Kip E. Meintzer – Investor Relations Tal Payne – CFO Gil Shwed – Founder, Chairman and CEO

Shaul Eyal – Oppenheimer & Company Daniel Ives – FBR Capital Markets Phil Winslow – Credit Suisse Group Gregg Moskowitz – Cowen & Company Michael Turits – Raymond James Robert Breza – RBC Capital Markets Philip Rueppel – Wells Fargo Securities Sarah Friar – Goldman Sachs Brent Thill – UBS Keith Weiss – Morgan Stanley Sterling Auty – J.P. Morgan Jonathan Ho – William Blair Walter Pritchard – Citigroup Rob Owens – Pacific Crest John Koski [ph] – Sanford Bernstein Scott Zeller – Needham & Company Todd Raker – Deutsche Bank

Greetings, and welcome to the Check Point Software third quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kip E. Meintzer, Head of Global Investor Relations for Check Point Software Technologies. Thank you, Mr. Meintzer. You may now begin. Kip E. Meintzer: Thank you, Rob. Good morning, everyone. I'd like to thank all of you for joining us today to discuss Check Point's record financial results for the third quarter of 2010. Joining me on the call today are Gil Shwed, Chairman, and CEO; and Tal Payne, Chief Financial Officer. As a reminder, this call is being webcast live on our website and is being recorded for replay. To access the live webcast and replay information, please visit the company's website at checkpoint.com. For your convenience, the conference call replay will be available through October 27. If you'd like to reach us after the call, please contact Investor Relations at +1 650 628 2040. Before we begin with management's presentation, I'd like to bring the following to your attention. During the course of the call, Check Point representatives will make certain forward-looking statements. These forward-looking statements may include our expectations regarding demand for our security products, our expectations regarding the introduction of new products and the success of those products, and our expectations regarding our business and financial outlook for the fourth quarter and full year of 2010. Other statements which may be made in response to questions, which refer to our beliefs, plans, expectations, or intentions, are also forward-looking statements for the purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act. Because these statements pertain to future events, they are subject to various risks and uncertainties, and actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to, the risks discussed in Check Point's annual report on Form 20-F for the year ended December 31, 2009, which is on file with the Securities and Exchange Commission. As a reminder, Check Point assumes no obligation to update its forward-looking statements. In our press release, which has been posted on our website, we present GAAP and non-GAAP results along with reconciliation tables, which highlight this data, as well as the reasons for our GAAP presentation – our presentation of non-GAAP information. Now I would like to turn the call over to Tal Payne, Check Point's Chief Financial Officer, for a review of the financial results.

Thank you, Kip. And hello, everyone. I’d like to thank you all for joining us today for the review of an excellent third quarter. This quarter we recorded all-time record results across all key metrics. Our results exceeded the high end of our projections as we continued to demonstrate solid growth across all regions. Our revenues for the third quarter increased by 17% over the same period in 2009, while our non-GAAP earnings per share were $0.63, representing 21% growth over the third quarter of 2009. Before I proceed further into the numbers, let me remind you that our third quarter GAAP financial results include non-cash equity-based compensation charges, amortizations of acquired intangible assets, restructuring and other acquisition-related charges, and the related tax effects. Keep in mind that non-GAAP information is presented excluding these items. Now let’s take a look at the financial highlights for the quarter. Third quarter revenues were all-time record of $273.2 million, an increase of 17% compared to $233.6 million in the same period a year ago. This growth was driven by exceptionally strong product sales. Product and license revenues were $106.4 million, representing a 22% increase over the same period last year. The growth came from all main network security product lines, including the Power-1, UTM-1 and Smart-1. Our software updates, maintenance and service revenues reached $166.8 million this quarter, a 14% increase year-over-year. Deferred revenue as of September 30, 2010 was $396.3 million, an increase of $36.2 million or 10% over September 30, 2009. Our trend on the past two years is to move from – to more concentrated contract renewals in the fourth quarter by unifying each customer renewal into one large contract. We expect Q4 to show significant increase in deferred revenues just like we saw last year. We had growth in revenues across all geographies, with the Americas and Asia-Pacific leading the growth. This is the fifth consecutive quarter in which the Americas are leading our growth. It is a good sign for the strength of our business in the US. Revenue distribution by geography for the quarter was as follows. Americas contributed 44% of revenues, Europe contributed 38% of revenues, and Asia-Pacific and Japan, Middle East and Africa region contributed the remaining 18%. From a deal size and quantity perspective this quarter, transactions greater than $50,000 accounted for 57% of the total order value compared to 54% in the same period a year ago. $1 million customers have also grown nicely this quarter, with deal value growing by 10% compared to Q3 last year. Product value in these deals was even more impressive with 36% growth. From an operating perspective, we posted great results. Our non-GAAP operating income was $156.9 million this quarter, an increase of 23% compared to the same period in 2009. This also reflected the highest quarterly non-GAAP operating income in the history of the company. Non-GAAP operating margin this quarter was 57%, an increase from 55% in the same period last year and the previous quarter. GAAP net income for the third quarter of 2010 was $114.5 million or $0.54 per diluted share, up from $91.5 million or $0.43 per diluted share in the same period a year ago, representing an increase of 26% year-over-year. Non-GAAP net income for the quarter was $132.6 million or $0.63 per diluted share up from $109.5 million or $0.52 per diluted share a year ago. Earnings per share exceeded the high end of our guidance, representing 21% growth year-over-year, primarily as a result of our top-line performance. The number of shares used in computing diluted earnings per share was 211.6 million shares. Going forward, given the increase in the stock price, at the current level, this number is expected to be around 213 million to 214 million shares in Q4 2010. Our cash flow from operations this quarter was $144.6 million, an increase of 15% from $126 million in the third quarter a year ago. This was mainly as a result of strong collection as reflected in our DSOs, which were 59 days this quarter compared to 74 days in the same period last year. During the quarter, we purchased approximately 1.44 million shares for the total cost of $50 million as part of our share repurchase program. Finally, our cash balance at the end of the quarter was $2.256 billion compared to $1.736 billion as of September 30 last year. Over the past 12 months, we have generated $520 million, net after two small acquisitions and approximately $200 million in stock purchases. Now let me turn the call over to Gil for his insights on the third quarter.

Thank you, Tal. And thank you, everyone, for joining us on the call today. The third quarter was quite an exceptional quarter. We delivered all-time high record results for the quarter that exceeded both our top and bottom line projections while producing operating margin of 57%. This was the second consecutive quarter that we realized plus-20% organic growth in product revenues, which reflects strong demand across our network security products during the quarter. I’m also pleased to see that more and more customers are drawn by our Software Blade platform and recognize the value that we are working hard to provide. Our numbers only show the tip of the iceberg in the potential of selling additional new blades. Our IPS Blade is doing quite well, and we will continue to have an impact in the revenues. Keep in mind that its revenues are part of the services line and are amortized over the next year. The Software Blade long-term strategic vision is starting to catch up with our customers. During the quarter, we announced and delivered several new software blades, further expanding our offering. These include the Application Control Blade, which is actually expected to ship in Q4, that secures the access to Web 2.0 through a unique combination of the technology, user awareness and broad application control from the world's largest application classification database, the Check Point AppWiki, with over 50,000 Web 2.0 widgets and more than 4,500 Internet applications. We also introduced our Security Gateway Virtual Edition Software Blade with VMsafe integration that provides customers with one-click security protection for private and public clouds. In addition, we introduced Multi-Domain Management Software Blades that allow businesses of all sizes to simplify management by segmenting security into virtual domains based on location, business unit or security functions. And we keep innovating with more software blades. For example, this quarter, actually today we are going to release another exciting blade, our Mobile Blade, which will enable our customers to get new level of connectivity and security from their iPhones. Customers will get one-click secure access to their corporate portal and full and secure integration with email, contacts and calendar. The new iPhone Mobile Blade is available now and so is the Gateway Software Blade. As for financial projection, our year-to-date results have provided us with some good results to increase our fourth quarter projection. So we are increasing our projection, as we expect revenues in the range of $290 million to $312 million. Non-GAAP earnings per share is expected to be between $0.65 to $0.70. GAAP-based EPS is expected to be approximately $0.09 less than that. For the full year, that translates into revenues in the range of $1,069 million to $1,091 million, with non-GAAP earnings per share between $2.38 to $2.43. GAAP-based EPS again is expected to be approximately $0.36 less than that. I’m glad to have you all on the call. I’m even more pleased to raise our guidance again for the year. We are looking forward for a great fourth quarter. With that, I’d like to open the call for your questions.

Thank you. (Operator instructions) Our first question is from the line of Shaul Eyal with Oppenheimer & Company. Please proceed with your question. Shaul Eyal – Oppenheimer & Company: Thank you, operator. Hey, good afternoon, guys. Congrats on the good execution – continued good execution, I should add. Two questions in my end. Gil, Tal, what’s kind of the current state of affairs in Europe? Maybe you can talk – maybe you can provide us with some more color about the specific countries. And the second question is, Gil, what are you seeing in terms of market share gain? Can you kind of specify any particular vendor that you think you could be grabbing or regaining some share?

First looking from a geographical point, I did mention that the US continued to be very strong, again, the fifth in a row, which is quite impressive. Europe was fine. We haven’t seen much impact on the macroeconomic effects of Europe. We have some countries that we get better results and some countries that we didn’t have as good results, but at least as far as we can tell, which was related to internal issues that we have, and it doesn’t really correlate with the macroeconomic conditions that some might expect in Europe. So I think overall Europe is stable, going well, and we’d see next quarter and how it continues. Asia-Pacific, by the way, this quarter was very strong. We had a multi-quarter trend that we are increasing our revenues that continue. It has a lot more potential. Again, there are some countries in Asia that we have much more potential. But overall the numbers are actually very, very good and honestly priced. So is Latin America, by the way, for this quarter. I mean, overall, everything is good, and there are few countries that we can improve, but as far as I can tell, it related only to more of our internal issues and anything I can identify as macroeconomic. And related to market share, I don’t have an – I mean, I’m trying to focus on doing the right thing for the customer on developing the right product, not only trying to measure us against the competition. I do have all the reasons to believe that this year we are gaining market share nicely. And I would guess that it’s from several or most competitors, and I think we have a lot of new products and new exciting things coming up in the next year that will accelerate it even more. But again, my focus remains on how we do the right thing for the customers, not on measuring one point or two-point gain in market share in the quarter. Shaul Eyal – Oppenheimer & Company: Got it. Maybe just kind of a quick follow-up. How many blades did you guys have by the end of the quarter? That’s still at around 33 or that’s a higher number now?

I think it’s a higher number, but I don’t have it in my mind. It depends significantly (inaudible) management – I mean, the total combination is around 40, but I will need to double – to check it and count it. Maybe you counted it better. I’m not sure. Shaul Eyal – Oppenheimer & Company: Okay. Thank you very much. Good quarter.

Our next question is from Daniel Ives with FBR Capital Markets. Please proceed with your question. Daniel Ives – FBR Capital Markets: Yes, thanks. Great quarter again. When you think about your cash balance, I mean, obviously you have more cash in some countries. How are you thinking about either accelerating the buyback? Obviously I would increase the tax rate. On maybe acquisitions, you go for small acquisitions, what areas. Maybe you could just talk about that. Obviously it’s a good problem to have, but just how you are thinking about it. Thanks.

I’ll talk a little bit about the buyback, taxation and how these things change, because they are changing. I do think that our cash balance is actually very good in the sense that it enables us to think more and more about bigger and bigger acquisitions. And I’m not trying to tell that we want to do a big one now or that we have something on the page, but I think that the cash balance that we have is good that we can do an accretive deal at most sizes available today in the security market, and I think that’s a very good sign if we find that one of the companies in the marketplace today is the right target. Again, there's no hints here, just look at the macro level when I analyze a security company compared to our cash balance. It’s probably more –

And I’ll just add that, as we always said, that the main use for our cash is plan for acquisitions, buyback and working capital needs. And I would just say one word about the buyback historically and still the case today was that there is a limit on the amount that we can distribute as buyback or as a dividend that is not subject to taxes. So there is no limit. We can distribute as much as we would like, but if we distribute little bit more than a certain amount, then it will be subject to taxes. The good news is that the tax authorities in Israel and the legal situation right now that it looks like it’s going to be changed. There is a proposition to change it, which means that the consideration whether to distribute or not will not have any more (inaudible) and everything will go according to the plan, then we will not have any more consideration of the tax effect. Now we will be open to make our decision that still remain – decisions will remain acquisition, buyback versus the levels of cash in the company. So tax changes look like they are going ahead, but we will have to continue following up closely and to see if it will be changed. Daniel Ives – FBR Capital Markets: Thanks.

Maybe one more addition, there is another plan also to reduce the tax rate in Israel in general. So I think when it comes to taxes, the way the government is growing here is to change it in a way that should be positive, assuming it will happen, and it is expected to happen in 2012.

Thank you. Our next question is coming from the line of Phil Winslow of Credit Suisse Group. Please proceed with your question. Phil Winslow – Credit Suisse Group: Hi, guys. Great quarter. I’m wondering if you could just touch a little bit on what you’ve all been doing. I know there has been something that you haven’t done for a couple years. I’m trying to shift the renewals and consolidate them towards Q4. Have you seen accelerating a trend towards that over the past year? And then also just a question to Gil. When you look at just the blade strategy right now, what do you think as far as (inaudible) install base of actually getting the architecture out there, sort of what we’re staying in? Thanks.

Sure. I would start and then Gil might add a few cents if there is still. You’re right. We did see it in the last few years and it continued to more a concentrated contract renewal for the fourth quarter by unifying the customers’ renewals to one large contract. It benefits it and it benefits the customers. So it’s the same phenomena we’ve seen before. You can see that the short-term deferred revenues increasing 12%, and you can see that the reduction versus the previous quarter is similar in percentage, obviously not in dollars because our base is increasing. But in percentage, it’s similar to what you’ve seen on average in the last five years between 2% or 3% to 6%. So it’s very much in line with our expectation.

In terms of the Software Blade, I think we are seeing – I mean, most of the new products are sold with R70 and the Software Blade. We are seeing also a continual change and continual shift of existing customers who upgrade their software to R70 to Software Blade version. I think that year-to-date the small percentage of the tip of the iceberg in terms of what the benefits are. The good news is that I think we are in more and more from customers that we find is appealing that they want the new functionalities. They are seeing like the Mobile Blade that we are launching today that hasn’t really grown (inaudible). Every company has remote users. Every company wants to connect mobile devices with its network. It can have and should have a good impact on people’s motivation to upgrade. And so I think we are – today we are talking about many, many tens of thousands of customers that are already on the Software Blade version. And I think that 2011 can be a very important year for a much bigger version. Phil Winslow – Credit Suisse Group: Great. Thanks, guys.

Thank you. Our next question is coming from the line of Gregg Moskowitz of Cowen & Company. Please proceed with your question. Gregg Moskowitz – Cowen & Company: Okay. Thanks very much. Tal, maybe just a quick housekeeping question. I know you reported the deal volume increase for large deals. Just wanted to confirm, is that a total contract value number that you are talking about? And if so, I was wondering if you could also tell us how many deals over $1 million were signed in the quarter.

Sure. I was talking about the deal value. That’s correct. The number of transactions were 19 customers with software transaction over $1 million. Gregg Moskowitz – Cowen & Company: Okay. And then in terms of the security appliances as a percentage of product revenue this quarter?

I think it’s a little bit over 75%. It’s right now pretty much stabilized. And that means that with all the growth that we are seeing is not shifting product mix, it’s selling more products. It’s getting slightly a higher rate into this product. So it’s all organic and it’s all very, very nice growth that we are seeing. Gregg Moskowitz – Cowen & Company: Okay. And then just lastly for Gil, how did Endpoint do in the quarter? And I’m wondering do you have an update on the potential timing of the new Endpoint suites that you are planning on leasing.

Endpoint was relatively stable this quarter. I think there is a lot of fair expectation for the new version like you mentioned. And it’s still expected to shift this quarter, and that’s a very revolutionary approach with the management, with unified management with a new close look for a security management of Endpoint, which I think is way, way ahead of everything else in the marketplace, still between that availability and having a more significant effect on our growth rate on revenue values will take a long time. We are still a small vendor in that space and I think we will need to show a lot of (inaudible) to the superiority of our management and client technology in the Endpoint space. Gregg Moskowitz – Cowen & Company: Okay. That’s helpful, Gil. Thanks very much.

Thank you. Our next question is from Michael Turits of Raymond James. Please proceed with your question. Michael Turits – Raymond James: Hey, guys. On Software Blade, two questions. One, could you just maybe put in order – you mentioned IPS. Could you put in order the blades that are selling in terms of how much they are being pushed through? And then I have a follow-up.

In front of me, I don’t have – I mean, I have right now – there are two types of blades, what we call the annuity blade that the customer pays every year and there is a sort of blades that are part – not part, that are product blades that the customer pays forever. In terms of the annuity blades that include solution for exemption, anti-virus, URL filtering, anti-spam, things like that, the IPS blades are approximately 75% of the blades and all the others are 20% to 25% of the blades volume. We have seen very nice growth on all of them. I mean, the overall growth in blades is – with annuity blades year-over-year was about 29%. The IPS blades themselves are closer to 40%, 50%. So I mean, we are seeing very, very healthy growth in the blade sell volume. And by the way, many of these blades, the good version or the version that will unlock all the value around, then we still expect it to come later this year or next year. Michael Turits – Raymond James: Okay. And Gil, approximately where are blades now in terms of percentage of your services revenue? If I look at that services number, how big a piece of that is accounted for by blade and how much was it, say, a year ago?

It’s not a very big volume, because I mean, we have very, very big software subscription contract. It’s the fourth contract that amount for the most of that. It’s significant, but it’s still very small and we don’t break the number out specifically. Michael Turits – Raymond James: Okay. Great. Thanks very much, guys.

Thank you. Our next question is from the line of Robert Breza of RBC Capital Markets. Please proceed with your question. Robert Breza – RBC Capital Markets: Hi, good morning. Gil, I was wondering if you could kind of give us an update on how the overall transition for the Nokia customer base. And just kind of help (inaudible) the anniversary date, really just kind of an update on what you are seeing from a customer conversion perspective would be helpful. Thanks.

I think very, very good. I mean, by now – long ago, I mean, we are already completely integrated. I don’t think that there are any issues in the marketplace. Customers are very, very confident about our ability to deliver, about our ability to support. I think the integration internally was very quick. So I mean, it’s not that we are – and it happened in Q2 last year. So I mean, it’s not – we haven’t changed much. I think by now, we have already completed two quarters that we have quarter-on-quarter comparison from a financial standpoint and on your own good feel from customers. I think what customers are expecting now is what will come at 2011 and mainly 2012 with unifying the platforms. But at this point, customers are very happy. They will be coming more and more. Again, the accounts are becoming unified. The potentially unified customers that prefer purchased only Nokia IPS lines as they are more open to get the Check Point Power-1 and UTM appliances, which is also very good. And again, I think we hear a lot of expectation to the new model that may come to market in late 2011 and 2012, which are actually unified to platforms and with single platform for Check Point. Robert Breza – RBC Capital Markets: Great. Thank you. Nice quarter.

Thank you. Our next question is from the line of Philip Rueppel with Wells Fargo Securities. Please proceed with your question. Philip Rueppel – Wells Fargo Securities: All right. Great. Thank you very much. Gil, you mentioned that the migration to the new blade chassis, the R70, will be important as we move into 2011. Are you seeing acceleration in that, or is that still happening at a measured pace? And then second of all, maybe for Tal, the margin improvement that we saw in the quarter, was there anything specific or more beneficial this quarter than you expected or really was it just the greater revenue realization? Thanks.

I’ll start maybe with the easy part about the margins, it’s mainly the revenues. I mean, the expenses are not necessarily working in our favor with the weakness of the dollar even though we had very little effect, but it’s still not in our favor. So the main one is simply more revenues and more product revenues that we expected. And as for the migration to R70, I think it’s going really, really well. I think customers are happy with the product. I think the only thing – the only thing that holds us back is the customers are not anxious to upgrade their Gateways. I mean, they are – and it’s actually a good news because it means that, first, we have a lot more potential moving forward, and second, it means that we are very happy with what we are today. Philip Rueppel – Wells Fargo Securities: Great. And from a customer perspective, is the drive there to move more towards a suite of products, the UTM kind of solution, or is it really the desire to upgrade the point products initially and then you see the follow-on sales later on?

I think it depends on how we package it. Many customers – I mean, it depends. On the high end and data centers, customers are trying to keep the security solutions doing small number of function and doing it very, very well. And the Software Blade Architecture allows them to think about it in a more open way and to see that we have an architecture that’s more mix and match than they had before. The customers are still at the data center and the high end. They are still focused on small number of functions per device. On the small and mid-sized enterprises – and again small and mid-sized enterprises are not necessarily highly competitive. It can be competitive with thousands of people, then start to be pretty [ph] big. I see a much, much bigger shifting to using all the functionalities of the UTM and the Software Blade, things like messaging security, anti-virus, IPS and so on. So that goes very well. And on the high end, there is more and more shift towards using the IPS because the IPS is the (inaudible) customers are getting more and more that they are using that we can supply that high quality and high speed. Philip Rueppel – Wells Fargo Securities: Great. That’s very helpful. Thanks very much.

Thank you. Our next question is from the line of Sarah Friar with Goldman Sachs. Please proceed with your question. Sarah Friar – Goldman Sachs: Terrific. Thanks for taking my question. Gil, can I ask a question on the Endpoint? What do you see going on there, as we see changes like the virtualization begin to gain momentum? What does that mean in terms of the changing footprint for Check Point? Does it move more and more stuff back towards the data center again making the network more important? Or do you still think that there is a role for security on that Endpoint?

I think that – I mean, of course, virtualization is an important trend, but again I think it’s – even with much more virtualization, there is a lot more endpoint. I think the main shift that I’m starting to see on the Endpoint, yes, I mean, Endpoint software is still very important. I mean, we’ve asked our customers what their priorities next year. And most of them are using products from more than three vendors to security Endpoint, and yes, they would like to reduce this number of vendors. They are interested in what we are doing. But the bigger shift that I’m seeing is actually on something else, is the move to mobility. We’ve seen a tremendous shift in the last three years to making mobile devices like iPhone or iPad and all of our competitors gained momentum in the enterprise space. We are starting to see that as a real trend, and that’s the first time. Even if the ability towards the network from the mobile device exists for ten years, the real day-to-day use of that is only accelerating with this kind of open or semi-open devices in the last year or two. And we are seeing more and more interest in that. I think if there is one thing that in the next five years can change more drastically the shift of platform, it’s the trend. Sarah Friar – Goldman Sachs: Got it. Okay. That’s very helpful. Tal, could I just follow up quickly on the cost side of things? I understand the leverage that you get when you get that outperformance on the top line, which is terrific. But as you think about particularly sales and marketing, since it’s the biggest OpEx line, do you assume that for December and if we look at into the next year that as a percentage of revenue, it returns a more normalized level around kind of 19% to 20% rather than the 18% of sales during the quarter?

I would just say that typically Q3 have higher margins than Q2 if you look throughout the history, as Q2 has higher marketing expenses and so on. So we have less events in Q3. That’s why you would see lower marketing expenses, for example. And typically as well, many employees take vacations, so you have less compensation expenses in that quarter. So that’s part of the explanation for the margin. And I would assume the trends in the future as well.

When we try to do most of the mark, I mean, Q4 has lot more sales and marketing expenses based on year-end commission and so on. Q1, Q2, we have lot more conferences and events. And again, I think our focus has and will remain on driving the top and bottom line. I think we are trying to improve on the margin still. Sarah Friar – Goldman Sachs: Great. Okay. Thank you very much.

Thank you. Our next question is from the line of Brent Thill with UBS. Please proceed with your question. Brent Thill – UBS: Thanks. The blades seem to be having a positive impact on ASPs. And I’m just curious in terms of how much more running you think you have on ASPs. And secondly, a number of the software companies are new it. Enterprise license agreement model, as they become a platform, are you seeing more customers requesting an enterprise license agreement where they can consolidate all their spend and creating some of these specialized programs too and enterprise license agreement with the customer base?

I would say yes and no. Yes from the standpoint that I think our relationship has greatly improve with our large customers in the sense that we are able to look at the largest single product purchases, but as much bigger the total strategy of the total account, and that reflected both the things like annuity, the fact the customers renew their contract once a year and not renew few products or few accounts every quarter. It’s also reflected in the big purchases of new products. And we are not entering into many, many huge agreements when the customer signs a blanket agreement to buy too many products. We did some of that a few years ago. We are still open to doing that, but at the end (inaudible) to customers is usually very, very tangible. We buy the project – the project and the product that they need at the time they need it. And I mean, there is no – hardly ever any kind of huge contracts that are not reflecting the ongoing installation and usage of our software on an ongoing basis.

Thank you. Our next question is from the line of Keith Weiss with Morgan Stanley. Please proceed with your question. Keith Weiss – Morgan Stanley: Excellent. Thank you, guys. Also, very nice quarter. I was wondering if you could talk to us a little bit about the linearity you saw in the quarter, sort of how revenues played out or how sales played out throughout the quarter. And then maybe give us a little bit of visibility into your pipeline heading into 4Q and perhaps what’s most promising in that pipeline?

The quarter was very back-end loaded like most third quarters. It’s slightly less back-end loaded than the previous quarter, but still, I mean, it’s not a big change. Two or three more (inaudible) in the last day that are not a strategic shift. There are positive shift when it happens, but it’s not a game-changing thing in terms of planning our business. I think we are starting Q4 with a good pipeline of projects and good pipeline of products that we are shipping in good number of contracts. So I mean, I want to be cautious we had very good run-up in the last few quarters, but there is no reason – I really, really want to be careful about the fourth quarter, but from all the other indications that I get, it’s going to be a great quarter. We have increased the guidance, we have good forecast from our field, and we expect to ship more products than we’ve ever done in our history. Keith Weiss – Morgan Stanley: Excellent. And if I could add one follow-on, from an endpoint of your guidance, it looks like you guys expect to be able to maintain margins close to that 57% level. The shekel has been gaining strength versus the US dollar. I was wondering if you could give us some visibility into how much is in that expense target or the weaker US dollar.

Sure. Remember that the year 2010 we hedged. So whatever happens with the dollar, it had some effect for the portion that is not hedged. But the larger portion is hedged, and therefore the effect is minor either way, if it’s going up and if it’s going down. Looking forward, you’re right that in the last few months it looks like the dollar is getting weak again, which means when we hedge next year it will be at lower levels and higher level of expenses as we start the year. And just to give you a sense as – about 50% of our expenses are in local currencies that are not the dollar, and number is Israeli shekel and then the euro and then many other currencies. If the dollar is getting weaker, then our base of expenses increases. And if you assume a 5% change in the dollar and approximately 60% of our expenses are in local currency, then it should be an effect of (inaudible) about $10 million. Just as a general – obviously it can shift and it can change, and it could be maybe (inaudible). But in general, the effect of 50% is in local currency, and usually they are moving to the same way versus the dollar.

Obviously, we want the dollar to be strong and with the shekel – Keith Weiss – Morgan Stanley: Excellent. Thank you, guys.

Thank you. Our next question is from the line of Sterling Auty with J.P. Morgan. Please proceed with your question. Sterling Auty – J.P. Morgan: Yes, thanks. Hi, guys. Two questions. The first one is, 2010 has been a very good year for you guys. As you think about the trends that have benefited you and you think about the sustainability, as we look out to 2011, I know you’re probably not ready to give a growth rate, but qualitatively, how should we think about the legs that these trends have carrying into 2011? Could we see the same tailwind continue into next year?

We haven’t done our modeling for next year. So I’m not going to give any number for the guidance. I would say in general that my basic assumption is that the momentum or the success that we’re seeing this year is not going to continue next year. And I think that next year is going to be positive. I don’t think we are going to have a lot of success, but at least in terms of planning, we are not going to plan the same kind of growth rate that we’ve seen so far. And I think that’s overall a good time because we will see that that will be reflected in good profitability, because I mean, most – let's be honest about what – the main thing we control is our expense line. The revenue line is dependent on many, many other factors that are beyond our control. And that’s something we always have to remember. Sterling Auty – J.P. Morgan: Okay. And then my follow-up is, now that you’ve annualized the Nokia acquisition, some of the stuff that you have to write off for deferred revenue in the M&A accounting, in other words, their maintenance specifically, is there any sense as to those customers – what the renewal rates of those customers where the deferred revenue is written off? Are they coming back at a high rate in resignings? In other words, are we going to get some layer on that deferred revenue from the old Nokia customers and is that part of the benefit we should see in the fourth quarter?

I think it’s two different questions. I mean, the accounting treatment of contract is one thing that I think we are pretty much past that effect for the most part.

Yes, we’re pretty much past that probably in Q1 this year.

So I mean, what we are seeing now is a stable situation in that regard. We haven’t seen customers leaving us in a higher phase, quite the contrary. We’ve seen many Nokia customers that are very happy to stay with us. Keep in mind we can use that acquisition to rationalize many, many rates and actually reduce some of the support in subscription rates. We wanted to use that opportunity to actually give better value to customers. And I think even if it’s sort of short-term, we’ll sacrifice some revenues on that in the past year. I think long-term we’ve created the higher support – higher annuity rate, higher attachment rate. And in general, customers think that we are more competitive than we’ve been before. So if I would give my guess, and it’s a guess today, it’s what we can expect former Nokia customers instead of renewal rate, it’s probably higher today than it was before with Nokia. I mean, these are all significantly higher, not from a – sort of from 70% to 90%, it’s a significant change that will stay over time. Sterling Auty – J.P. Morgan: All right. Great. Thank you.

Thank you. Our next question is from Jonathan Ho with William Blair. Please proceed with your question. Jonathan Ho – William Blair: Good morning. Can you guys give us some additional color on what the internal issues were in Europe and whether those issues have been resolved? And just as a follow-up, how much demand are you seeing for application visibility solutions? And do you think that could potentially drive an incremental upgrade cycle to the firewall base?

We haven’t seen – I mean, maybe I was misunderstood. We didn’t have any major issue in Europe. We have some countries that did well, some countries that did less than that, and now nothing main. Actually, the leadership of our team in Europe remained unchanged. The heads of all the regions are doing good job. And we have some countries that some people left and other countries that more people joined, but nothing that’s a turmoil in our organization, quite the contrary. I mean, it’s our management team in Europe is extremely good and extremely stable. Actually today I can say it for the most part of our role before we go over the situation, but it is the situation now. What was again the second part of the question? Jonathan Ho – William Blair: The second part of the question was, how much demand are you seeing for application visibility solutions? And do you think that maybe this could drive an incremental upgrade to the firewall base?

Okay. Maybe one more comment about Europe. In one country that we did see some business that wasn’t growing at the pace we want to grow is the UK. The UK has been our strongest country for like three or four years now, and we’ve seen some slowdown there. As I said, it is related to what we believe is internal issue, not macro economical issue. And I think that that’s actually a good sign because producing the results that we’ve done in that environment and that we have plenty of upside coming big to the UK next year. So I mean, it’s actually, I think, showing stronger part of the business. As of the – I think if you mean the Application Control Blade, there is a high level of interest in that. Actually, when I use it, and I use it now every day, it opens – you look at the same gateway that you looked before, you will see tremendous amount of data that you couldn’t see before. The exact application, the exact – I mean, the exact amount of application, the exact sub-app on the Internet, which people are being with Facebook and which people are doing streaming media and so on, some of it is more usage based, some of it is more security-based like users that are opening up the corporate networking to file sharing and even real cost value applications that are all over HTTP or a web connection. So I think the level of interest is high. I still think that the level of feasibility of those data and how important it is, is still to be proven. And it’s not proven yet. I think overall it will have a very, very positive impact on our customers, because once you get with them, your every customer would say (inaudible) what’s going on, I want to use this blade, and that triggers the whole nice set of events from buying the blade itself to what maybe the entire software to the latest software version to buy new appliances that will support that. So if I’m right, and many people will express interest in that, it should have only positive impact on our business. Jonathan Ho – William Blair: Great. Thank you.

Thank you. Our next question is coming from Walter Pritchard with Citigroup. Please proceed with your question. Walter Pritchard – Citigroup: Questions, I guess, Tal, for you. One on the large uptick in annuity revenue. You saw in the quarter the software update subscriptions and so forth. That’s the biggest increase you’ve seen in a number of quarters here. I’m wondering – is that a sustainable increase and do you expect that sort of level to build going forward.

I’m not sure I understood. Can you repeat it? Walter Pritchard – Citigroup: Sure. So, the annuity – I guess the annuity revenue stream, the software updates, maintenance and so forth was up pretty significantly in the quarter, I think, almost $10 million. And I’m wondering what the drive of that was. And do we expect that to grow on a sustained basis going forward, or is there something anomalous this quarter that caused the spike there?

We expect the service revenues to continue and increase, knocking the $10 million as we’ve seen this quarter, but obviously there can be some shift between quarters. So I’d say, yes, it was a strong quarter in the level of the services more than expected in that regard, but we still expect it to continue to grow. If you look to the history as well, it increases in some quarter, it was a one, two, three quarters flat and then it suddenly increased in $3 million, $4 million a quarter. And in the recent year, I think we had $2 million or $3 million each quarter, and this quarter was very strong. Some of them relate to annuity. Some of them can relate to specific services of installation and so on and services that the customers are purchasing. But it’s all organic, it’s all normal, and we do expect to see continued growth, not in that way. Walter Pritchard – Citigroup: Got it. And then just related to headcount plans going forward, I mean, I think this year somewhat of a breakout year for the company and you’ve always been very conservative in your hiring and so forth. I’m wondering – is there anything, say, a year like this or another like this that would cause the company to really step up on an order of magnitude the level of investment in the business, specifically with headcount?

I think we are constantly growing the headcount. There is no big revolution there. I mean, this quarter actually as of the many, many people, almost 100 people today have come. And I don’t expect any, I mean, sort of unusual events. I think we do expect us to keep growing, to keep invest in the right places. There is a lot of places in sales in the sales team that we want to invest, a few places in R&D that we want to invest. We’ve actually started this quarter like free programs for A2 level employees, mainly in technical positions that we are training newly – I mean, some graduates – not even graduates of universities into becoming experts on technical products of Check Point. I mean, it’s stable and expect to be stable. I think what we are doing now, what we are trying to do is focus the people on the places that we – that are the places that we can get the best return from them, whether in sales or the technical team. Walter Pritchard – Citigroup: Great. Thanks a lot, Gil.

Our next question is coming from the line of Rob Owens with Pacific Crest. Please proceed with your question. Rob Owens – Pacific Crest: Thank you very much. Tal, can you give us a sense of what an apples-to-apples comparison would look like for Europe on a year-over-year now that you shifted, I think, Middle East and Africa into APAC?

Yes.

But I think we are breaking on that.

No, but I understand. But we don’t have last year, but we have – I can give you if you just give me – Rob Owens – Pacific Crest: Okay. While you are looking at it, I guess a bigger picture one for Gil. Given the consolidation we are seeing across the sector, is this having any kind of impact on pricing out there? Are you guys changing your discipline as you are looking at acquisitions? I guess from a bigger picture perspective, how should we view Check Point continue to tuck in, be a consolidator or potentially one of the companies that gets consolidated in this space?

First, I don’t see that acquisition and so on as much impact on pricing or competitiveness for us, rather I think it’s – the competitors are being acquired, still need to sell, and sometimes actually they need stronger discipline because from startups that are not dependent on quarter-by-quarter results, we need to produce much higher revenues and so on and so forth. I do think that the world needs a company that focuses purely on security and can deliver the best security software. And I think we want to be that, and we are that company and we want to be even bettering that. So I think that we have high expectation from ourselves in the next few years to become a bigger consolidator of security and to provide more security for our customers. The people keep doing it in the focused way that was done and so on. And I hope that in the next ten years we will see that happening in a similar way or even a better way than it has happened in the last ten years.

And maybe just to go back to your questions, and Europe growing about 10% this quarter. Rob Owens – Pacific Crest: All right. Thanks, Tal. Thanks, guys.

Our next question is from the line of Jeff Evenson of Sanford Bernstein. Please proceed with your question. John Koski – Sanford Bernstein: Hi, this is John Koski [ph] for Jeff. Jeff, thanks for filling me in. A kind of a bigger picture question. What security products do you find bigger cloud operators are looking for and the security in virtual environments becoming more important, both to cloud operators and to you from a revenue standpoint?

I think our revenues in the cloud in general are not extremely high, depending of course what we’re calling the cloud. We have many security providers that we are working on for 10, 11 years. We should call it cloud. We don’t call it cloud, but it’s – they buy the regular Check Point product. We’ve provided what we call today the Multi-Domain Management Software Blade, and this product continues to work well and we see a lot of interest on that. Other than that, I think cloud services, the cloud securities are still in its early stages, at least as security spending is concerned. And I think I’ve said it before and I’d say it again now, these are the high potential, but I think in terms of security and in terms of investment, sometimes we estimate these expectations tend to be a little bit higher than reality. John Koski – Sanford Bernstein: And then a quick question on the blades. Of the customers – I know it’s not that many, but of customers who are using software blades, how many on average do they activate?

I don’t have this number, but I think – I think it’s six or seven per customer, but I need to check that. Really I don’t want to – that would be my guess. John Koski – Sanford Bernstein: Okay. Thanks.

Thank you. Our next question is from the line of Scott Zeller with Needham & Company. Please proceed with your question. Scott Zeller – Needham & Company: Thank you. I hope I’m not repeating an earlier question. But I wondered if there is color around federal spending for both the US and the continent?

It’s stable. I haven’t seen too much happening over there. I think it’s in line with the rest of our business. Scott Zeller – Needham & Company: And in the US?

I don’t – nothing in particular, but –

It remained the same percentage of our revenues, so nothing changed in general. Scott Zeller – Needham & Company: Thank you.

Thank you. Our next question is from the line of Todd Raker with Deutsche Bank. Please proceed with your question. Todd Raker – Deutsche Bank: Hey, guys. Nice quarter. Just one quick question. I know you don’t want to talk about 2011, Gil. But as we think about the dynamics of the business and the blade architecture and the annuity, would you expect deferred revenue in the balance sheet growth to exceed the revenue growth on the P&L? How should we think about that dynamic around the annuity business?

I think we need to calculate that and do the financial. I mean, I haven’t done that yet. I think that the general rule is that if the revenue (inaudible) growth or the product growth is accelerating, it will grow much faster than the deferred revenue, and if the product revenue is shrinking or the growth rate is declining, then the subscription rates are growing. That’s what generally should do. The theoretical modeling of that is what you will see. I think I’m very – we are very, very fortunate to be today in a position when our product growth rates are accelerating, and therefore we are growing much, much faster than the overall deferred revenue. But the theory, in terms of projects, I think we will do the calculation for next year, and we’ll see next year.

Yes. And then maybe I’ll just add in other words, remember the deferred have other factors there. Remember that the deferred revenues don’t include the product booking, the deferred revenue do not include contracts that have not been invoiced, the deferred include contracts that have been invoiced for the long-term that can shift between quarters as there is nothing to do with annuity rates. So it’s not a one-on-one indication of anything in any quarter.

But our intention will be – having bigger deferred revenues is good. Having higher revenue in general is even better. I think having high product revenue, I think, is the most important factor because that means the customers are actively choosing to buy more, to do more, to expand the usage. And that’s the most important factor. And I think it’s – these are all good factors. Todd Raker – Deutsche Bank: Thanks, guys.

Thank you. Ladies and gentlemen, we’ve reached the end of our allotted time for questions. I would now like to turn the floor back over to management for closing comments. Kip E. Meintzer: Thank you all of you joining us today. We will be taking calls after the call. And have a great day. Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.