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F5 Networks Inc. Reports Operating Results (10-Q)

February 07, 2011 | About:
10qk

10qk

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F5 Networks Inc. (FFIV) filed Quarterly Report for the period ended 2010-12-31.

F5 Networks Inc. has a market cap of $8.86 billion; its shares were traded at around $123.64 with a P/E ratio of 50.04 and P/S ratio of 10.05. F5 Networks Inc. had an annual average earning growth of 20.4% over the past 5 years.Hedge Fund Gurus that owns FFIV: Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Louis Moore Bacon of Moore Capital Management, LP. Mutual Fund and Other Gurus that owns FFIV: Columbia Wanger of Columbia Wanger Asset Management, RS Investment Management, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Cost of net service revenues. Cost of net service revenues consist of the salaries and related benefits of our professional services staff, travel, facilities and depreciation expenses. For the three months ended December 31, 2010, cost of net service revenues as a percentage of net service revenues decreased to 17.8%, compared to 18.2% for the same period in the prior year, primarily due to the scalability of our existing customer support infrastructure and increased revenue from maintenance contracts. Professional services headcount at the end of December 2010 increased to 444 from 356 at the end of December 2009. In addition, cost of net service revenues included stock-based compensation expense of $1.8 million for the three months ended December 31, 2010, compared to $1.5 million for the same period in the prior year.

Sales and marketing. Sales and marketing expenses consist of salaries, commissions and related benefits of our sales and marketing staff, the costs of our marketing programs, including public relations, advertising and trade shows, travel, facilities, and depreciation expenses. Sales and marketing expenses increased 32.3% for the three months ended December 31, 2010, from the comparable period in the prior year. The increase in sales and marketing expense was primarily due to an increase of $11.4 million in commissions and personnel costs for the three months ended December 31, 2010, from the comparable period in the prior year. The increased commissions and personnel costs were driven by growth in sales and marketing employee headcount and increased sales volume for the corresponding period. Sales and marketing headcount at the end of December 2010 increased to 923 from 729 at the end of December 2009. Sales and marketing expense included stock-based compensation expense of $8.7 million for the three months ended December 31, 2010, compared to $6.7 million for the same period in the prior year. The increase in sales and marketing expense was also due to investments in marketing promotions and initiatives aimed at promoting our brand and creating market awareness of our technology and our products.

Research and development. Research and development expenses consist of the salaries and related benefits for our product development personnel, prototype materials and other expenses related to the development of new and improved products, facilities and depreciation expenses. Research and development expenses increased 22.0% for the three months ended December 31, 2010, from the comparable period in the prior year. The increase in research and development expense was primarily due to an increase of $2.9 million in personnel costs for the three months ended December 31, 2010, from the comparable period in the prior year. In addition, research and development expense included a year over year increase in computer equipment and software costs of $1.3 million to support the development of new and improved products. Research and development headcount at the end of December 2010 increased to 527 from 459 at the end of December 2009. Research and development expense included stock-based compensation expense of $5.9 million for the three months ended December 31, 2010, compared to $4.9 million for the same period in the prior year. We expect research and development expenses to remain consistent as a percentage of net revenue in the foreseeable future.

General and administrative. General and administrative expenses consist of the salaries, benefits and related costs of our executive, finance, information technology, human resource and legal personnel, third-party professional service fees, bad debt charges, facilities and depreciation expenses. General and administrative expenses increased 29.7% for the three months ended December 31, 2010, from the comparable period in the prior year. The increase in general and administrative expense was primarily due to an increase of $1.5 million in personnel costs for the three months ended December 31, 2010, from the comparable period in the prior year. Stock-based compensation expense was $6.1 million for the three months ended December 31, 2010, compared to $3.9 million for the same period in the prior year. General and administrative headcount at the end of December 2010 increased to 235 from 198 at the end of December 2009.

Cash and cash equivalents, short-term investments and long-term investments totaled $952.3 million as of December 31, 2010 compared to $862.1 million as of September 30, 2010, representing an increase of $90.2 million. The increase was primarily due to cash provided by operating activities of $103.1 million for the three months ended December 31, 2010 which was partially offset by $25.0 million of additional cash required for the repurchase of outstanding common stock under our stock repurchase program. The increase in cash flow from operations for the first three months of fiscal year 2011 resulted from increased net income combined with changes in operating assets and liabilities, as adjusted for various non-cash items including stock-based compensation, depreciation and amortization charges. Based on our current operating and capital expenditure forecasts, we believe that our existing cash and investment balances, excluding auction rate securities (ARS), together with cash generated from operations should be sufficient to meet our operating requirements for at least the next twelve months.

Cash used in financing activities was $6.0 million for the three months ended December 31, 2010, compared to cash provided by financing activities of $3.4 million for the same period in the prior year. Our financing activities for the three months ended December 31, 2010 consisted of cash required for the repurchase of outstanding common stock under our stock repurchase program of $25.0 million, partially offset by cash received from the exercise of employee stock options and stock purchases under our employee stock purchase plan of $8.8 million and tax benefits related to share-based compensation of $10.1 million.

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