F5 Networks, Inc. (FFIV) Message Board

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Technology Stocks : F5 Networks, Inc. (FFIV)

FFIV 264.50

+2.5%

3:59 PM EST

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To: tktrimbath who wrote (1468)	4/18/2005 10:18:10 PM
From: Asymmetric	of 1801

Lehman Report from April 1, 2005 Following our latest round of channel and industry checks, we expect F5 to deliver March-Q results at least at high end of guide range. Checks indicate strong momentum continues for L4-7 ind. in general & for F5 in particular. Bel Mar-Q rev up QoQ in all regions. Recovery in US fed'l sales more than offset seasonal decline in US enterprise. Europe up off relative smaller base as FFIV continues to build out its presence. Japan is expected to deliver a strong quarter. Bel sales of security prod rebounding with solid QoQ growth. Strong channel interest in FirePass + Traffic Shield. Buffalo Jump traction continues & may reach 50% of sales this Q. Channel checks also suggest lead time extending (>6 wks in some cases) & pricing stable. Our Mar-Q ests move from $64M/0.29 to $65M/0/30 and our CY"05 ests move fr $284M/1.26 to $288M/1.32 A common theme from our channel checks is how strong F5's products, particularly the Buffalo Jump (aka Big IP Version 9) stack up against competitive products. Last quarter was the first full quarter of shipments for Buffalo Jump and Buffalo Jump reached about 37% of F5's traffic management product booking. We estimate that Buffalo Jump may achieve over 50% of traffic management product booking in March-Q. In addition, channel partners we spoke to are enthusiastic about the FirePass and Traffic Shield products and are seeing strong interest from end customers. With respect to lead-times, our channel checks indicate that F5's products range from 48 hrs to 4 weeks and, although lead-time has shortened slightly in the month of March, according to some resellers, it is still above normal range. We consider the extension of lead-times indicative of strong demand as the company has resolved some of the manfacturing/supply chain issues seen in last Dec-Q. Additionally, the pricing environment appears to be stable. Looking beyond F5's strong financial performance in recent periods, analysts and investors have been trying to identify the fundamental drivers for the strong demand for Layer 4-7 products. Our conversations with industry contacts and leading priveate companies in the space suggest that the on-going trend of data center consolidation and Linux server vs Sun server substitution have been driving the upgrades of data center infrastructure with Layer 4-7 switches a key part of that infrastructure. In addition, F5's competitive positioning in the Layer 4-7 space has strengthened over the last 5 yrs due to 1) lack of investment in this area by competitors, namely Cisco and Nortel and 2) effective use of alliances (icontrol).

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