F5 Annual Report 2003 | Quarterlytics

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FY2003 Annual Report · F5

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Financial Data

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$

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$

120

115

110

105

100

Revenue

115.9

108.3

107.4

Gross Margin

t
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e
c
r
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P

2001

2002

2003

2001

2002

2003

Operating Expenses

90.6

87.3

84.8

Net Income (Loss)

4.1

-8.6

-30.8

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$

-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

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$

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$

2.5

1.5

0.5

-5

-10

-15

Inventories

2.6

0.8

0.3

2001

2002

2003

Cash Flow from Operations

14.6

9.5

-11.8

DSO

2001

2002

2003

Cash, Equivalents &
Investments

80.3

79.0

69.8

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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.

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.

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

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$

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.

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

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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

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.

.05

.04

.03

.02

.01

.00

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1 Q 03

2 Q 03

3 Q 03

4 Q 03

EPS

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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

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

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2.0

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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

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DSO

1 Q 03

2 Q 03

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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.

Cash Flow from
Operations

5.6

3.4

2.7

2.9

1 Q 03

2 Q 03

3 Q 03

4 Q 03

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Cash & Investments

100

96.1

89.0

83.9

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79.0

1 Q 03

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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

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.

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.

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.

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.

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

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.

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.

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.

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

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.