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SUNNYVALE, CA -- (Marketwired) -- 01/29/14 -- Fortinet® (NASDAQ: FTNT)

Fourth Quarter 2013 Highlights

• Billings of $209.8 million, up 20% year over year(1,2)
• Revenues of $177.4 million, up 17% year over year(2)
• GAAP diluted net income per share of $0.07(2)
• Non-GAAP diluted net income per share of $0.15(1,2)
• Cash flow from operations of $46.7 million
• Free cash flow of $39.5 million(1)
• Cash, cash equivalents and investments of $843.0 million(7), with no debt

Full Year 2013 Highlights

• Billings of $684.2 million, up 14% year over year(1,3)
• Revenues of $615.3 million, up 15% year over year(3)
• GAAP diluted net income per share of $0.26(3)
• Non-GAAP diluted net income per share of $0.48(1,3)
• Cash flow from operations of $147.4 million
• Free cash flow of $133.5 million(1)

Fortinet® (NASDAQ: FTNT) -- a leader in high-performance network security -- today announced financial results for the fourth quarter and full year ended December 31, 2013.

"We had a strong finish to 2013, meeting or exceeding our expectations across our key non-GAAP operating metrics during the fourth quarter," said Ken Xie, founder, chairman, and chief executive officer. "Our performance highlights the global demand for our network security solutions, improved execution, and the leverage we are now experiencing from prior investments in our sales, marketing, and product development. Looking forward, we expect the advanced persistent threat opportunity, continued execution in the data center with 100Gbps deployments, and next-generation firewall displacements, to be key drivers of our business."

Financial Highlights for the Fourth Quarter of 2013

• Billings(1,2): Total billings were $209.8 million for the fourth quarter of 2013, an increase of 20% compared to $174.3 million in the same quarter of 2012.
  
  
• Revenue(2): Total revenue was $177.4 million for the fourth quarter of 2013, an increase of 17% compared to $151.2 million in the same quarter of 2012. Within total revenue, product revenue was $83.9 million, an increase of 18% compared to the same quarter of 2012. Services revenue was $90.3 million, an increase of 18% compared to the same quarter of 2012.
  
  
• Deferred Revenue: Deferred revenue was $432.6 million as of December 31, 2013, up $32.5 million from $400.2 million as of September 30, 2013.
  
  
• Cash and Cash Flow(1,4,6): As of December 31, 2013, cash, cash equivalents and investments were $843.0 million, compared to $839.0 million as of September 30, 2013. In the fourth quarter of 2013, cash flow from operations was $46.7 million and free cash flow was $39.5 million.
  
  
• GAAP Operating Income(2,5): GAAP operating income was $24.6 million for the fourth quarter of 2013, representing a GAAP operating margin of 14%. GAAP operating income was $35.0 million for the same quarter of 2012, representing a GAAP operating margin of 23%.
  
  
• GAAP Net Income and Diluted Net Income Per Share(2,5): GAAP net income was $12.0 million for the fourth quarter of 2013, based on a 53% tax rate for the quarter. This compares to GAAP net income of $21.5 million for the same quarter of 2012, based on a 41% tax rate for the quarter. GAAP diluted net income per share was $0.07 for the fourth quarter of 2013, based on 168.9 million weighted-average diluted shares outstanding, compared to $0.13 for the same quarter of 2012, based on 167.0 million weighted-average diluted shares outstanding.
  
  
• Non-GAAPOperating Income(1,2,5): Non-GAAP operating income was $37.8 million for the fourth quarter of 2013, representing a non-GAAP operating margin of 21%. Non-GAAP operating income was $41.6 million for the same quarter of 2012, representing a non-GAAP operating margin of 27%.
  
  
• Non-GAAPNet Income and Diluted Net Income Per Share(1,2,5): Non-GAAP net income was $25.9 million for the fourth quarter of 2013, based on a 33% effective tax rate for the quarter. Non-GAAP net income for the same quarter of 2012 was $28.2 million, based on a 34% effective tax rate. Non-GAAP diluted net income per share was $0.15 for the fourth quarter of 2013 based on 168.9 million weighted-average diluted shares outstanding, compared to $0.17 for the same quarter of 2012, based on 167.0 million weighted-average diluted shares outstanding.
  
  

Financial Highlights for the Full Year 2013

• Billings(1,3): Total billings were $684.2 million for fiscal 2013, an increase of 14% compared to $602.0 million in fiscal 2012.
  
  
• Revenue(3): Total revenue was $615.3 million for fiscal 2013, an increase of 15% compared to $533.6 million for fiscal 2012. Within total revenue, product revenue was $278.0 million for fiscal 2013, an increase of 12% compared to $248.9 million for fiscal 2012. Services revenue was $329.7 million for fiscal 2013, an increase of 20% compared to $274.0 million for fiscal 2012.
  
  
• Deferred Revenue: Deferred revenue was $432.6 million as of December 31, 2013, an increase of 19% compared to deferred revenue of $363.2 million as of December 31, 2012.
  
  
• Cash and Cash Flow(1,4,7): As of December 31, 2013, cash, cash equivalents and investments were $843.0 million(4), compared to $739.6 million as of December 31, 2012. In fiscal 2013, cash flow from operations was $147.4 million and free cash flow was $133.5 million.
  
  
• GAAP Operating Income(3,5): GAAP operating income was $72.1 million for fiscal 2013, representing a GAAP operating margin of 12%. GAAP operating income was $100.5 million for fiscal 2012, representing a GAAP operating margin of 19%.
  
  
• GAAP Net Income and Diluted Net Income Per Share(3,5): GAAP net income was $44.3 million for fiscal 2013, based on a 42% tax rate for the year. This compares to GAAP net income of $66.8 million for fiscal 2012, based on a 36% tax rate for the year. GAAP diluted net income per share was $0.26 for fiscal 2013, based on 168.2 million weighted-average diluted shares outstanding, compared to $0.40 for fiscal 2012, based on 166.3 million weighted-average diluted shares outstanding.
  
  
• Non-GAAPOperating Income(1,3,5): Non-GAAP operating income was $116.7 million for fiscal 2013, representing a non-GAAP operating margin of 19%. Non-GAAP operating income was $130.1 million for fiscal 2012, representing a non-GAAP operating margin of 24%.
  
  
• Non-GAAPNet Income and Diluted Net Income Per Share(1,3,5): Non-GAAP net income was $80.7 million for fiscal 2013, based on a 33% effective tax rate for the year. Non-GAAP net income for fiscal 2012 was $88.8 million, based on a 34% effective tax rate. Non-GAAP diluted net income per share was $0.48 for fiscal 2013 based on 168.2 million weighted-average diluted shares outstanding, compared to $0.53 for fiscal 2012, based on 166.3 weighted-average diluted shares outstanding.
  
  

(1) A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

(2) Includes the impact of a $2.2 million and $1.9 million sale of patents during the fourth quarter of fiscal 2013 and 2012, respectively.

(3) Includes the impact of a $2.8 million and $3.7 million sale of patents during fiscal 2013 and 2012, respectively.

(4) Excludes $2.0 million equity investment in a privately-held company, which is recorded in other assets on the consolidated balance sheets.

(5) Includes the impact of a $1.5 million non-recurring cumulative out-of-period adjustment recorded during the fourth quarter of fiscal 2012 to reflect a true-up related to forfeitures of stock awards granted to employees. The adjustment resulted in lower stock-based compensation expense and higher operating income and net income during the fourth quarter of fiscal 2012.

(6) During the fourth quarter of fiscal 2013, the Company repurchased $38.9 million of its common stock under its share repurchase program, all of which was paid in the fourth quarter of fiscal 2013 except for $5.4 million which was settled and paid in January 2014. In addition, capital expenditure related to the construction and improvement of the Company's future corporate headquarters amounted to $5.5 million.

(7) During fiscal 2013, the Company repurchased $38.9 million of its common stock under its repurchase program, all of which was paid in fiscal 2013 except for $5.4 million which was settled and paid in January 2014. In addition, capital expenditure related to the construction and improvement of the Company's future corporate headquarters amounted to $6.8 million.

Conference Call Details

Fortinet will host a conference call today, January 29, 2014, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its financial results. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 34200682. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet's website at http://investor.fortinet.com and a replay will be archived and accessible at http://investor.fortinet.com/events.cfm. A replay of this conference call can also be accessed through February 5, 2014, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 34200682.

Following Fortinet's financial results conference call, the Company will host an additional question-and-answer session at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to provide an opportunity for financial analysts and investors to ask more detailed questions. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 34200866. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and a replay will be archived and available after the call at http://investor.fortinet.com/events.cfm. A replay of this conference call will also be available through February 5, 2014 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 34200866.

About Fortinet (www.fortinet.com)

Fortinet (NASDAQ: FTNT) is a worldwide provider of network security appliances and a market leader in unified threat management (UTM). Our products and subscription services provide broad, integrated and high-performance protection against dynamic security threats while simplifying the IT security infrastructure. Our customers include enterprises, service providers and government entities worldwide, including the majority of the 2012 Fortune Global 100. Fortinet's flagship FortiGate product delivers ASIC-accelerated performance and integrates multiple layers of security designed to help protect against application and network threats. Fortinet's broad product line goes beyond UTM to help secure the extended enterprise -- from endpoints, to the perimeter and the core, including databases and applications. Fortinet is headquartered in Sunnyvale, Calif., with offices around the world.

Copyright © 2014 Fortinet, Inc. All rights reserved. The symbols ® and ™ denote respectively federally registered trademarks and unregistered trademarks of Fortinet, Inc., its subsidiaries and affiliates. Fortinet's trademarks include, but are not limited to, the following: Fortinet, FortiGate, FortiGuard, FortiManager, FortiMail, FortiClient, FortiCare, FortiAnalyzer, FortiReporter, FortiOS, FortiASIC, FortiWiFi, FortiSwitch, FortiVoIP, FortiBIOS, FortiLog, FortiResponse, FortiCarrier, FortiScan, FortiDB and FortiWeb. Other trademarks belong to their respective owners.

FTNT-F

Forward-looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding demand for our solutions, momentum of our business and our expectations regarding the drivers of our future business. Although we attempt to be accurate in making forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. Important factors that could cause results to differ materially from the statements herein include the following: general economic risks; specific economic risks in different geographies and among different customer segments, including specific economic risks such as those that may result from the U.S. budget process; uncertainty regarding increased business and renewals from existing customers; uncertainties around continued success in sales growth and market share gains; failure to grow the sales pipeline and to convert sales pipeline into final sales, and other sales execution risks; risks associated with successful implementation of multiple integrated software products and other product functionality risks; execution risks around new product development and introductions and innovation; customer support challenges; litigation and disputes and the potential cost, distraction and damage to sales and reputation caused thereby; market acceptance of new products and services; the ability to attract and retain personnel, and the loss of any key personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations and service providers; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand for, the UTM model in general and by specific customer segments; timing of higher capacity data center deployments and upgrades; competition and pricing pressure and the impact of increasing competition and new entrants in the market; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and our other filings with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.

Non-GAAP Financial Measures
We have provided in this release financial information that has not been prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures below. As previously mentioned, a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Billings. We define billings as revenue recognized plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive deferred revenue, which is an important indicator of the health and visibility of our business, and has historically represented a majority of the quarterly revenue that we recognize. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. First, billings include amounts that have not yet been recognized as revenue. Second, we may calculate billings in a manner that is different from other companies that report similar financial measures. Management compensates for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with revenues calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparisons of our operating results to competitors' operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating the Company is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures. Management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation expense, amortization expense and impairment charges related to certain intangible assets, reduced by the income from payments we received from a patent settlement. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, amortization expense and impairment charges related to certain intangible assets, and patent settlement related income so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes stock-based compensation expense, amortization expense and impairment charges related to certain intangible assets. Stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business. Second, stock-based compensation is an important part of our employees' compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that other companies exclude when they report their non-GAAP results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and diluted net income per share. We define non-GAAP net income as net income plus stock-based compensation expense, amortization expense and impairment charges related to certain intangible assets reduced by the income from payments we received from a patent settlement, and includes the impact of the tax adjustment, if any, required to achieve the effective tax rate on a pro forma basis, which could differ from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required to achieve the effective tax rate on a pro forma basis, which could differ from the GAAP tax rate. We believe the effective tax rates we used are reasonable estimates of long-term normalized tax rates under our global operating structure. The same limitations described above regarding our use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income and diluted net income per share calculated in accordance with GAAP.

                               FORTINET, INC.
                        CONSOLIDATED BALANCE SHEETS
                         (Unaudited, in thousands)


                                                     December    December
                                                      31, 2013    31, 2012
                                                    ----------- -----------
                       ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                         $   115,873 $   122,975
  Short-term investments                                375,497     290,719
  Accounts receivable, net of allowance for
   doubtful accounts of $32 and $115, respectively      130,471     107,642
  Inventory                                              48,672      21,060
  Deferred tax assets                                    50,980      13,663
  Prepaid expenses and other current assets              14,053      13,215
                                                    ----------- -----------
    Total current assets                                735,546     569,274
PROPERTY AND EQUIPMENT-Net                               33,599      25,638
DEFERRED TAX ASSETS-Non-current                          30,058      48,525
LONG-TERM INVESTMENTS                                   351,675     325,892
OTHER INTANGIBLE ASSETS-Net                               6,841       2,117
GOODWILL                                                  2,872           -
OTHER ASSETS                                              4,820       4,051
                                                    ----------- -----------
TOTAL ASSETS                                        $ 1,165,411 $   975,497
                                                    =========== ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                  $    32,546 $    20,816
  Accrued liabilities                                    27,380      18,481
  Accrued payroll and compensation                       34,997      28,957
  Income taxes payable                                   21,421       3,782
  Deferred revenue                                      293,664     247,268
                                                    ----------- -----------
    Total current liabilities                           410,008     319,304
DEFERRED REVENUE-Non-current                            138,964     115,917
INCOME TAXES PAYABLE-Non-current                         30,208      28,778
OTHER LIABILITIES                                           471         564
                                                    ----------- -----------
    Total liabilities                                   579,651     464,563
                                                    ----------- -----------
STOCKHOLDERS' EQUITY:
  Common stock                                              161         162
  Additional paid-in capital                            462,644     400,075
  Treasury stock                                              -      (2,995)
  Accumulated other comprehensive income                  1,092       3,091
  Retained earnings                                     121,863     110,601
                                                    ----------- -----------
    Total stockholders' equity                          585,760     510,934
                                                    ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $ 1,165,411 $   975,497
                                                    =========== ===========



                               FORTINET, INC.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited, in thousands, except per share amounts)

                                  Three Months Ended        Year Ended
                                 --------------------  --------------------
                                 December   December   December   December
                                  31, 2013   31, 2012   31, 2013   31, 2012
                                 ---------  ---------  ---------  ---------
REVENUE:
  Product                        $  83,884  $  71,025  $ 278,046  $ 248,948
  Services                          90,276     76,711    329,723    274,043
  Ratable and other revenue          3,190      3,426      7,528     10,648
                                 ---------  ---------  ---------  ---------
    Total revenue                  177,350    151,162    615,297    533,639
                                 ---------  ---------  ---------  ---------
COST OF REVENUE:
  Product (1)                       37,579     26,974    114,611     93,971
  Services (1)                      15,916     13,836     64,123     50,682
  Ratable and other revenue            382        632      1,909      2,767
                                 ---------  ---------  ---------  ---------
    Total cost of revenue           53,877     41,442    180,643    147,420
                                 ---------  ---------  ---------  ---------
GROSS PROFIT:
  Product                           46,305     44,051    163,435    154,977
  Services                          74,360     62,875    265,600    223,361
  Ratable and other revenue          2,808      2,794      5,619      7,881
                                 ---------  ---------  ---------  ---------
    Total gross profit             123,473    109,720    434,654    386,219
                                 ---------  ---------  ---------  ---------
OPERATING EXPENSES:
  Research and development (1)      27,747     20,525    102,660     81,078
  Sales and marketing (1)           62,331     48,117    224,991    179,155
  General and administrative (1)     8,752      6,038     34,913     25,511
                                 ---------  ---------  ---------  ---------
    Total operating expenses        98,830     74,680    362,564    285,744
                                 ---------  ---------  ---------  ---------
OPERATING INCOME                    24,643     35,040     72,090    100,475
INTEREST INCOME                      1,318      1,400      5,306      5,006
OTHER EXPENSE-Net                     (419)      (170)    (1,455)      (485)
                                 ---------  ---------  ---------  ---------
INCOME BEFORE INCOME TAXES          25,542     36,270     75,941    104,996
PROVISION FOR INCOME TAXES          13,526     14,763     31,668     38,160
                                 ---------  ---------  ---------  ---------
NET INCOME                       $  12,016  $  21,507  $  44,273  $  66,836
                                 =========  =========  =========  =========
Net income per share:
  Basic                          $    0.07  $    0.13  $    0.27  $    0.42
                                 =========  =========  =========  =========
  Diluted                        $    0.07  $    0.13  $    0.26  $    0.40
                                 =========  =========  =========  =========
Weighted-average shares
 outstanding:
  Basic                            163,281    160,034    162,435    158,074
                                 =========  =========  =========  =========
  Diluted                          168,873    166,955    168,183    166,329
                                 =========  =========  =========  =========

(1) Includes stock-based
 compensation expense as
 follows:
  Cost of product revenue        $     106  $      96  $     383  $     333
  Cost of services revenue           1,298      1,032      4,841      3,736
  Research and development           3,666      2,452     13,271      9,226
  Sales and marketing                5,599      1,996     19,526     12,793
  General and administrative         2,018      1,186      6,450      4,602
                                 ---------  ---------  ---------  ---------
                                 $  12,687  $   6,762  $  44,471  $  30,690
                                 =========  =========  =========  =========



                               FORTINET, INC.
              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                         (Unaudited, in thousands)



                                  Three Months Ended        Year Ended
                                 --------------------  --------------------
                                  December   December   December   December
                                  31, 2013   31, 2012   31, 2013   31, 2012
                                 ---------  ---------  ---------  ---------
Net income                       $  12,016  $  21,507  $  44,273  $  66,836
Other comprehensive (loss)
 income, net of reclassification
 adjustments:
  Foreign currency translation
   (losses) gains                     (716)      (344)    (1,617)       524
  Unrealized gains (losses) on
   investments                         239       (110)      (587)     3,331
  Tax (provision) benefit
   related to items of other
   comprehensive income or loss        (84)       (32)       205     (1,166)
                                 ---------  ---------  ---------  ---------
Other comprehensive (loss)
 income                               (561)      (486)    (1,999)     2,689
                                 ---------  ---------  ---------  ---------
Comprehensive income             $  11,455  $  21,021  $  42,274  $  69,525
                                 =========  =========  =========  =========



                               FORTINET, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Unaudited, in thousands)


                                  Three Months Ended        Year Ended
                                 --------------------  --------------------
                                  December   December   December   December
                                  31, 2013   31, 2012   31, 2013   31, 2012
                                 ---------  ---------  ---------  ---------
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net income
                                 $  12,016  $  21,507  $  44,273  $  66,836
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
    Depreciation and
     amortization                    4,112      3,488     15,623     11,564
    Amortization of investment
     premiums                        2,734      2,960     11,634     12,962
    Stock-based compensation        12,687      6,762     44,471     30,690
    Excess tax benefits from
     employee stock option plan       (470)    (2,458)    (2,974)   (12,069)
    Other non-cash items, net          441        (12)       961        881
    Changes in operating assets
     and liabilities:
    Accounts receivable-net        (22,669)   (17,800)   (22,080)   (12,120)
    Inventory                       (3,749)     3,674    (35,093)   (11,303)
    Deferred tax assets             (3,944)    (4,739)   (18,750)    (9,254)
    Prepaid expenses and other
     current assets                 (1,111)       862       (907)       791
    Other assets                       350        585      1,243      2,470
    Accounts payable                  (569)    (2,088)    10,485        961
    Accrued liabilities             (1,539)    (1,000)     1,092        301
    Accrued payroll and
     compensation                    4,613      3,036      6,013      4,599
    Deferred revenue                32,446     23,100     68,871     68,292
    Income taxes payable            11,320     12,416     22,522     28,265
                                 ---------  ---------  ---------  ---------
    Net cash provided by
     operating activities           46,668     50,293    147,384    183,866
                                 ---------  ---------  ---------  ---------
CASH FLOWS FROM INVESTING
 ACTIVITIES:
  Purchases of investments        (133,654)   (77,698)  (552,778)  (601,087)
  Sales of investments              32,409        500     57,897     26,268
  Maturities of investments         65,807     72,266    369,659    415,440
  Purchases of property and
   equipment                        (7,148)    (1,800)   (13,877)   (22,083)
  Payments made in connection
   with business acquisitions,
   net of cash acquired                  -       (500)    (7,635)    (1,249)
                                 ---------  ---------  ---------  ---------
    Net cash used in investing
     activities                    (42,586)    (7,232)  (146,734)  (182,711)
                                 ---------  ---------  ---------  ---------
CASH FLOWS FROM FINANCING
 ACTIVITIES:
  Proceeds from issuance of
   common stock                      1,114      2,081     25,584     38,087
  Taxes paid related to net
   share settlement of equity
   awards                             (486)         -     (1,452)         -
  Excess tax benefit from
   employee stock option plan          470      2,458      2,974     12,069
  Repurchase and retirement of
   common stock                    (33,529)         -    (33,529)         -
                                 ---------  ---------  ---------  ---------
    Net cash (used in)/provided
     by financing activities       (32,431)     4,539     (6,423)    50,156
                                 ---------  ---------  ---------  ---------
EFFECT OF EXCHANGE RATES ON CASH
 AND CASH EQUIVALENTS                 (324)       (91)    (1,329)      (326)
                                 ---------  ---------  ---------  ---------
NET (DECREASE) INCREASE IN CASH
 AND CASH EQUIVALENTS              (28,673)    47,509     (7,102)    50,985
CASH AND CASH EQUIVALENTS--
 Beginning of period               144,546     75,466    122,975     71,990
                                 ---------  ---------  ---------  ---------
CASH AND CASH EQUIVALENTS--End
 of period                       $ 115,873  $ 122,975  $ 115,873  $ 122,975
                                 =========  =========  =========  =========



Reconciliations of non-GAAP results of operations measures to the nearest
 comparable GAAP measures
(Unaudited, in thousands)


Reconciliation of GAAP revenue to billings


                                  Three Months Ended        Year Ended
                                 --------------------  --------------------
                                  December   December   December   December
                                  31, 2013   31, 2012   31, 2013   31, 2012
                                 ---------  ---------  ---------  ---------
Total revenue                    $ 177,350  $ 151,162  $ 615,297  $ 533,639
  Increase in deferred revenue      32,455     23,107     69,443     68,352
  Less deferred revenue balance
   acquired in business
   combination                           -          -       (550)         -
                                 ---------  ---------  ---------  ---------
Total billings (Non-GAAP)        $ 209,805  $ 174,269  $ 684,190  $ 601,991
                                 =========  =========  =========  =========


Reconciliation of net cash provided by operating activities to free cash
 flow


                                   Three Months Ended        Year Ended
                                 --------------------  --------------------
                                  December   December   December   December
                                  31, 2013   31, 2012   31, 2013   31, 2012
                                 ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                      $  46,668  $  50,293  $ 147,384  $ 183,866
  Less purchases of property and
   equipment                        (7,148)    (1,800)   (13,877)   (22,083)
                                 ---------  ---------  ---------  ---------
Free cash flow (Non-GAAP)        $  39,520  $  48,493  $ 133,507  $ 161,783
                                 =========  =========  =========  =========



Reconciliation of non-GAAP results of operations to the nearest comparable
 GAAP measures
(Unaudited, in thousands, except per share amounts)

Reconciliation of GAAP to Non-GAAP operating income, operating margin, net
 income and diluted net income per share


                       Three Months Ended           Three Months Ended
                        December 31, 2013            December 31, 2012
                  ---------------------------- ----------------------------
                    GAAP   Adjustm    Non-GAAP   GAAP   Adjustm    Non-GAAP
                   Results   -ents      Results  Results  -ents      Results
                  -------- -------    -------- -------- -------    --------
Operating Income  $ 24,643 $13,186(a) $ 37,829 $ 35,040 $ 6,510(b) $ 41,550
                  ======== =======    ======== ======== =======    ========
Operating Margin        14%                 21%      23%                 27%
                  ========            ======== ========            ========
Adjustments:
  Stock-based
   compensation
   expense                  12,687                        6,762
  Amortization
   expense of
   certain
   intangible
   assets                      508(c)                       226(c)
  Impairment
   charges related
   to certain
   intangible
   assets                      469                            -
  Patent
   settlement
   income                     (478)                        (478)
  Tax adjustment               746(d)                       218(e)
                           -------                      -------
Net Income        $ 12,016 $13,932    $ 25,948 $ 21,507 $ 6,728    $ 28,235
                  ========            ======== ========            ========
Diluted net income
 per share        $   0.07            $   0.15 $   0.13            $   0.17
                  ========            ======== ========            ========
Shares used in per
 share
 calculations -
 diluted           168,873             168,873  166,955             166,955
                  ========            ======== ========            ========

(a) To exclude $12.7 million of stock-based compensation expense, $0.5
million of amortization expense of certain intangible assets, and $0.5
million of impairment charges related to certain intangible assets offset by
$0.5 million of patent settlement income in the three months ended December
31, 2013.

(b) To exclude $6.8 million of stock-based compensation expense and $0.2
million of amortization expense of certain intangible assets offset by $0.5
million of patent settlement income in the three months ended December 31,
2012.

(c) Effective second quarter of fiscal year 2013, amortization expense of
certain intangible assets is excluded from GAAP operating income and GAAP
net income. Prior period amounts have been adjusted to conform to the
current period presentation.

(d)  Non-GAAP financial information is adjusted to achieve an overall 33
percent effective tax rate on a pro forma basis, which differs from the GAAP
tax rate, in the three months ended December 31, 2013.

(e) Non-GAAP financial information is adjusted to achieve an overall 34
percent effective tax rate on a pro forma basis, which differs from the GAAP
tax rate, in the three months ended December 31, 2012.



                  Year Ended December 31, 2013 Year Ended December 31, 2012
                  ---------------------------- ----------------------------
                    GAAP   Adjustm    Non-GAAP   GAAP   Adjusm    Non-GAAP
                   Results  -ents      Results  Results  -ents       Results
                  -------- -------    -------- -------- -------    --------
Operating Income  $ 72,090 $44,579(f) $116,668 $100,475 $29,604(g) $130,079
                  ======== =======    ======== ======== =======    ========
Operating Margin        12%                 19%      19%                 24%
                  ========            ======== ========            ========
Adjustments:
  Stock-based
   compensation
   expense                  44,471                       30,690
  Amortization
   expense of
   certain
   intangible
   assets                    1,551(h)                       826(h)
  Impairment
   charges
   related to
   certain
   intangible
   assets                      469                            -
  Patent
   settlement
   income                   (1,912)                      (1,912)
  Tax adjustment            (8,104)(i)                   (7,604)(j)
                           -------                      -------
Net Income        $ 44,273 $36,475    $ 80,748 $ 66,836 $22,000    $ 88,836
                  ========            ======== ========            ========
Diluted net
 income per share $   0.26            $   0.48 $   0.40            $   0.53
                  ========            ======== ========            ========
Shares used in
 per share
 calculations -
 diluted           168,183             168,183  166,329             166,329
                  ========            ======== ========            ========

(f) To exclude $44.5 million of stock-based compensation expense, $1.6
million of amortization expense of certain intangible assets, and $0.5
million of impairment charges related to certain intangible assets offset by
$1.9 million of patent settlement income in the twelve months ended December
31, 2013.

(g) To exclude $30.7 million of stock-based compensation expense and $0.8
million of amortization expense of certain intangible assets offset by $1.9
million of patent settlement income in the twelve months ended December 31,
2013.

(h) Effective second quarter of fiscal year 2013, amortization expense of
certain intangible assets is excluded from GAAP operating income and GAAP
net income. Prior period amounts have been adjusted to conform to the
current period presentation.

(i)  Non-GAAP financial information is adjusted to achieve an overall 33
percent effective tax rate on a pro forma basis, which differs from the GAAP
tax rate, in the twelve months ended December 31, 2013.

(j) Non-GAAP financial information is adjusted to achieve an overall 34
percent effective tax rate on a pro forma basis, which differs from the GAAP
tax rate, in the twelve months ended December 31, 2012.

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