F5 Buys uRoam, Reports Strong Q3

SEATTLE -- F5 Networks, Inc. (Nasdaq:FFIV), the leading provider of Application Traffic Management solutions, today announced that it has acquired the assets of privately-held uRoam, Inc. a provider of industry-leading remote access solutions using Secure Socket Layer (SSL) Virtual Private Networks (VPN). The $25 million cash transaction was completed on July 23, 2003. F5 has hired substantially all of uRoam's employees, including core founders, key development and sales personnel.

Under the terms of the deal, F5 has acquired the rights to all of uRoam's technology. uRoam's principal offering is its unique line of FirePass(TM) servers, which enable secure web-based access to any network application from any remote client--including wireless devices--with no client set-up and no additions or modifications to the back-end resources being accessed. FirePass servers lead the industry in functionality, stability and scalability, providing secure, web-based user access from more devices to more applications than any other product on the market today. Together with other elements of uRoam's technology, FirePass is a powerful complement to F5's suite of Application Traffic Management products, which already include a number of security features. F5 will continue to develop, sell and support the FirePass product, and over the next 12 - 18 months plans to integrate uRoam's technology into a comprehensive suite of product offerings designed to ensure application security and manageability across the enterprise.

"The acquisition of uRoam is an important step toward our goal of providing unsurpassed security in the reliable delivery of enterprise applications," said John McAdam, F5 president and CEO. "Combined with the ability of our BIG-IP(R) product to provide in-line, deep-packet inspection of content and to interface with other network devices as an enforcement engine against intrusion and other security threats, uRoam's technology will enable us to provide the most comprehensive application and user security in the industry. As we integrate uRoam's SSL VPN capabilities with current and future F5 products, we believe we can deliver a cost-effective, easy-to-manage application security solution that will meet the current and future needs of our customers and prospects."

F5 believes the acquisition of uRoam by F5 will be well received by existing uRoam customers; uRoam's largest customer, SAP America, Inc., was upbeat about the acquisition. "It's critical that our sales force and consultants can securely connect to SAP corporate information from any customer location," said John Harford, director of Network Services, SAP America, Inc. "To help us accomplish this, we implemented uRoam's FirePass solution, which currently provides secure connectivity for our remote user population. We welcome the addition of uRoam's technology to F5's current product offering, as it will present businesses like ours with an even deeper and more comprehensive solution set that can help expand company services and increase the number of remote users worldwide."

Skip Glass, former CEO of uRoam, also expressed confidence in F5's ability to leverage the strength of uRoam's technology, "F5's track record, business model and long-term strategy made it an ideal choice in determining how to ensure that the potential of our technology would be realized fully and in ways that are aligned with the future needs of current uRoam customers. Another key factor in our decision was the positive response of our employees to the prospect of joining the F5 team."

Commenting on the financial impact of the uRoam acquisition, Steve Coburn, F5's senior vice president of finance and CFO, said he expects early sales of uRoam's products in September but does not expect revenue from those sales to be material in the current quarter, ending September 30, 2003. For fiscal 2004, he said uRoam's products could generate revenue in the range of $8 million to $12 million.

In a separate release:

F5 Networks, Inc. (Nasdaq:FFIV) today announced net income of $1.4 million ($0.05 per share) on revenue of $29.2 million for the third quarter of fiscal 2003, up from $0.8 million ($0.03 per share) on revenue of $28.0 million in the prior quarter. Both results exceeded the target ranges ($0.02 to $0.04 per share on revenue of $27.5 million to $29.0 million) set by management in the company's April 23rd earnings release. In the third quarter of fiscal 2002 the company reported revenue of $27.1 million and a net loss of $4.3 million ($0.17 per share), including non-recurring expenses related to the discontinuation of its EDGE-FX(TM) cache business and the consolidation of operations.

F5 president and chief executive officer John McAdam said the company's sequential revenue growth resulted from strong sales in North America and Asia-Pacific, up sharply from the prior quarter. "The growth of sales in North America was stronger in the third quarter than we had anticipated, with product sales up 12 percent from the second quarter," McAdam said. "Internationally, sales in Asia-Pacific grew even faster, helping to offset seasonal slowness in Japan. From a product perspective, revenue increased sequentially across all product categories, with system sales representing 68 percent of total revenue and software sales accounting for 5 percent. We also saw sequential growth in service revenue, which represented 27 percent of total revenue."

According to McAdam, the growth of North American revenue was fueled primarily by increased channel sales and a number of large enterprise wins. "As we continued to forge new relationships with some of the region's largest resellers, we saw meaningful contributions from several of the new partners we signed up in prior quarters. In addition, we continued to build momentum in sales to global strategic accounts, which included four large wins totaling more than $2.5 million," McAdam said.

Operationally, the company turned in a solid performance, reflected in several key metrics. Gross margin and operating expenses for the quarter were within the company's target ranges. Days sales outstanding (DSO) fell to 63 days, and operating cash flow of $3.4 million helped boost cash, cash equivalents and investments to $96.8 million at June 30.

In a separate release issued today (http://www.f5.com/f5/news/press/), 5 also announced that it has acquired the assets of uRoam, Inc., a provider of Web-based remote access solutions, for $25 million in cash. Steve Coburn, F5's senior vice president of finance and CFO, said he expects early sales of uRoam's products in September but does not expect revenue from those sales to be material in the current quarter, ending September 30, 2003. For fiscal 2004, he said uRoam's products could generate revenue in the range of $8 million to $12 million.

Including the effect of the acquisition, F5 has set a fourth quarter revenue target of $29.5 million to $30.5 million with earnings of $0.02 to $0.03 per diluted share.

F5 Networks Inc.

uRoam Inc.