John Eldridge - Director of IR Andy Reinland - Sr. VP and Chief Finance Officer John McAdam - President and CEO Dan Matte - Sr. VP of Marketing

Samuel Wilson - JMP Securities Inder Singh - Lehman Brothers Troy Jensen - Piper Jaffray Ehud Gelblum - J.P. Morgan Erik Suppiger - Signal Hill Capital Group Mark Sue - RBC Capital Markets Paul Mansky - Citigroup Global Markets Matt Robison - Ferris Baker Watts Richard Sherman Jr. - MKM Partners Manuel Recarey - Kaufman Brothers Jeffrey Goldberg - Banc of America Securities Rohit Chopra - Wedbush Morgan Brent Bracelin - Pacific Crest Securities Ryan Hutchinson - WR Hambrecht + Co Cameron Cooke - Janco Partners Bill Choi - Jefferies & Company

Good afternoon. Welcome to F5 Third Quarter Financial Results. All parties would be on a listen-only mode until the question-and-answer session. Today's call is being recorded. If you have any objections, please disconnect. I'd now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Thank you sir, you may begin. John Eldridge - Director of Investor Relations: Thank you Andrea, and welcome to all of you to our third quarter 2007 conference call. Speakers on today's call are John McAdam, President and CEO; and Andy Reinland, Senior VP and Chief Finance Officer. John Rodriguez, Senior VP and Chief Accounting Officer; Tom Hull, Senior VP of Worldwide Sales; Dan Matte, Senior VP of Marketing; and Karl Triebes, Senior VP of Product Development and CTO, are also with us to answer the questions following our prepared comments. If you don't have a copy of today's press release, its available on our website, www.f5.com. In addition, you can access an archived version of today's live webcast from the Events Calendar page of our website, through October 24th. From 4.40 PM today until 7 PM Pacific Time July 26th, you can also listen to a telephone replay at 888-562-6807 or 203-369-3941. During today's call, our discussion will contain forward-looking statements which include words, such as believe, anticipate, expect and target. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by these statements. Factors that may affect our results are summarized in our quarterly release, described in detail in our SEC filings. Please bear in mind that F5 has no duty to update any information presented in this call. Now, I will turn the call over to Andy Reinland. Andy Reinland - Senior Vice President and Chief Finance Officer: Thanks John. In our fiscal third quarter, we achieved revenue of $132.4 million, reflecting 4% sequential growth and within our guided range of $131 million to $133 million. Our bookings outpaced our reported revenue for the quarter. Book-to-bill was greater than one. GAAP EPS of $0.51 was above the $0.48 to $0.50 guidance, we provided in our release in conference call on April 25th. Before discussing detailed results for the quarter and guidance for Q4, I want to remind you that all number are GAAP-based unless specifically identified as non-GAAP. Overall revenue grew $4.8 million or 4% from the prior quarter, and $32.3 million or 32% from the third quarter a year ago. The Americas represented 58% of revenue, EMEA accounted for 18% and Japan and APAC, each represented 12%. Product revenue of $97.8 million represented 74% of revenue. Service revenue of $34.7 million was 26%. Revenue from our core business was $121.5 million or 92% of revenue. Security revenue was $8.9 million, including $7.2 million from our SSL VPN products, and $1.7 million from an Application Security Manager product. WAN Optimization and Acceleration revenue was $2.1 million. The Telco vertical was 22% of revenue. Financial and technology sectors, each accounted for 19%. U.S. Federal Government generated 6% and total government was 11%. During Q3, we have three greater-than-10% distributors. AB-NET Technologies, which accounted for 12.3%, Ingram Micro which accounted for 11.2%, and Tech Data which accounted for 10.1%. Moving down the income statement; gross margin in Q3 was 77.6%, including approximately 600,000 of stock-based compensation expense. Operating expenses of $75 million were within our target range of $73 million to $76 million, and included approximately $10 million of stock-based compensation expense. Our operating margin was 21%. Our non-GAAP operating margin, which excludes stock-based compensation expense was 29%. Our effective tax rate was 37.6%. Excluding stock-based compensation expense, our non-GAAP effective tax rate would have been 33.5%. We continue to generate strong cash flow. Cash from operations was $38.2 million, and we ended the quarter with $633 million in cash in investments. On the balance sheet, DSO end of the period at 53 days. Inventories at quarter end were $9.3 million. Deferred revenue increased 11% from the prior quarter, to $83.2 million. Capital expenditures for the quarter were $4.5 million, and depreciation and amortization expense was $3.9 million. During Q3, we added approximately 75 employees ending the quarter with 1355 full-time employees. Moving on to the fourth quarter outlook. We are seeing early indications that our investment in sales and support headcount over the first GAAP of our fiscal year if beginning to pay dividends. As a result, we are targeting revenue in the range of $142 million to $144 million. We expect gross margin in the 77% to 78% range, including approximately 500,000 in stock-based compensation expense. We expect operating expenses between $78.5 million and $81.5 million, including approximately $10.5 million of stock-base compensation expense. Our effective tax rate for the quarter is anticipated to be 37%. Excluding stock-based compensation, we expect our non-GAAP effective tax rate to be 33%. We expect our Q4 earnings per share to be in the range of $0.53 to $0.55 on a pre-split basis and $0.27 to $0.28 per share reflecting the two-for-one stock split announced in our press release today. We are continuing to invest in the growth of the business and plan to add 100 to 120 employees this quarter. We estimate DSOs will be at or around 50 days. We expect inventory levels within a range of $8 million to $10 million, and we anticipate cash flow from operation to be in excess $40 million. With that, I will turn the call over to John McAdam. John McAdam - President and Chief Executive Officer: Thanks Andy and good afternoon every one. We are actually speaking today from Chicago, where we are hosting our Annual North America Progress Summit. We have approximately 300 sales persons, sales engineers and managers from our North American VAS [ph] in attendance to the conference. This is an exciting opportunity to meet with these partners, and share our plans for the upcoming years. Q3 which marks our 18th quarter of sequential growth was another solid milestone for the company. The percentage of business from each of our key geographies was pretty much as expected and was similar to previous quarter. Business in Japan down sequentially as expected in the first quarter of Japan's fiscal year, but the drop was much less than previous year. Our U.S. Federal business continues to demonstrate the strength we have seen in recent quarter, and represented approximately 6% of revenue for the quarter. Our EMEA business also experienced sequential growth in Q3, and our business in Asia-Pacific though down slightly on a sequential basis, actually had an increase in order booking, which bodes well for growth in Q4. U.S. Enterprise business also delivered sequential growth, as we continue to make progress in the Fortune 500 accordance [ph]. Our North American service provider business was down from the previous quarter, and below our internal forecast. The service provider sales pipeline remains strong, but we did experience some slippage of deals which were originally forecast for Q3. However, we expect most of those opportunities to close in Q4. Our services business once again produced solid sequential growth with yet another sizeable increase in deferred revenue. From a product perspective, the mix of business remains similar to the previous quarter, with our core Application Delivery Controller business accounting for approximately 92% of the total, compared to the position in our core business remains very strong as indicated in the latest magic quadrant from Gartner, where we continued to advance up onto the right and occupy the clear leadership position in the market. During its first few quarter as a new high-end of our Application Delivery Controller family, the BIG-IP 8800 continue to meet our expectations and was responsible for some key wins. We believe that BIG-IP 8800 system has no real viable competitor today, and we expect demand for this product to increase this quarter and into fiscal 2008, as both the volume and complexity of internet traffic continues to grow at significant rates. Our FirePass sales were up sequentially as expected, reflecting the strength of our competitive position in a market that remains relatively flat. In application acceleration we're seeing very good traction with our Web Accelerator product, which is now available as a software module on BIG-IP. Web Accelerator is proving to be a really great competitive differentiator on TMOS, and has contributed to a number of strategic BIG-IP sales wins. Sales of WANJet a symmetric WAN Optimization solution, continues to be slow as expected and we do not see that situation changing until, we release WANJet availability on TMOS. Recently we have moved into beta phase with this product, which we believe will position F5 with a key player in the WAN Optimization market in fiscal 2008. Montreal continues to be on-track for delivery to market at the end of this calendar year. During the last quarter we had discussions and product demonstrations with potential customers of Montreal during which we provided detailed information on Montreal's architecture, performance targets and functionality. The reactions have been extremely positive and we expect Montreal to increase our technology leadership in the application delivery control in market during fiscal 2008. Last quarter we talked about some of our new marketing initiatives including the partnership with Microsoft, where we announced the industries first application-ready network solutions for Microsoft applications. The Microsoft application-ready network solution contains prescriptive architectures, designs, applications and deployment guides. These two utilize the entire product portfolio to optimize Exchange 2007, SharePoint 2007 and Vista applications. During Q3, we held a number of joint marketing seminars with Microsoft in some of the key regions in North America. The seminars proved to be very successful in evangelizing the F5 value-add for these Microsoft solutions and resulted in the addition of significant new prospects for our sales pipeline. We also introduced application-ready network for SAP solutions last quarter, and we plan to extend this approach to our other major application partners. As far as Q4 guidance is concerned, Andy provided a target revenue range which will result in solid sequential revenue growth this quarter and position us for continued growth in fiscal 2008. Historically, Q4 has been a strong quarter for the company and we expect that trend to continue. Apart from EMEA which tends to see some softness in the summer months, we expect to see solid growth from all the other geographies. We expect to see strong sequential growth in Japan and continued growth in Asia-Pacific. We also expect sequential growth in Americas, which includes our US Federal and service provider business. As a result of our high contract renewal rates driving the continued growth of our deferred revenue of service business should deliver another solid quarter. To leverage the strength of our product roadmap and market position, we plan to continue with aggressive hiring-for-growth strategy in Q4. During fiscal 2000... to-date, we increased our employee base by 285. And as Andy mentioned, we plan to add another 100 to 120 employees in the current quarter. Our key goals with these investments are focused on top line revenue, customer satisfaction and technology leadership. We believe these investments will bear fruit in Q4 and then to fiscal 2008 and I continue to feel very confident about our current position as well as our potential growth... our potential for continued growth. I want to thank the entire F5 team and their partners for the support last quarter, and with that I will hand the call over for Q&A. Question And Answer

Thank you. [Operator Instructions]. Our first question comes from Samuel Wilson. Your line is open. Please state your company name and you may ask your question. Samuel Wilson - JMP Securities: JMP Securities. Good afternoon gentlemen. Just two questions for you today. Can you give us a sense of what linearity was in the quarter and also can you just give us a sense of how the overall environment if there's been any sort of material change in the last 90 days in terms of the overall demand environment? Thank you. Andy Reinland - Senior Vice President and Chief Finance Officer: Yes, still on the first question Sam the linearity, we were... the third month it was 49%. John McAdam - President and Chief Executive Officer: And then the overall environment Sam, no major changes as I mentioned in my script there. We did see some slippage of deals in North American service provider market. That mainly down to the fact that these are larger deals in very, very big projects are controlled frankly as much as in the Enterprise. But overall globally we think it's pretty good and that's why we feel good of the Q4. Samuel Wilson - JMP Securities: Perfect thank you very much. Good quarter gentlemen.

Thank you. Inder Singh. Please state your company name and you may ask your question. Inder Singh - Lehman Brothers: Yes hi. I am at Lehman Brothers. I wanted to ask you a question about really the guidance, the fact that your book-to-bill is greater than one, and you did have some of the resource right to contract perhaps with in timing. It seem to me that perhaps your guidance could be a bit on the conservative side. What's your philosophy on that right now in terms of... are you trying to be conservative. Are there risks that you are trying to quantify in the guidance that perhaps you can give some color on please? John McAdam - President and Chief Executive Officer: Well we have first of all the guidance is a guidance and we didn't comment on we believe it's conservative, but we obviously... it's our system for providing guidance. It's been pretty affective in the last four to five years. And it's based really on strong pipeline, competitive strength, the bottoms-up forecast and obviously absolute with the real position in Q3 as well. But that's fundamental what we based the guidance on. Inder Singh - Lehman Brothers: And as far as that Montreal you are really not counting on revenue from that until next year. So is that right? John McAdam - President and Chief Executive Officer: That's correct. Yeah we have goal is to get Montreal up to market at this end of this calendar year and by that we talk about achieving revenue. Inder Singh - Lehman Brothers: Great, thank you gentlemen. John McAdam - President and Chief Executive Officer: Thanks.

Troy Jensen your line is open. Please state your company name and you may ask your question. Troy Jensen - Piper Jaffray: Piper Jaffray. Thanks for taking my question here. Quick question for John. Net scale has seem to have struggled a little bit in the June quarter. I wonder if you could talk maybe a little bit about your win rate versus that competitor? Andy Reinland - Senior Vice President and Chief Finance Officer: Yes I think that our win rate is extremely high across the Board, extremely high. And when we look at some of the... if you take the service provider space, we didn't see any loss deals we thought with it and generally that was going down. I mean now and again we will loss a typically a small opportunity to fiscal, because we can't get much phase time with the customer for a significant portion of the time we win, and from the Net Scale... from a Net Scale perspective with 8000 and 8400 with TMOS and the all the modules with TMOS we feel of a really, really strong positions and that was reflected I think in the GAAP-related gross margin quarter. Troy Jensen - Piper Jaffray: Alright got it. And the follow up on...and there is a question about Montreal given that the 8800's got pretty longer than expected sales cycles I would expect that Montreal is going to be similar if not that longer given it's a more complex system? Andy Reinland - Senior Vice President and Chief Finance Officer: It's possible with the I mean with that I also mentioned that we actually let some customers touch Montreal last quarter and that's not beta as everyone get that impression but clearly it's in a strong position with that application where we do that. And their reaction was very, very strong. So I think that will be some I think suppressed demand and then we will see how the sales cycle goes. But certainly the value is going to be high in terms of the actual sale itself. Obviously, the sale value of Montreal. Troy Jensen - Piper Jaffray: Got it there. Keep up to good return. John McAdam - President and Chief Executive Officer: Thank you.

Ehud Gelblum, your line is open. Please state your company name, and you may ask your question. Ehud Gelblum - J.P. Morgan: Hi, thank you. It's J.P. Morgan. A couple of question if I could. One, I don't know if you mentioned that the 8800 is doing well and that you be expected to be a larger percentage of revenues go forward. Can you give us sense to what percent of revenues you are now in 8800 and how large you expect that to be? And then as you look at these 285 people that you have hired now and if the headcount continues to grow. When do you think we will start to seeing revenue growth to accelerate, as you start kind of getting the impact of the larger sales force on your sales, so that your volume could actually... can we see sort of increasing growth rate at some point when we get to full quarter, kind of what's the timing on any impact of that? John McAdam - President and Chief Executive Officer: I think both very, very good questions, but unfortunately both I am not going to give you absolute direct answers. But we will give best color we can here. First of all we don't give a percentage by product, by specific product. So we don't do that. However, the 8800 is definitely doing really well. We won some real key new business accounts. Some of them... some of the globally named dotcom accounts for the 8800 last quarter. So we are very pleased with that and there is a lot of evaluation in fact in that as well. So we feel good about that, but we don't give the percentages. Regarding the growth, I mean clearly 285 staffing the quarter in addition to fiscal year with a continued aggressive hiring of 100 to 120. We are clearly looking as I stated one of the main areas we are looking for here is top line growth. I think we will that the fruits of that as we move into next fiscal. But we won't really talk about that in any sort of detail until we come to October. But we do absolutely expect to see some productivity coming from that investment. Ehud Gelblum - J.P. Morgan: Okay. Can I just sneak one last thing in? You are doing a great job moving WANJet over to TMOS for the -- and we're expecting that to when it get on TMOS to be contributing factor to the whole installation market. In the market that you had in case that doesn't work, how do you think about your plan B. What are you looking for, if WANJet and TMOS does not pick up to some acceptable level? Would you consider some sort of M&A type of arrangement to get into that space, or do you think you would just keep going with strategy have right now regardless of what the outcome here, would not be even once you have it on board? John McAdam - President and Chief Executive Officer: We are always looking at the M&A space. We do that constantly and we are looking at opportunities that typically are adjacent to what we do. In another words very much in application space, very much into knowledge within internet protocol. Web Accelerator by the way, is we -- that's other, probably go with the acquisition of -- is proving to be a major differentiator. But we are always doing that... we are always... that not going to be a change in strategy for us actually to do that. In terms of WANJet and TMOS, it's moved into beta phase which means we are letting customers touch it and clearly that's a big milestone and we do expect to it get us growth in 2008. But that's not the one and only target that we have got in terms of growth drivers. Ehud Gelblum - J.P. Morgan: Okay. Thank so much. Dan Matte - Senior Vice President of Marketing: Yes Ehud. This is Dan speaking. One of the other things just a point to highlight from what John mentioned with Web Accelerator and maybe another during the quarter AT&T announced the new service for their hosted customer to that's an acceleration service of based on Web Accelerator. So I think some pretty good stuff is happening with our product. Ehud Gelblum - J.P. Morgan: Right. Dan Matte - Senior Vice President of Marketing: Thank you.

Erik Suppiger your line is open. Please state your company name and you may ask your question. Erik Suppiger - Signal Hill Capital Group: Signal Hill and good afternoon. First half could you speak a little qualitatively about the bookings growth; last quarter you book-to-bill was less than one, in this quarter your book-to-bill is more than one. So it's difficult for us to get much of a sense for the sequential growth that you saw. Can you just speak a little bit qualitatively if not quantitatively on how the growth looked? John McAdam - President and Chief Executive Officer: Yes the only time we talked about book-to-bill is it was given a clue and that's not one has been below one. Above one we just leave to that and don't give any more details on that. Erik Suppiger - Signal Hill Capital Group: All right. Can you give us the stock comp on the individual line items for the operating expenses? Andy Reinland - Senior Vice President and Chief Finance Officer: Could you ask that again Erik. John McAdam - President and Chief Executive Officer: Your stock comp on individual line item? Andy Reinland - Senior Vice President and Chief Finance Officer: You can get that in the press release at the bottom of the income statement. Erik Suppiger - Signal Hill Capital Group: Okay. And then lastly how much of your telco business is North America? Andy Reinland - Senior Vice President and Chief Finance Officer: We have broken that out and don't have that first of all but we generally we don't break it out the costs as I said. We do however comment that telco represented strongly in all the theaters, we have a broad customer base there. John McAdam - President and Chief Executive Officer: And then just to get some more color on the bookings issue again we don't talk about from a quantitative point of view, but all the geographies except Japan will up in bookings last quarter. And Japan was absolutely expected to be down because in the past financial quarter. Erik Suppiger - Signal Hill Capital Group: All right and I was just North America, where the telco was pushed out? John McAdam - President and Chief Executive Officer: That's correct. Erik Suppiger - Signal Hill Capital Group: Very good, thank you. John McAdam - President and Chief Executive Officer: Thank you.

Mark Sue, your line is open. Please state your company name and you may ask your question. Mark Sue - RBC Capital Markets: Hi, it's RBC Capital Markets. Just on the service provider deal slippage. Was it one or was that more than some a couple of carriers in North America? Was it all 8800, and were there more stochastic [ph] from competitors or is just greater time for evaluations? If you could just help us with granularity there? John McAdam - President and Chief Executive Officer: Yes, it was just few and some of them did involve the 8800 as well. And that it tends to be involve this in some other carrier. We also did see some slippage with the Nokia type relationship, and Ericsson which was some as well, but most of it was in North America and some was 8800. Mark Sue - RBC Capital Markets: And if it's just one quarter? John McAdam - President and Chief Executive Officer: The deals are still ongoing. Mark Sue - RBC Capital Markets: I see, but you are confident that those things will close this quarter, would be is pretty high? John McAdam - President and Chief Executive Officer: That was forecast done... in the forecast it was. Mark Sue - RBC Capital Markets: Got it. And then separately John, just on churns and deal sizes, as we are going to finish the fiscal year end, and I'll see the comment on that and also how you can... how you feel about headcount growth translating directly into revenue growth? Andy Reinland - Senior Vice President and Chief Finance Officer: Yes. On the deal sizes, we end up with the introduction of 8800 and the uptake of 8400. We are seeing it go up. So it's moving north to 160,000 for us now. John McAdam - President and Chief Executive Officer: Yes, on the sales productivity and hiring and investment, the key really is that what's the number going to be, once at sales people in particular and in the company more than six months and what range we tend to have there. So we are still looking at that. But the very fact that we will continue to hire gives an indication of how we believe the strategy is going. Mark Sue - RBC Capital Markets: Got it. And you feel like your success rate for your hires have been so far so good? John McAdam - President and Chief Executive Officer: Yes, we are happy with the overall hiring, yes. Mark Sue - RBC Capital Markets: That's helpful. Thank you gentlemen.

Paul Mansky, your line is open and please state you company name. Paul Mansky - Citigroup Global Markets: Yes. It's a Citigroup. Most of my questions has been answered. But I would like to just get some clarification on Montreal if I could. Are you expecting revenue contribution in your December '07 quarter? John McAdam - President and Chief Executive Officer: In the Dec '07... we are target from... the end of this year, end of this calendar year. So it's going to be touch and go passive... to be passively trying between will we get some revenue in Dec or if it's going to slip a few weeks to January. But it's in that space and it's on-track for that. I don't want to be too specific when we are talking about weeks on a major, major project. Paul Mansky - Citigroup Global Markets: Yes absolutely, understandable. Great, thank you very much.

Matt Robison, your line is open. Please state you company name and you may ask your question. Matt Robison - Ferris Baker Watts: Ferris Baker Watts. I will start with my usual question; DevCentral number of users? Andy Reinland - Senior Vice President and Chief Finance Officer: That were 17,429. Matt Robison - Ferris Baker Watts: So up about 2100 then Andy Reinland - Senior Vice President and Chief Finance Officer: That's correct. Matt Robison - Ferris Baker Watts: And Andy what was the cash flow from option exercise, or was it so pretty small given that you've switched to shares? Andy Reinland - Senior Vice President and Chief Finance Officer: No it was just over $9 million and we had a... it's in-place stock purchase plan exercise what we think kind of drove that this quarter. Matt Robison - Ferris Baker Watts: Okay. Can you guys comment on the tone of business in terms of infrastructure buys for the data centers or the big internet content providers. John McAdam - President and Chief Executive Officer: I think, it continues. No question... Matt Robison - Ferris Baker Watts: Do you see acceleration in all this, big data centers then put up around the rivers up in new part of the world? John McAdam - President and Chief Executive Officer: Yes. No, I think that that's absolutely a kind of good market for us and that's why... and complexity and performance seems to be the key buying criteria and product for the 8800 leap. So that's a big opportunity for us I think, as we move into fiscal '08. Matt Robison - Ferris Baker Watts: Is that... do you think that... is that then growing faster than the rest of revenue or is it something you're looking more forward to. John McAdam - President and Chief Executive Officer: Yes, it's too early to tell. We basically do our business in three main areas; the enterprise, telco and then if you like the big dotcoms. And all three, we expect to see grow. Matt Robison - Ferris Baker Watts: I think in the past you have talked about those dotcom's as a segment, centrally little more than you did today. Is that... am I remembering that wrong or I think you called it the technology? John McAdam - President and Chief Executive Officer: Yes, and we still do. And we still do, we still call that. That's part of our technology vertical. Matt Robison - Ferris Baker Watts: Right and that was as strong as the other businesses? John McAdam - President and Chief Executive Officer: Yes, we'll give you number.

It's 19%. Matt Robison - Ferris Baker Watts: 19%.

Yes. Matt Robison - Ferris Baker Watts: Okay, thank you. John McAdam - President and Chief Executive Officer: Thank you.

Richard Sherman, your line is open. Please state your company name and you may ask your question. Richard Sherman Jr. - MKM Partners: Yes, hi good afternoon. It's MKM Partners. Just couple ones; as you go through the cash flow guidance at about $40 million, that was for sure north of $160 million for that year. Is that correct? Andy Reinland - Senior Vice President and Chief Finance Officer: Well, you did hear correctly in excess of $40 million. I am not sure of the total off the top of my head. Richard Sherman Jr. - MKM Partners: Okay. Thank you and then -- Andy Reinland - Senior Vice President and Chief Finance Officer:

Richard Sherman Jr. - MKM Partners: Absolutely and then on the R&D, and your operating expense is obviously, in the last quarter you were talking about 60, 80 and now you are seeing the higher end, in the 100 to 120 range. If you just look at the R&D number, then there is a lots of support and sales hiring going on. It looks like R&D isn't creeping up in the last four quarters as a percentage of revenue. When might that start to turn and you start to see better leverage off of the R&D investment. Is that around Montreal, is that the next break point where we might actually see R&D to be just where it was as a percentage of revenue? Andy Reinland - Senior Vice President and Chief Finance Officer: I think, what we will do it as we talk about the past is look at our roadmap and our project and what we want to accomplish and we are going to hire accordingly to keep technology leadership and that's always been our strategy. John McAdam - President and Chief Executive Officer: We believe technology leadership is the absolutely key and I don't see a scenario where we back off in our investment in R&D. Andy Reinland - Senior Vice President and Chief Finance Officer: Yes, and Rich it is just about $160 million for the year, based on my guidance. Richard Sherman Jr. - MKM Partners: Okay, very good. So and just back on the R&D question, is there a target number that you're looking at in terms of R&D or are we thinking 35% to 36% of revenue or whether you expect to see... I guess simple question is, do you expect a continued increase as a percentage of revenue? Andy Reinland - Senior Vice President and Chief Finance Officer: If we look at last quarter, the people we added, 30 of them were in R&D. We had a focus hiring there and yes, I think we're going to continue to invest. We don't have a specific target. Really it's around, our strategic objective accomplishing our roadmap, keeping technology leadership. So next quarter, when we give kind of our annual talk about... annual calls, when we guidance for fiscal year 2008, we'll give you some more color on what our targets, we expect there. Richard Sherman Jr. - MKM Partners: Very good, I mean it's just 30 and then 13, excuse me. Okay. And then maybe just lastly on the telco deal that you've talked about earlier. Have any of those close early in the quarter? John McAdam - President and Chief Executive Officer: Yes, we wouldn't talk about that. But as I said in the call, we expect a number of the deals, most of them actually that we saw slippage tightly closed during the quarter. Richard Sherman Jr. - MKM Partners: Very good. Thank you John. John McAdam - President and Chief Executive Officer: Okay. Thank you.

Manny Recarey, your line is open. Please state your company name and you may ask your question. Manuel Recarey - Kaufman Brothers: Kaufman Brothers. Good Afternoon. One question; can you give a little color on the security market? I mean is that still one that has lot of potential with some... it hasn't really start to accelerate growth or do you see that starting to accelerate soon? John McAdam - President and Chief Executive Officer: First of all, there are two areas to security matter. One is the application of firewall the ASM, application security module. That's an interesting product in the sense that is a bit like web accelerator. Runs into a BIG-IP and it performs out security function at the application we are and it leverages a wall [ph] of the BIG-IP sale. So, when we talk about the sales in that and when we talk about price of the module, we typically don't include leverage sales which might be used for other things. So the... it is difficult to actually judge that market. But we see it as a major differentiator for it. Regarding FirePass, which is a more access SFL BTN, I actually stated in my script that we had sequential growth in regard to some nice deals actually last quarter. We feel really great about competitive position, but the market and sales has proved to be somewhat lumpy, not growing tremendously over the last couple of years. And we don't see any major conferences going to change that in the attempt. So we like it, we like our competitive position, but it's certainly no as a robust a growth market as the other markets we are in. Manuel Recarey - Kaufman Brothers: Okay. Thank you. John McAdam - President and Chief Executive Officer: Thank you.

Tim Long, your line is open. Please state your company name and you may ask your question. Jeffrey Goldberg - Banc of America Securities: Banc of America. Good afternoon guys this actually Jeff Goldberg dialing in for Tim. Couple of questions; I was hoping you provide some more color on the product revenue and service revenue, despite some new products looks like a product revenue has actually been decelerating on both the year-over-year and sequential basis for the last three quarters. Yet the service revenue experienced very strong trends. Can you talk about what's kind of strength in service revenue and why were seeing... we haven't seen a real improvement in the product revenue, despite new sales people and new products? And then, how important is growth in the security business in WANJet to your guidance and have there been any additional flaws in the buyback going forward? Andy Reinland - Senior Vice President and Chief Finance Officer: First of all the service product revenue question. The service revenue is done by a number of things; the high tax rate, the high renewal rate and the professional services as we entered with a major deal. So that looks like its going to be a very strong business as per the foreseeable future and going to continue to grow. On the product revenue you are absolutely right, we were somewhat down last quarter. However, I think it's important to realize that the product bookings because of book-to-bills being less in one last quarter versus a great in the next quarter, has actually faster growth than the product revenue. Okay, so that's important. And then when you look at the forecast for this quarter, when we talk about the range, as we talked about then we are expecting some acceleration of product revenue growth as we move into Q4. So, I think that's very important to take as your guidance. Jeffrey Goldberg - Banc of America Securities: On the service revenue, how important is purchase of new software modules that's driving the service revenue and should we look at growth in that service revenue business as a sign the people are purchasing more and more modules and that's requiring service for installation? Andy Reinland - Senior Vice President and Chief Finance Officer: I meanit's important, I don't think it's something you should link that with our service revenue growth was really good, you shouldn't make that assumption. That definition not means that the modules are going really well. We believe we're doing really well. But I just don't link them together, I don't see that and there's a service cost associated with the modules but it is also associated with the systems, that's only the correlation there. I am sorry, what was the other question; one was buyback. I don't know if that was, but.., on buyback, we have stated in January that we had a big discussion at the Board level and we haven't had one really since, while we may have one in October, and that possibly likely. So the situation remains the same, which is we love that balance sheet, we are competing against fiscal. We want to some flexibilities, so nothing exactly in the short term in buyback. Jeffrey Goldberg - Banc of America Securities: and then just how much growth is needed from the security and the WANJet business to get to current numbers and I guess how you're thinking of those lines going forward. Is it more of an option or is it something that needs to really kick up to seeking growth in a way? Andy Reinland - Senior Vice President and Chief Finance Officer: Right and again its quite competitive answer. So if you look at WAN Optimization side, web accelerator is becoming a key differentiator for the BIG-IP sales. So from that perspective that is quiet important and we feel very good about the trend. WAN Optimization which is a WANJet product, in the short term is really not figuring in any big way in our forecast, and that's effectively what I have stated in the script. And then FirePass again, we feel good about competitive position but we are a little bit vary because we have seen effectively two years of lumpiness. Again the bottom-line is when we look our growth drivers, the application delivery controller mark as a core BIG-IP, is the key one we look at. Jeffrey Goldberg - Banc of America Securities: Thanks guys.

Rohit Chopra your line is open. Please state your company name and you may ask your question. Rohit Chopra - Wedbush Morgan: Wedbush Morgan. Good afternoon. Couple of questions, first one on the new WAN product. What is the initial target market, do you stay with the data center folks or do you go after the same market as Riverbed. And if you did that, should we expect some kind of increase in sales and marketing more than as anticipated right now? John McAdam - President and Chief Executive Officer: Yes, first of all the WAN Optimization, I have to remember two sides just from our perceptive as Web Accelerator and then 1J. 1J which is the symmetric solutions of what you have a product to a branch and you have a products... in our branches and products in the data center. And that's absolutely focused against Riverbed. But in reality, where we stay non-competitive until we get on TMOS, we haven't been putting much attention on it. We will probably change that almost certainly when we move into fiscal '08, especially when we have our sales conference in October. From that perspective, we sell a lot to the people we sell to today. So it's in the data center, some times it's at the branch, but we are having no problem finding prospect. Web Accelerator, we actually think we have got technology lead there sitting on top of TMOS and there we tend to sell to the same people that would buy the Big-IP product. Rohit Chopra - Wedbush Morgan: Okay. And then the other question was back to service providers, again, you mentioned some wireless companies. Where there any wireline deals that may have slipped as well or --? John McAdam - President and Chief Executive Officer: Yes, Tom Hull is nodding at me. Yes, there was [ph], but we are not going to go into specific details of deals that slipped. Rohit Chopra - Wedbush Morgan: Okay, thank you. John McAdam - President and Chief Executive Officer: Okay, thanks Rohit.

Brent Bracelin, your line is open. Please state your company name and you may ask your question. Brent Bracelin - Pacific Crest Securities: Pacific Crest Securities. A couple of kind of follow-up questions for me. One on obviously acceleration in pace of hires here. Where are you looking to redeploy kind of additional resources? Is it wireline, wireless, kind of the core enterprise or security? Just a little color on where you guys is applying from of those additional resources or plan to apply the resources? And then, secondarily, just looking at kind of traditional seasonality and looking at kind of your guidance here, could you just talk a little bit about kind of the positive swing factors that you look at that could drive upside to your guidance relative to historical seasonality that is a little stronger? And then also what are the negative swing factors that you guys are considering as you kind of enter your fiscal year end here? John McAdam - President and Chief Executive Officer: Okay, yes. So first of all resources. We are hiring across the board. Specifically, I think you were focusing on sales there. We are hiring globally. I mean Tom Hull's management team are all constantly requesting headcount. And we are giving them it, maybe not always as much as they want, but we are, and that's... so from a geographic point of view, we are hiring in all the major geographies. And then when you look at each geography, when looking at the large dotcom type fraternity, we are hiring in service provider world and we are putting more focus on the enterprise. So it's really across the board. I wouldn't say it was one vertical more than another. But... and you were asking the question about when we look at our forecast, what's the swing factors that we look at. Well, first of all, Q4 tends to be historically strong for us. It's the end of the financial year, it's when sales people are pushing hard to get to the sales quarter club that we have. You tend to, from a budget point of view, see a very strong Japan, you tend to see a very strong Federal. We have historically seen strong U.S. enterprise and service providers as well before they move into the end of the calendar year. EMEA tends to be slightly in the weaker side because of the summer. So we take that into account. I think I mentioned Federal fiscal year end, and then we did take into account the pipeline. Pipeline and both are up [ph] full count are actually the two key measurements that we look at. Brent Bracelin - Pacific Crest Securities: Okay. John McAdam - President and Chief Executive Officer: Does that answer the question? Brent Bracelin - Pacific Crest Securities: Yes, I mean obviously as you look at kind of historical seasonality, it's been a little higher than what your guidance was. And I don't know if there was anything kind of from a challenge standpoint or hurdle standpoint that you're kind of baking in to kind of your numbers, or again is it partially being kind of conservative here? John McAdam - President and Chief Executive Officer: Well, we'll see. We'll see how it all transpires. The actual guidance we have given is actually quite higher than normal. If you check out our guidance of last year and previous quarters, you'll find out our guidance is actually higher. And we'll see how the quarter ends up. Brent Bracelin - Pacific Crest Securities: Okay, fair enough. Thank you. John McAdam - President and Chief Executive Officer: Okay. Thank you.

Ryan Hutchinson, your line is open. Please state your company name and you may ask your question. Ryan Hutchinson - WR Hambrecht + Co: WR Hambrecht. Good afternoon guys. I have a follow up to an earlier question. Just in terms of the guidance, as we look out here, based on your commentary, John, is it fair to assume that the product revenue grows at a faster pace than the services revenue in the quarter? John McAdam - President and Chief Executive Officer: We didn't comment on that, but we definitely expect to see acceleration in the product revenue growth. I'll leave it at that. Ryan Hutchinson - WR Hambrecht + Co: Okay. And then it looks like there is some... not necessarily an issue, but some share shift perhaps within your distributors. Your two largest historical distributors are down sequentially. Can you just walk us through what the dynamics there are? John McAdam - President and Chief Executive Officer: Again, no major dynamic happened. Andy Reinland - Senior Vice President and Chief Finance Officer: Yes, I mean Tech Data, which is the distributor there has newly come on above 10%, and their biggest reseller is Dell. And in turn, they are our biggest value-added reseller, and not business is driving and growing and that was the result. John McAdam - President and Chief Executive Officer: Yes. Ryan Hutchinson - WR Hambrecht + Co: But, okay, I guess the question is there a share shift going from Ingram Micro to Avnet or any changes in those relationships? John McAdam - President and Chief Executive Officer: No, we haven't seen a change in relationship or any trends. I mean they are all... those three that we talked about very intensely [ph], they are key, key partners for us. They have all been attendants at the event we are having right now and they are really very strategic for us. So I wouldn't read anything significant into that. Ryan Hutchinson - WR Hambrecht + Co: Okay, fair enough. And then finally, just as we look at the WANJet product again here, adding disk-based caching, coordinated on to TMOS, do you feel that that puts you on an equal footing with some of the competition there and if so, when should we see a meaningful uptick in that revenue stream? And if not, what additional features are needed to put you on par with some of the competition? John McAdam - President and Chief Executive Officer: Yes, I don't think it puts us on equal footing. It would be wrong to imply that. It puts us in a much stronger footing than we are today, and I also gather some differentiation because it's on TMOS. So from that perspective, I think if you look at where we are at, we can definitely see some growth coming. But the reality is we think it's going to be towards the middle of the fiscal year '08 where we get in a strong competitive position. Some of that is to add some more protocol, that type of stuff. But we do expect to see some growth from that market. The good thing for us is that we can be reasonably patient because our core business is growing and we have got Web Accelerator that's growing and accelerating... pardon the pun... as well, so. But really, realistically, I think you'll see some growth because of TMOS, but from a competitor position in terms of being very, very strong, we think it's going to be the middle of the fiscal. Ryan Hutchinson - WR Hambrecht + Co: Okay, great. Thanks. That's it from me guys. John McAdam - President and Chief Executive Officer: Okay. Thank you.

Cameron Cooke, your line is open. Please state your company name and you may ask your question. Cameron Cooke - Janco Partners: Janco Partners. I just wanted to get back to the sales cycle question a little bit. Does the move to a chassis-based architecture on Montreal affect the sales cycle at all? Can you speak a little bit about that? John McAdam - President and Chief Executive Officer: I don't think that'll be very, very significant. It may do in the sense that we do expect the size of the opportunity to get bigger and some times that can affect decision making. But it's the same people we are selling to, it's the same value proposition, it's the same market. So I don't think it'll be very... I don't think it will be that significant. As I've said in previous calls, and we've seen this with the 80, 100 [ph], when you've got a flagship product where we have 80, 100 [ph] today and we will have with Montreal where you get effectively no competition for it, that tends to drag the other products faster. So in other words, as customer will buy a 6800 because they know they have a lot of headroom going up. So it tends to actually increase the overall momentum by having a very, very competitive flagship product. Cameron Cooke - Janco Partners: And would you consider this as big a change as Buffalo Jump was for you guys back in '04, '05? John McAdam - President and Chief Executive Officer: Interesting question. I don't know if it's quite a change, but it's certainly... it's a real... I think... we think game winner in terms of how competitive it is from a leadership point of view. But it's a difficult comparison because one was a total rearchitecture for the whole product line change, the other... Montreal was where you are adding at the top end of your range. Cameron Cooke - Janco Partners: Thank you.

Thank you. Our last question comes from Bill Choi. Please tell your company name and you may ask your question. Bill Choi - Jefferies & Company: Okay, that's Jefferies & Company. First, a clarification, just the modules both security and acceleration, those module revenues are properly categorized in security and web acceleration as given, or are they included in ATM? John McAdam - President and Chief Executive Officer: Hello? Bill Choi - Jefferies & Company: Did you hear the question? John McAdam - President and Chief Executive Officer: Yes, we think that's correct, they're included. Bill Choi - Jefferies & Company: Okay. All right. And then just to follow up on that distribution, does all Dell revenue go through Tech Data? John McAdam - President and Chief Executive Officer: Yes, I have to say all. I mean there may be some that we are not aware of globally that doesn't, but you should consider the absolute majority goes through Tech Data. Bill Choi - Jefferies & Company: Okay. And then a bigger picture question. I know that you guys are just underway with 8800 and Montreal coming in at the end of the calendar year, but can you just talk a little bit about the product roadmap for next year? So what comes after Montreal? John McAdam - President and Chief Executive Officer: It's interesting. We haven't talked about that. We actually have a lot of products on the roadmap that we have not talked about. We will do that actually in October and then we'll do that in a lot more detail on an analyst day that we'll arrange pretty soon after October in the November timescale. So we haven't actually made that public yet. I mean obviously talking now, you've got heads up on it. But that's where we'll go through our product roadmap in a lot of detail because we actually have a roadmap that effectively replaces just about every product we've got on the drawing board right now. So that's pretty exciting as well. But we'll give you that detail as we move into the fiscal. Bill Choi - Jefferies & Company: Okay, thanks. John McAdam - President and Chief Executive Officer: Okay. All right, I think that's the last question. So thanks again for calling in and we'll talk to you next quarter. Thank you.

Thank you. That concludes today's conference. You may now disconnect from the audio portion of today's call.