high performance, intelligent
corporations including USA Today, Microsoft and Alaska Airlines.
load balancing, fault tolerance, security, manageability, open systems,
BIG/ip® Controller
BIG/ip optimizes server availability and performance. BIG/ip sits
between the network and server array. It continuously monitors
each server for service availability and performance, and routes
incoming queries to the most available server. BIG/ip allows network
managers to use a variety of sophisticated load-balancing algorithms
to fine-tune performance and availability.
3DNS® Controller
What happens when a major airport is closed due to weather?
Airlines cannot afford to wait until their aircraft reaches that airport
before finding out the airport is closed. That’s why every major
airline staffs a central operations center that looks at all airports
and reroutes planes when airports go down.
3DNS does the same job for multiple sites. It communicates with
each server around the world on a regular basis – keeping track of
key performance attributes. Then, when a request comes in, 3DNS
routes the request to the most available site.
see/IT™ Network Manager
see/IT, is a traffic analysis and trending software tool for BIG/ip and
3DNS. With see/IT, managers can configure key high availability and
intelligent load balancing factors. Managers can also analyze traffic
flow to better understand how to optimize service. see/IT can
even predict future sources of traffic jams.
enforcement of policy management, and global data management.
global/SITE™ Controller
Products and Services
Anyone who has ever been stuck in a holding pattern waiting to
land understands the needs that drive F5’s product line. Just as air
global/SITE began shipping in October, 1999. global/SITE is a network
controller that manages the distribution and synchronization of
content to geographically distributed IP-servers. Think of global/SITE
as a “change appliance” or “content manager”.
traffic controllers manage air traffic, F5 manages IP traffic flow.
Each time the webmaster completes a new version of content, the
Market
Never has a new medium gained acceptance as fast as the Internet.
From a virtual standing start in 1994, the net now boasts well over
100 million users. Compare this with television (20 years to reach
100 million users) and the Fax (10 years to reach 100 million users).
The net is straining under this load, and corporations are busy
struggling to build high-availability, business-critical applications.
All of this is driving a new market for Internet Traffic Management.
According to Internet Research Group, this new market – products
F5 has 4 core products: the BIG/ip® Controller, 3DNS® Controller,
global/SITE™ Controller and the see/IT™ Network Manager. All
four help manage traffic to IP-based servers and devices in a way
that maximizes availability and throughput.
content set is registered with global/SITE. When ready, the webmaster
with strategic partners, our ability to meet future customers’ needs and
tells global/SITE to publish the new content. global/SITE is smart
any other statements concerning future events or performance are
enough to compare the new content to the prior version, and only
forward-looking statements which are subject to a number of known and
replicate the changes. Furthermore, global/SITE units can work in
unknown risks, uncertainties and other factors which may cause our
concert–a central global/SITE will post new content to remote
actual results, performance or achievements to differ materially from
that help provide high performance, high-availability, scalable access
F5 products benefit Internet sites through four “points of control”.
global/SITEs where the content is then published locally. The result
those expressed or implied by such statements. Relevant risks and
to servers – is projected to grow in excess of 65% annually through
Servers (BIG/ip), the network (3DNS), content (global/SITE) and
is a simple, efficient foolproof way to maintain dynamic content
uncertainties include those discussed in Item 7 of Part I under the heading
the year 2002.
network management (see/IT).
over a large set of servers.
“Risk Factors” in the enclosed Annual Report on Form 10-K.
Composite
Professional Services
F5’s Professional Services team is dedicated to making customers’
network applications successful. The team offers full service
solutions for technical support, basic to advanced training,
auditing/customization services, providing network monitoring
and performance analysis reporting for future capacity
planning.
F5’s full service solutions meet customers’ needs for high availability
today and tomorrow. Service support plans include 24x7 toll-free
technical support, software updates and 24-hour replacement in
the unlikely event a unit needs replacement. The F5 Professional
Services team is dedicated to the seamless integration of BIG/ip,
3DNS, see/IT, global/SITE and all future F5 products into existing
network infrastructures while ensuring the successful use of F5
technology on an ongoing basis.
• • •
Statements in this report concerning expected increases in our sales,
expected increases in the functionality of our products, expected increases
in our sales and marketing presence, our development of new relationships
58141_12_Inside 1/18/00 2:11 PM Page 2
C
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CM MY CY CMY K
What We Do
If you think about it, most things in life are predictable. Pick up the
phone and you get a dialtone. Flip a switch and the lights turn on.
Go to a web site and … oops … perhaps not everything is
predictable.
What is Internet Quality Control?
Businesses need control over the availability and performance of
Businesses want – and need – control over their web sites. Revenue
their web sites. Is the web site available and working properly and
and profitability depend on being able to control web site availability
can the web server respond to ever–increasing customer demands?
and performance. But while we’ve come to expect a certain Quality
The level of control a company has over their web site is called
of Service (QoS) from services such as the telephone and power,
Internet Quality Control.
no such standard exists for web sites.
When F5 first started, we talked with dozens of companies and
Not only is QoS required for networks, but also control over the
developed a model showing how different types of companies define
resources (servers, networks, and content) that ultimately deliver
Internet Quality Control.
the QoS users expect. Additionally, you need the tools to manage
these areas in order to enforce your company’s Internet policies.
That’s where F5 Networks, Inc. comes in. As pioneers in the field
of high availability and Internet Quality Control, F5 develops turnkey
solutions that increase the availability and performance of Internet
Protocol (IP)–based servers and network devices such as firewalls,
routers, cache servers, proxy servers, and more.
For example, while all web sites care about availability, e-commerce
sites have the greatest need. Similarly, multimedia sites and mega-
websites have the greatest performance demands.
F5 saw early on that it was not enough to focus on just one attribute
– either availability or performance. The majority of companies F5
spoke with said they needed both.
Our products act like air traffic controllers, routing client requests
Based on this insight, F5 developed the first true high-availability
to the most available server and re-routing requests away from
load-balancing product line. Looking at some of the most successful
downed servers – or servers that are not responding accurately.
web sites today, it is clear that this vision was correct.
Founded in 1996, F5 has grown to more than 180 employees and
Successful web sites are those that address all elements of Internet
boasts an impressive customer list of more than 750 of the top
Quality Control, including high availability, high performance, intelligent
corporations including USA Today, Microsoft and Alaska Airlines.
load balancing, fault tolerance, security, manageability, open systems,
BIG/ip® Controller
BIG/ip optimizes server availability and performance. BIG/ip sits
between the network and server array. It continuously monitors
each server for service availability and performance, and routes
incoming queries to the most available server. BIG/ip allows network
managers to use a variety of sophisticated load-balancing algorithms
to fine-tune performance and availability.
3DNS® Controller
What happens when a major airport is closed due to weather?
Airlines cannot afford to wait until their aircraft reaches that airport
before finding out the airport is closed. That’s why every major
airline staffs a central operations center that looks at all airports
and reroutes planes when airports go down.
3DNS does the same job for multiple sites. It communicates with
each server around the world on a regular basis – keeping track of
key performance attributes. Then, when a request comes in, 3DNS
routes the request to the most available site.
see/IT™ Network Manager
see/IT, is a traffic analysis and trending software tool for BIG/ip and
3DNS. With see/IT, managers can configure key high availability and
intelligent load balancing factors. Managers can also analyze traffic
flow to better understand how to optimize service. see/IT can
even predict future sources of traffic jams.
enforcement of policy management, and global data management.
global/SITE™ Controller
Products and Services
Anyone who has ever been stuck in a holding pattern waiting to
land understands the needs that drive F5’s product line. Just as air
global/SITE began shipping in October, 1999. global/SITE is a network
controller that manages the distribution and synchronization of
content to geographically distributed IP-servers. Think of global/SITE
as a “change appliance” or “content manager”.
traffic controllers manage air traffic, F5 manages IP traffic flow.
Each time the webmaster completes a new version of content, the
Market
Never has a new medium gained acceptance as fast as the Internet.
From a virtual standing start in 1994, the net now boasts well over
100 million users. Compare this with television (20 years to reach
100 million users) and the Fax (10 years to reach 100 million users).
The net is straining under this load, and corporations are busy
struggling to build high-availability, business-critical applications.
All of this is driving a new market for Internet Traffic Management.
According to Internet Research Group, this new market – products
F5 has 4 core products: the BIG/ip® Controller, 3DNS® Controller,
global/SITE™ Controller and the see/IT™ Network Manager. All
four help manage traffic to IP-based servers and devices in a way
that maximizes availability and throughput.
content set is registered with global/SITE. When ready, the webmaster
with strategic partners, our ability to meet future customers’ needs and
tells global/SITE to publish the new content. global/SITE is smart
any other statements concerning future events or performance are
enough to compare the new content to the prior version, and only
forward-looking statements which are subject to a number of known and
replicate the changes. Furthermore, global/SITE units can work in
unknown risks, uncertainties and other factors which may cause our
concert–a central global/SITE will post new content to remote
actual results, performance or achievements to differ materially from
that help provide high performance, high-availability, scalable access
F5 products benefit Internet sites through four “points of control”.
global/SITEs where the content is then published locally. The result
those expressed or implied by such statements. Relevant risks and
to servers – is projected to grow in excess of 65% annually through
Servers (BIG/ip), the network (3DNS), content (global/SITE) and
is a simple, efficient foolproof way to maintain dynamic content
uncertainties include those discussed in Item 7 of Part I under the heading
the year 2002.
network management (see/IT).
over a large set of servers.
“Risk Factors” in the enclosed Annual Report on Form 10-K.
Composite
Professional Services
F5’s Professional Services team is dedicated to making customers’
network applications successful. The team offers full service
solutions for technical support, basic to advanced training,
auditing/customization services, providing network monitoring
and performance analysis reporting for future capacity
planning.
F5’s full service solutions meet customers’ needs for high availability
today and tomorrow. Service support plans include 24x7 toll-free
technical support, software updates and 24-hour replacement in
the unlikely event a unit needs replacement. The F5 Professional
Services team is dedicated to the seamless integration of BIG/ip,
3DNS, see/IT, global/SITE and all future F5 products into existing
network infrastructures while ensuring the successful use of F5
technology on an ongoing basis.
• • •
Statements in this report concerning expected increases in our sales,
expected increases in the functionality of our products, expected increases
in our sales and marketing presence, our development of new relationships
58141_12_Inside 1/18/00 2:11 PM Page 1
C
M
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CM MY CY CMY K
F 5 N E T W O R K S M I L E S T O N E S
T O O U R S H A R E H O L D E R S
S e p t . 9 9
7 5 0 +
C u s t o m e r s
S e p t . 9 9
1 8 0 +
E m p l o y e e s
S e p t . 9 9
1 s t P r o f i t a b l e
Q u a r t e r
J u n . 9 9
I P O
$ 4 M i l l i o n
D o l l a r M o n t h
Dear Shareholders:
This has been a remarkable year for F5. During the past fiscal year we completed two successful public offerings,
raising over $56,000,000. We increased our net revenue by 469% over the prior year and reported a profit in
the fourth quarter. We also tripled the size of our staff to 187 employees, developed a strong presence in key
international markets, particularly Europe and Asia Pacific, and introduced two major new products into the
marketplace.
During the past fiscal year our customer base grew to over 750 customers, including leading companies in a
variety of industries that rely on the internet as a fundamental component of their business. We also developed
important strategic partnerships with major resellers and original equipment manufacturers to help leverage
our market reach and increase sales worldwide.
Nearly four years ago, when the internet was still in its infancy, F5 embarked on its mission to enhance the
reliability and scalability of networked servers. Since that time, there has been dramatic growth of internet-
based commerce and communications, and more organizations are recognizing the value of F5’s products and
services in helping to optimize the reliability, scalability and manageability of their mission-critical Internet
infrastructure.
We are proud of our achievements to date, and believe the best is yet to come. To meet our customers’ rapidly
evolving requirements we continue to develop our product portfolio. We continually strive to enhance the
performance, management and security functionality of our products through internal development and by
leveraging the complementary products of our strategic partners. We are also increasing our direct sales and
marketing presence world-wide, and enhancing our sales and marketing channels by developing new relationships
with strategic partners in Internet traffic and content management.
At F5, we remain committed to the goal of becoming the definitive standard for Internet traffic and content
management products and services.
Thank you for your support.
Sincerely,
Jeffrey S. Hussey
President, Chief Executive Officer and Chairman
D e c . 9 8
1 s t M i l l i o n
D o l l a r M o n t h
F e b . 9 6
C o m p a n y F o u n d e d
Composite
58141_13_Cover 1/18/00 2:14 PM Page 2
C
M
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CM MY CY CMY K
1 9 9 9 F I N A N C I A L H I G H L I G H T
C O R P O R AT E A N D S H A R E H O L D E R I N F O R M AT I O N
C USTOMER G ROWT H
750
479
339
217
145
91
Quarter
Ended
6/98
9/98
12/98
3/99
6/99
9/99
R EVEN UE
$13.8M
$7.6 M
$3.8 M
$2.7 M
$1.9 M
$.8 M
$1 M
$1.1 M
D I R E C T O R S
Jeffrey S. Hussey
Chairman of the Board
F5 Networks, Inc .
Carlton G. Amdahl
Technology Consultant
Keith Grinstein
Vice–Chairman
Nextel International, Inc .
Karl D. Guelich
Certified Public Accountant
Alan J. Higginson
Consultant
Quarter
Ended
FYE 9/30
12/97
3/98
6/98
9/98
12/98
3/99
6/99
9/99
N O T I C E O F A N N U A L M E E T I N G
Our annual shareholders meeting
will be held:
February 17, 2000, 9:00AM
The Sheraton Hotel & Towers
1400 6th Avenue
Seattle, Washington
S ELECTED F INA NCIAL D ATA
Net revenues
Loss from operations
Net loss
1999
1999
1998
1998
1997
1997
$ 27,825
$ 4,889
$
229
(4,878)
(3,668)
(1,428)
(4,344)
(3,672)
(1,456)
Net loss per share – basic and diluted
( 0.42)
( 0.60)
( 0.24)
Weighted average shares – basic and diluted
10,238
6,086
6,000
Cash and cash equivalents
$ 24,797
6,206
Total employees at year end
187
80
143
20
Composite
O F F I C E R S
Jeffrey S. Hussey
President and Chief Executive Officer
Robert J. Chamberlain
Vice President of Finance - Chief Financial
Officer and Treasurer
Steven Goldman
Senior Vice President Sales,
Marketing & Services
Brett L. Helsel
Vice President of Product Development
Chief Technology Officer
C O R P O R AT E H E A D Q U A R T E R S
F5 Networks
200 – 1st Avenue West,
Seattle, WA. 98119
(206) 505-0800
N A S D A Q L I S T I N G
NASDAQ Symbol – FFIV
I N V E S T O R R E L AT I O N S
Michael Newman
Street Connect
(206) 320-1231
I N D E P E N D E N T A U D I T O R S
PricewaterhouseCoopers LLP
Seattle, Washington
L E G A L C O U N S E L
Heller Ehrman White & McAuliffe
Seattle, Washington
T R A N S F E R A G E N T A N D R E G I S TA R
American Stock Transfer
40 Wall Street
New, York, NY 10005
(212) 936-5100
58141_13_Cover 1/18/00 2:14 PM Page 1
C
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CM MY CY CMY K
S
S
K
K
R
R
O
O
W
W
T
T
E
E
N
N
2 0 0 1 s t A v e n u e W e s t # 5 0 0
S e a t t l e , W a s h i n g t o n 9 8 1 1 9
w w w . f 5 . c o m
5
5
1 9 9 9 A N N U A L R E P O R T F
F
Composite