F5
Annual Report 2003

Plain-text annual report

Financial Data s n o i l l i M $ s n o i l l i M $ 120 115 110 105 100 95 90 85 80 75 Revenue 115.9 108.3 107.4 Gross Margin 77 72 58 t n e c r e P 80 75 70 65 60 55 50 2001 2002 2003 2001 2002 2003 Operating Expenses 90.6 87.3 84.8 Net Income (Loss) 4.1 -8.6 -30.8 s n o i l l i M $ 5 0 -5 -10 -15 -20 -25 -30 -35 2001 2002 2003 2001 2002 2003 Selected Financial Data (in thousands) 2001 2002 2003 Net Revenues Gross Profit $ 107,367 $ 108,266 $ 115,895 $ 61,862 $ 77,787 $ 88,990 Operating Expenses $ 90,578 $ 87,328 $ 84,801 Income (Loss) from Operations $ (28,716) $ (9,541) Net Income (Loss) $ (30,790) $ (8,610) $ $ 4,189 4,087 Cash, Cash Equivalents & Investments $ 69,783 $ 80,333 $ 79,010 Long-Term Debt $ 0 $ 0 $ 0 1 s n o i l l i M $ s n o i l l i M $ 3 2.5 2 1.5 1 0.5 0 15 10 5 0 -5 -10 -15 Inventories 2.6 0.8 0.3 2001 2002 2003 Cash Flow from Operations 14.6 9.5 -11.8 DSO 82 68 55 2001 2002 2003 Cash, Equivalents & Investments 80.3 79.0 69.8 s y a D s n o i l l i M $ 85 80 75 70 65 60 55 50 90 80 70 60 50 2001 2002 2003 2001 2002 2003 About F5 Networks F5 Networks keeps IP-based traffic flowing and business information always available to any user from any device, anywhere in the world. Our products ensure secure and reliable access to servers and the applications that run on them. F5 also provides tools to automate communications between applications and the network, eliminating tedious, manual processes. As the pioneers of intelligent load balancing, F5’s continued innovations help businesses optimize and protect their IT investments. Our mission is to ensure the availability, scalability, performance, and security of IT resources that enterprises require to successfully do business. The company is headquartered in Seattle, Washington with offices worldwide. For more information go to www.f5.com. 2 John McAdam President, Chief Executive Officer and Director TO OUR SHAREHOLDERS: Fiscal 2003 was another year of solid progress on several fronts. During the year, we – – – – – – – – returned to profitability and achieved three consecutive quarters of revenue growth continued to strengthen our balance sheet upgraded and expanded our family of traffic management products strengthened our distribution channels added new sales and marketing partners increased our base of major enterprise accounts further broadened our share of the traffic management market expanded our addressable market with the acquisition of uRoam Corporation’s FirePass SSL VPN technology On the strength of these accomplishments, we completed a successful public offering in early November, netting approximately $114 million from the sale of 5.2 million shares of common stock and increasing our cash and investments to nearly $200 million. As a result, we believe F5 is well-positioned to pursue expanding opportunities in the converging application traffic management and security markets. 3 TO OUR SHAREHOLDERS Revenue Profitable Growth. Following the company’s return to profitability in the first quarter of fiscal 2003, we posted two consecutive quarters of increased revenue and earnings. In the fourth quarter we reported net revenue of $31.6 million, up 8 percent from the prior quarter and 17 percent from the fourth quarter of 2002. Strong fourth quarter sales offset the incremental expenses associated with our July acquisition of the FirePass technology and enabled us to achieve net income of $1.4 million ($0.05 per share), equal to the prior quarter. Net income for the full year was $4.1 million ($0.14 per diluted share) on record annual revenue of $115.9 million, a year-over-year improvement of $0.48 per share. F5’s return to sustained profitability was the result of improving sales and tight control of both operating expenses and product costs. Excluding restructuring charges we took in fiscal 2002, operating expenses were up less than $800,000 year over year, while gross margins increased to 77 s n o i l l i M $ 35 30 25 20 15 10 5 0 31.6 27.1 28.0 29.2 1 Q 03 2 Q 03 3 Q 03 4 Q 03 percent in the first quarter and held steady throughout the year. As we move into a new fiscal year, we believe we can achieve continued sequential revenue growth and that our cost controls Gross Margin and expense discipline will enable us to leverage those gains and accelerate our earnings growth. 80 77 77 77 77 Strong Balance Sheet. During fiscal 2003 we continued to strengthen our balance sheet by actively and carefully managing our cash and other assets. Although inventories crept up slightly throughout the year, our close working relationship with our contract manufacturer enabled us to keep them under $800,000. On the receivables line, days sales outstanding (DSO) declined to 55 days in the fourth quarter, down from 68 days in the fourth quarter of last year. Cash flow of $5.6 million in 40 t n e c r e P the fourth quarter marked the tenth consecutive quarter of positive cash flow from operations and contributed to $14.6 million in cash flow for the year, compared to $9.5 million in fiscal 2002. After 0 spending approximately $27 million to acquire the assets of uRoam in July, we ended the year with $79 million in cash, cash equivalents and investments, compared to $80.3 million at the end of fiscal 2002. Product Momentum. Key drivers of the company’s revenue growth in fiscal 2003 were rapid acceptance of the new BIG-IP application switch products we introduced in the first quarter and steadily increasing demand throughout the year. First shipped in early December 2002, the BIG-IP 5100, 2400 and 1000 represented 20 percent of system sales in the first quarter and accounted for 61 percent in the fourth quarter. As we anticipated, the industry-leading performance of the Layer 4 ASIC we developed for the BIG-IP 2400 has been an important differentiator in sales situations where customers put a premium on Layer 4 performance. At the same time, the high performance and rich Layer 7 functionality of the BIG-IP 4.5 software, which is common across all of our application switch and appliance products, has further distanced our products from the competition’s and is redefining customer perceptions about the nature and importance of traffic management in the network. 4 .05 .04 .03 .02 .01 .00 s n o i l l i M $ 1 Q 03 2 Q 03 3 Q 03 4 Q 03 EPS .05 .05 .03 .02 1 Q 03 2 Q 03 3 Q 03 4 Q 03 In early October, we introduced our re-branded version of the FirePass SSL VPN product which has been well received by customers, the trade press and industry analysts. "As an SSL solution, the FirePass product is strong,” wrote Lucinda Borovick, Director, Data Center Networks, IDC, in a report published shortly after the uRoam acquisition. “With support for a full range of enterprise applications, such as host access and client-server applications, FirePass can solve a wide variety of enterprise datacenter concerns." In a separate report, Jeff Wilson, Executive Director at Infonetics Research, agreed. “With F5’s leadership in L4-7 Switching and SSL security and the maturity of FirePass technology, F5 is providing a proven choice for organizations looking to secure and control their application access.” During the fourth quarter and prior to the launch of the re-branded product, FirePass sales exceeded our plan and generated more than a half-million dollars in systems revenue. As a result, we believe FirePass has the potential to become a significant contributor to the company’s near-term growth. Both FirePass and BIG-IP, as well as our other traffic management products, are slated for a major refresh during fiscal 2004. The new products will include enhanced features and improved performance resulting from major hardware and software upgrades. In addition, the BIG-IP software will include advanced functionality designed into our Universal Inspection Engine to enable further deep content inspection of application data. Deep content inspection, the ability to read the contents of multiple IP packets simultaneously, will enhance the ability of BIG-IP to provide application level security and is the cornerstone of our plans to develop an application security gateway that will combine elements of application traffic management and secure remote access technology. Partnership & Channel Leverage. F5’s go-to-market strategy is to build solid partnerships with hardware and software vendors, system integrators, distributors and value-added resellers, and leverage our partners’ strengths through our direct-assist selling model. During fiscal 2003, Dell continued to purchase BIG-IP software and resell it pre-installed on their servers. In June, we expanded our partnership with Nokia from an OEM relationship with Nokia Internet Communications to a broader reseller relationship that allows groups throughout the organization to bundle our products and resell them with their wireless solutions. Although the blade server market has ramped slower than we had hoped, we have developed individualized marketing programs with each of the major vendors—Dell, Fujitsu-Siemens, Hewlett Packard, IBM and NEC—and we expect to benefit from increased activity in this space in the coming year. As a side benefit of our blade server initiative, many enterprises who became first-time F5 customers through the purchase of our Blade Controller software have subsequently purchased other F5 products. In addition, our close working relationship with Hewlett Packard on the blade server front has recently been expanded into a broader reseller agreement that includes our other products as well. Our efforts to recruit new high-caliber channel partners were instrumental in driving revenue growth in the second half of the year and particularly in the fourth quarter. A key attraction for many systems integrators and resellers is the fact that our software-based products allow them to add value above the platform itself. In the first half of the year, we launched a domestic marketing program aimed at signing up value-added resellers who have been highly successful selling our competitors’ products, and by year-end many of these new partners had begun to make 5 TO OUR SHAREHOLDERS Operating Expenses meaningful contributions to our revenue stream. In the fourth quarter, nearly a third of our channel sales involved little or no direct assistance. Equally encouraging, roughly half of our current channel partners already sell security products and have been quick to embrace FirePass. Throughout fiscal 2003, our iControl partner program paid increasing dividends on the investments we have made in building relationships with some of the industry’s biggest software vendors and supporting the development necessary to enable their applications to interface with our products. In presentations at Oracle Application World last May, Oracle executives identified BIG-IP as a key component of the company’s “unbreakable Linux” initiative, and iControl-enabled Oracle applications represented a growing source of “pull-through” business for F5 during the year. Similarly, iControl- enabled integration of our products with Microsoft’s .NET architecture has pulled us into an increasing number of Web services opportunities. In the fourth quarter, sales involving one or more iControl partners—including Microsoft, BEA, Oracle, and IBM (Websphere)—were the highest to date and accounted for a growing percentage of systems revenue. Broad Base of Enterprise Customers. Following the collapse of the dot.com bubble at the end of fiscal 2000, F5’s survival was assured by refocusing our efforts and resources on selling to enterprise customers. By the end of fiscal 2001, we had shifted the bulk of our sales to enterprise accounts, and our return to profitable growth in 2003 reflects both our increasing penetration of the enterprise market and a growing number of major accounts. For fiscal 2003, sales to our top 20 major accounts amounted to $20.8 million. In the fourth quarter, sales to new and existing major accounts 25 s n o i l l i M $ 20 15 2.0 s n o i l l i M $ 1.0 22.2 20.9 21.2 20.6 1 Q 03 2 Q 03 3 Q 03 4 Q 03 Inventories 0.8 0.7 0.5 0.3 represented more than 20 percent of total bookings and were the highest to date. Our success in winning and keeping enterprise customers is a function of the fact that our products are aligned 0.0 1 Q 03 2 Q 03 3 Q 03 4 Q 03 with several key trends. As more and more enterprises convert legacy and client-server applications to Web-enabled applications, many are replacing single large servers that are costly to maintain with many smaller, less expensive servers. Our products help them do that cost-effectively by balancing traffic across all servers (regardless of whether or not they are running the same applications), ensuring that all servers and applications are running properly, and letting enterprises add new servers and scale their applications quickly and easily as traffic grows. In addition, our iControl interface allows customers to deploy applications that can talk directly to our products and control the way traffic is routed on their network. Because our products can also look deeply into the packets that make up IP traffic and recognize any value, they can manage traffic for virtually any type of application. Another key issue affecting enterprises today is the need to provide greater security, not just at the network level but at the application level as well. By integrating SSL (secure socket layer) acceleration and traffic management on the same device, our products reduce the cost of SSL encryption and 80 70 40 s y a D 20 0 DSO 66 64 63 55 1 Q 03 2 Q 03 3 Q 03 4 Q 03 6 TO OUR SHAREHOLDERS decryption and allow SSL traffic to be managed as easily as unencrypted traffic. Within the past year, SSL has also emerged as a compelling alternative to IPSec for the creation of virtual private networks (VPNs) that allow remote corporate users to access their networks securely from laptops and other devices. Since we acquired the FirePass SSL VPN technology in July, enterprise customers have expressed growing interest in this product as a way to reduce the cost and complexity of providing remote access for their employees. Increasing Market Share. Over the past 2 years, our focus on enterprise customers has enabled us to continue gaining market share from our competitors. At September 30, our share of the total Layer 4-7 market was 20 percent, and our leading share of the Layer 4-7 fixed switch and appliance market was 33 percent, up from 29 percent a year ago. During most of calendar 2001 and 2002, we gained share as the market contracted. But in the first three quarters of calendar 2003 the market expanded, and if this trend continues we believe we are well positioned to grow our core business ahead of the market. During the past year we also maintained our lead in the market for multipurpose SSL devices. In the second quarter of calendar 2003, our products accounted for 50 percent of worldwide sales of Layer 4-7 Switch/Load Balancers with SSL, 20 percent more than our closest competitor. Expanding Addressable Markets. While the Layer 4/7 switch and appliance market remains relatively small, it is projected to grow from just under $500 million to more than $700 million by the end of calendar 2006. In the same period, the emerging SSL VPN market is projected to grow from less than $100 million to more than $600 million, nearly doubling our addressable market. Many industry analysts believe that over the next three years SSL VPNs will replace IPSec VPNS for secure remote access, since SSL VPNs are easier to implement, less costly to maintain, and more secure. In 2003, uRoam represented only a fraction of the SSL VPN market, which was dominated by a handful of small, private companies. Since we acquired FirePass from uRoam, the competitive landscape has changed with the acquisition of one of these companies by a large provider of firewalls and IPSec VPNs. This move has helped validate the market and is likely to spur growth in calendar 2004. We are encouraged by the fact that our re-branded FirePass products are already gaining traction with our customers and channel partners, and we believe we can win a growing share of this market as it expands over the next two to three years. Beyond the current fiscal year, we see an opportunity to leverage the advanced functionality of both BIG-IP and FirePass to become a leader in the emerging market for application security. Because our traffic management products sit in-line between application servers and the edge of the network, they occupy prime network “real estate” and represent an ideal site for products that can look deeply into packets of data as they pass through and screen out security threats. Currently, industry analysts estimate that the market for application security has the potential to grow from under $50 million in calendar 2003 to more than $1.3 billion in calendar 2006.* * Market share data for the total Layer 4-7 market, which includes modular switches, fixed switches and appliances, and for the Layer 4-7 fixed switch and appliance combines F5 sales data with data from Dell’Oro Group. Data for the SSL and SSL VPN markets is from Infonetics Research. Market data for application security is from IDC. All numbers reflect the most recent data available as of the date of this report. 7 Cash Flow from Operations 5.6 3.4 2.7 2.9 1 Q 03 2 Q 03 3 Q 03 4 Q 03 s n o i l l i M $ 6 4 2 0 Cash & Investments 100 96.1 89.0 83.9 s n o i l l i M $ 80 60 40 20 0 79.0 1 Q 03 2 Q 03 3 Q 03 4 Q 03 Long-Term Business Strategy. Throughout fiscal 2003 the company’s operational and financial accomplishments reflected the successful execution of our long- term business strategy: – Maintain our core technology and market leadership – – – – Leverage our network “real estate” Partner with industry leaders Focus on enterprise customers Identify and exploit opportunities in markets adjacent to our core business As the new fiscal year gets underway, this strategy will continue to provide the framework for our operational and financial objectives. Although the future is difficult to predict, we believe that our commitment to manage our business for the long term is the best way to ensure that F5 will yield increasing value for our customers, partners, and employees, as well as our shareholders. On behalf of the company and our Board of Directors, thanks once again for your past and future support. John McAdam President, Chief Executive Officer and Director F5 NETWORKS November 15, 2003 8 TV Interactive During 2001, the European network of one of the most cost-effective solution was to upgrade the world’s premier media and entertainment the existing BIG-IP products with add-on SSL companies launched enhanced television services capabilities. When viewers see an item they that allow viewers to interact with programs want to buy, they simply press a button on their via set-top boxes, exploring items or topics of set-top box and an order form appears. Once interest in more detail. Redundant BIG-IP they have entered their order, the information products were deployed as an integral part of is sent directly to the channel operator’s data the infrastructure to ensure high availability and center, SSL-encrypted, and sent on to the manage the traffic between viewers and the network’s data center where BIG-IP decrypts it interactive servers. and sends it to the most available server. By deploying integrated traffic management and Recently, the network expanded these services SSL processing, the network achieved its security to let viewers purchase program-related products goals and significantly reduced both the size online using their credit cards. To ensure the and complexity of its system management security of these transactions, the developers workload. considered various options and concluded that Adding integrated SSL acceleration to its existing BIG-IP products was all it took to enable a large media and entertainment company to expand its interactive services. 9 Managing application traffic within multiple blade servers, BIG-IP ® Blade Controller ensures continuous fast action for thousands of simultaneous online game players. Online Gaming Interactive video gaming has come a long way For the Australian unit of one of the world’s since Ms. Pacman gobbled her first pixel and leading online gaming providers, a key step in began chomping her way through a two- optimizing its network infrastructure was to host dimensional maze. Today, online games feature its games on IBM blade servers with BIG-IP Blade lifelike characters inhabiting complex three- Controller to manage the traffic within each dimensional worlds and are played chassis. In addition to balancing gaming traffic simultaneously by thousands of remote players across the blades, BIG-IP ensures that each blade interacting with the game software and each and the game software running on it are other in real time. Behind the complexity of functioning properly. BIG-IP also simplifies the the games themselves is equally complex process of scaling the game across more blades networking technology, designed to ensure that as its popularity grows. The end result is a cost- players can log in easily, stay connected, and effective solution that measures up to the enjoy fast uninterrupted play. Networks must performance demands of thousands of also be cost-effective and scalable to accom- simultaneous users and can be easily replicated modate ever-increasing numbers of players. and expanded across multiple sites worldwide. 10 At one of Europe’s largest postal services, BIG-IP delivers secure, round-the-clock service for online postage customers. Postal Service Despite their growing use of email and other To ensure that the service is available and types of electronic communications, enterprises responsive around the clock, the service provider around the world continue to rely on postage- that hosts the system has deployed BIG-IP® paid delivery of hard-copy documents and application switches to manage traffic across packages to conduct their daily business. To the application servers. The product’s integrated simplify the process, one large European postal SSL encryption/decryption capability service has implemented an online postage simultaneously enables cost-effective, secure system that allows business customers to connectivity between a user and the application purchase postage over the Internet and digitally while improving the system’s overall stamp letters and other correspondence using performance. In addition, the integrated Layer any standard PC printer. Accessible 24 hours 2/3 switch and high port density eliminate the a day from virtually any location with an Internet need for separate switches and enable connection, the system has yielded cost-savings concurrent support of other devices. and improved productivity for an increasing number of corporate customers. BIG-IP also ensures that the system is scalable, allowing the service provider to add new servers easily to keep pace with increasing demand and a growing number of business customers. 11 Real Estate In today’s hot housing market, real estate The obvious solution was to establish links to professionals depend on having the most up- additional ISPs, ensuring that alternative to-date listing information at their fingertips. connections would be available if one failed. One regional multiple listing agency serves To address the challenge of managing traffic 14,000 real estate brokers in 14 counties across multiple connections, the agency chose through a private extranet that provides round- BIG-IP Link Controller. BIG-IP Link Controller the-clock access to a centralized database of constantly monitors the load on each connection area listings, market analyses, tax information, and routes traffic to the most available ISP. This and zoning on a broad range of properties. To allows the agency to provide uninterrupted ensure fast, reliable service, the agency deployed service and optimum performance to its BIG-IP to manage the traffic across a dozen customers in the event of an ISP failure or traffic servers that access redundant back-end congestion on one of the links. It also enables databases. Nevertheless, when an outage the agency to optimize the return on its occurred at the agency’s single ISP, traffic investment in bandwidth resources. between its network and the Internet was cut off, disrupting service for several hours. Balancing traffic across simultaneous connections to different ISPs, BIG-IP® Link Controller helps maintain uninterrupted service and optimum performance for customers of a large, regional multiple listing service. 12 As the application traffic management standard for a major financial institution, BIG-IP is an integral part of the company’s network infrastructure. Finance According to a recent survey of global worldwide team of financial advisors to wealth, approximately 33 million households track their interactions with clients and world-wide qualify as “wealthy”, with provide them with the most up-to-date managed assets (valued in local currency) financial information regarding their greater than $250,000. Collectively, the investment decisions. As the firm’s corporate wealth of this group amounts to roughly standard for application traffic management, $38 trillion, and there is intense competition BIG-IP is an integral part of the supporting among global asset managers for a share of network infrastructure, managing XML and this growing pie. SSL traffic and enabling capabilities such as “single sign-on”. In addition, developers In an effort to sharpen its competitive edge, have been able to save millions of dollars one of the world’s biggest global asset by leveraging the rich functionality of the managers is using cutting-edge technology BIG-IP Universal Inspection Engine and the to deliver new levels of service to its wealthy built-in capability of the Microsoft and Siebel clientele. Developed using Microsoft’s .NET platform and Siebel’s customer relationship software to control the network directly via F5’s iControlTM interface. management technology, the company’s Web-based application makes it easy for its 13 Tourism As East and West become more To provide information and assistance to economically intertwined, tourism is a key visitors before and after their stay, the board driver of economic growth in major cities relies heavily on its international Web site, on both sides of the Pacific. One of Asia’s available in multiple versions tailored to largest and most colorful population centers dozens of specific language groups and has attracted a steadily increasing stream cultures. To ensure that the site is up and of foreign visitors that approached 14 million running around the clock, the board chose last year with associated revenue of more BIG-IP to manage the voluminous traffic it than $8 billion. A large part of the city’s receives daily and to expand availability success in attracting tourists derives from during periods of peak demand. Thanks to the efforts of its tourism board, whose dual BIG-IP, the site’s responsive performance goal is to promote the city as a tourist helps give Web visitors a positive impression destination worldwide and to ensure that of the city that may well influence their visitors enjoy their stay. decision to go there in person. Around the clock and around the world, BIG-IP helps ensure that visitors to the tourism board’s Web site get a positive impression of the city it represents. 14 Overcoming differences in regional service levels, the FirePass® product gives remote humanitarian workers secure access to their agency’s centralized resources. International Humanitarian Organization In parts of the world where paved roads are of systems scattered around the world and few and far between, global humanitarian it’s little wonder the agency sought a more agencies increasingly rely on the “information flexible and cost-effective solution. They found superhighway” to support field workers in it in F5’s FirePass SSL VPN. far-flung local offices. However, one prominent children’s agency found that different levels With no need for client software, FirePass and types of infrastructure pose complex gave the agency’s very remote users secure, challenges that rendered an IPSec VPN solution, easy access to their email, the agency Intranet, with the need for special software on each and other network resources—such as Oracle client, unworkable for remote access to its Financials and custom fundraising centralized network in New York. In much of applications—from virtually any terminal with Asia and Africa, for example, the Internet is an Internet connection. As an added benefit, accessible only at Internet cafes. Elsewhere, it reduced the workload of its IT department ISPs limit IPSec VPN use to those with expensive and lowered maintenance costs by allowing business accounts. Add the cost and difficulty software vendors to service their applications of maintaining client software on hundreds remotely. 15 Manufacturing More than a decade after IBM introduced cost-effective way to give the auditing the AS400, the versatile midrange system team full access to its proprietary continues to be a mainstay of businesses applications. worldwide. One U.S. manufacturer of private label sportswear relies on AS400s Since implementing the FirePass product, to run custom back office applications— the company has expanded its use to give purchasing, ordering and shipping—that employees at other locations access to its support its global workforce of 4,000 in legacy systems. In addition, the company’s locations spread across three continents. IT department uses the system to perform The systems are located at company all remote maintenance on the AS400s headquarters in North Carolina. However, and to manage the network from any the company’s internal auditing division remote location. While traveling, is in Hong Kong, and until recently, that employees also use FirePass to access their posed a problem. Expanding the company email securely from any Web company’s WAN infrastructure was too browser. That’s helped reduce costs and costly. After exploring other alternatives, boost productivity. And it’s made the company selected a FirePass SSL VPN everyone’s job a lot easier. solution as the most secure, flexible and For one sportswear manufacturer, FirePass proved to be the easiest and most cost-effective way to provide its overseas offices with secure access to legacy applications at the company’s US headquarters. 16 Shareholders’ Information Board of Directors Corporate Officers Karl Guelich Board Chair, Certified Public Accountant John McAdam President and Chief Executive Officer John McAdam President and Chief Executive Officer Steve Coburn Jeffrey Hussey Founder Tom Hull Alan Higginson President and CEO, Hubspan, Inc. Jeff Pancottine Keith Grinstein Partner, Second Avenue Partners Julian Eames Senior Vice President of Finance and Chief Financial Officer Senior Vice President of Worldwide Sales Senior Vice President of Marketing and Business Development Senior Vice President of Business Operations and Global Services Rich Malone General Principal and Chief Information Officer Edward Jones Jeff Stockdale Senior Vice President of Product Development Glenn Edens Vice President, Research, Sun Microsystems, Inc. Joann Reiter Vice President and General Counsel Notice of Annual Meeting NASDAQ Listing Our annual shareholders meeting will be held: NASDAQ Symbol – FFIV F5 Networks Corporate Headquarters April 29, 2004 10:00 AM Corporate Headquarters 401 Elliott Avenue West Seattle, WA 98119 206.272.5555 www.f5.com Investor Relations 206.272.6677 • info@f5.com Independent Accountants PricewaterhouseCoopers LLP • Seattle, WA Transfer Agent American Stock Transfer • 212.936.5100 17 The statements contained in this report that are not purely historical are forward-looking statements. These statements include, but are not limited to, statements about our plans, objectives, expectations, strategies and intentions and are generally identified by the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions. Because these forward-looking statements are subject to a number of risks and uncertainties, our actual results could differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” in the company’s Form 10K for fiscal 2003 and in other documents we file from time to time with the Securities and Exchange Commission. All forward looking statements included in this report are based on information available to us on the date hereof. We assume no obligation to update any such forward-looking statements. © 2003 F5 Networks, Inc. All rights reserved. 18 © 2004 F5 Networks, Inc. All rights reserved. F5 Networks, Inc. • 401 Elliott Avenue West • Seattle, WA 98119 • 206.272.5555 • www.f5.com 

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