F5 Revenues Do a Buffalo Jump

F5 Networks Inc.'s (Nasdaq: FFIV) revenues jumped 59 percent last quarter on strong sales and the traffic management vendor's earnings topped analysts' expectations thanks to a one-time tax benefit.

F5 posted fourth quarter revenues of $50.2 million, almost $4 million above analyst estimates of $46.6 million.

The firm's significant one-time net benefit” was related to deferred tax assets in the quarter.

The company reported pro forma earnings of 28 cents a share, six to eight cents above the company’s own guidance.

For fiscal 2004, F5 reported annual revenue of $171.2 million, up 48 percent from $115.9 million reported in fiscal 2003.The last quarter has been a busy one for F5, with the launch of its long-awaited “Buffalo Jump” traffic management device, as well as a new high-end FirePass SSL VPN device (see F5 Fuses Firewall & VPN).

Buffalo Jump already accounts for some 10 percent of the company’s sales of traffic management products, although one exec on the call warned that it could be nine months before Buffalo Jump and TrafficShield really make their mark. “The full impact of these product architectures will take two to three quarters,” he said.

But execs on the conference call promised that Buffalo Jump’s TM/OS operating system will feature prominently in future announcements from F5. The company is planning to make TM/OS the standard architecture for all its existing products, including FirePass, according to F5 CEO John McAdam, as well as extending support for third party vendors.

With F5 facing stiff competition from Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Corp. (NYSE/Toronto: NT), McAdam is putting his faith in TM/OS to help F5 in emerging markets such as VOIP.

”I am pretty convinced that it is going to be a major differentiator,” he said. The operating system works in conjunction with VOIP and even extends deep into database architectures, he added.McAdam was somewhat less forthcoming about rival vendor Radware Ltd. (Nasdaq: RDWR); the Scottish exec made no reference to the long-running cookie patent lawsuit with Radware that was finally resolved last month (see Radware/F5 Cookie Lawsuit Crumbles).

This could be due to the fact that the two vendors have only partially patched up their differences -- another patent infringement lawsuit is still outstanding. In July, Radware filed a lawsuit in a New Jersey court alleging that F5 infringed one of its key technology patents (see Radware Fixes Legal Guns on F5).

For the first quarter of 2005, F5 predicts it will earn 20 to 21 cents a share on revenues of $52 million to $54 million.

The market responded positively to the results. In after-hours trading, F5 shares rose $2.92 (8.89 percent) to $35.75.

— James Rogers, Site Editor, Next-gen Data Center Forum0