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T
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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77-0560389
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1090 Kifer Road
Sunnyvale, California
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94086
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(Address of principal executive offices)
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(Zip Code)
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Common Stock, $0.001 Par Value
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The NASDAQ Stock Market LLC
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NASDAQ Global Select Market
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(Title of each class)
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(Name of exchange on which registered)
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Page
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Part I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Removed and
Reserved
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Part II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Other Information
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Part III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Part IV
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Item 15.
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•
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Firewall
. Our firewall technology delivers high performance network and application firewalling, including the ability to enforce policies based on application behavior and content. Our technology identifies traffic patterns independent of port or protocol used, and links them to the use of specific applications, enabling visibility and control over application behavior (explained in more detail below). By coupling application intelligence with firewall technology, the FortiGate platform is able to deliver real-time security with integrated application content level inspection, thereby simplifying security deployments.
|
•
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Virtual Private Network
. Our advanced VPN technology provides secure communications between multiple networks and hosts, through both secure socket layer, or SSL, and IPsec VPN technologies, leveraging our custom FortiASIC to provide hardware acceleration for high-performance communications and data privacy.
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•
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Antivirus
. Our antivirus technology provides protection against malware, including viruses, spyware and trojans.
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•
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Intrusion Prevention System
. Our IPS technology provides protection against current and emerging network level threats.
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•
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Web Filtering
. Our Web filtering automation technology works in concert with our research team to collect, analyze and categorize websites to provide real-time protection through website ratings and categorization. Our Web filtering technology is a pro-active defense feature that identifies known locations of malware and blocks access to these malicious sources.
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•
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Antispam
. We employ a variety of antispam techniques to detect and block spam. These techniques include a hosted service performing algorithmic validations of messages against known spam messages, sophisticated reputation service designed to evaluate and track valid email sources and destinations, intelligent image scanning to evaluate the validity of images and dynamic heuristic rules to allow messages to be evaluated based on content within each message.
|
•
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WAN Acceleration
. Our storage-enabled and storage-ready FortiGate appliances provide the ability to accelerate network traffic across the wide area network by implementing a combination of application content caching and protocol optimization techniques.
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•
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Application Control.
Our application control technology provides the ability to define granular network-based application policies giving end-customers additional control over application access.
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•
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Data Leakage Prevention (DLP).
Our DLP technology provides the ability to define rules based on corporate policies, and consequently detect and prevent confidential data from being distributed outside of the corporate network.
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•
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Traffic optimization.
Our traffic optimization technology combines quality of service techniques with traffic shaping to provide better service to selected network traffic based on customer policies without causing interruptions to other traffic.
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•
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SSL inspection.
Our SSL inspection technology provides the ability to decrypt SSL application content for processing by the FortiOS. The ability to inspect encrypted SSL content enables our customers to ensure protection from malware that would be otherwise hidden from traditional security products, and enforce the full complement of security and networking features available within FortiOS.
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•
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Vulnerability Management
. Our vulnerability management technology enables the FortiGate platform to perform network scans to discover systems on a network, identity vulnerabilities and recommend steps for remediation. The FortiGate devices can store the results of the scans locally, or send the results from multiple FortiGate devices to a central FortiAnalyzer for aggregation and analysis.
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•
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Wireless Controller
. Our wireless controller technology provides the ability to deploy FortiAP wireless access points to create a secure wireless network. FortiAP access points tunnel all wireless traffic to FortiGate or FortiWiFi platforms, enabling end-customers to use a single security platform to manage all wired and wireless network traffic.
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•
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the level of demand for our products and services;
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•
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the timing of channel partner and end-customer orders;
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•
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the timing of shipments, which may depend on many factors such as inventory levels and logistics, our ability to ship new products on schedule and accurately forecast inventory requirements, and potential delays in the manufacturing process;
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•
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the mix of products sold, the mix of revenue between products and services and the degree to which products and services are bundled and sold together for a package price;
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•
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the budgeting cycles and purchasing practices of our channel partners and end-customers;
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•
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seasonal buying patterns of our end-customers;
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•
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the timing of revenue recognition for our sales, which may be affected by both the mix of sales by our “sell-in” versus our “sell-through” channel partners, and by the extent to which we bring on new distributors;
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•
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the accuracy and timing of point of sale reporting by our sell-through distributors, which impacts our ability to recognize revenue;
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•
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the level of perceived threats to network security, which may fluctuate from period to period;
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•
|
changes in end-customer, distributor or reseller requirements or market needs;
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•
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changes in the growth rate of the network security or UTM markets;
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•
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the timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or end-customers;
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•
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deferral of orders from end-customers in anticipation of new products or product enhancements announced by us or our competitors;
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•
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decisions by potential end-customers to purchase network security solutions from larger, more established security vendors or from their primary network equipment vendors;
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•
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price competition;
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•
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changes in customer renewal rates for our services;
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•
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changes in the length of services contracts sold;
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•
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insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our products and services;
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•
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any disruption in our channel or termination of our relationship with important channel partners;
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•
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insolvency or credit difficulties confronting our key suppliers, which could disrupt our supply chain;
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•
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general economic conditions, both domestically and in our foreign markets;
|
•
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future accounting pronouncements or changes in our accounting policies; and
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•
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increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates, as a significant portion of our expenses are incurred and paid in currencies other than the U.S. dollar.
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•
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increased competition from larger competitors, such as Cisco Systems, Inc., Check Point Software Technologies Ltd., McAfee, Inc. (pending acquisition by Intel, Inc.), and Juniper Networks, Inc., that traditionally target enterprises, service providers and government entities and that may already have purchase commitments from those end-customers;
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•
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increased purchasing power and leverage held by large end-customers in negotiating contractual arrangements with us;
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•
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more stringent requirements in our support service contracts, including stricter support response times, and increased penalties for any failure to meet support requirements; and
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•
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longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer who elects not to purchase our products and services.
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•
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expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work-around errors or defects or to address and eliminate vulnerabilities;
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•
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loss of existing or potential end-customers or channel partners;
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•
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delayed or lost revenue;
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•
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delay or failure to attain market acceptance;
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•
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negative publicity, which will harm our reputation; and
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•
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litigation, regulatory inquiries or investigations that may be costly and harm our reputation.
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•
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a potential inability to obtain an adequate supply of required parts or components when required;
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•
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financial or other difficulties faced by our suppliers;
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•
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infringement or misappropriation of our intellectual property;
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•
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price increases;
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•
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failure of a component to meet environmental or other regulatory requirements;
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•
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failure to meet delivery obligations in a timely fashion; and
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•
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failure in component quality.
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•
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economic or political instability in foreign markets;
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•
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greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods;
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•
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changes in regulatory requirements;
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•
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difficulties and costs of staffing and managing foreign operations;
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•
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the uncertainty of protection for intellectual property rights in some countries;
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•
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costs of compliance with foreign policies, laws and regulations and the risks and costs of non-compliance with such policies, laws and regulations;
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•
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costs of complying with U.S. laws and regulations for foreign operations, including the Foreign Corrupt Practices Act, import and export control laws, tariffs, trade barriers, and economic sanctions;
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•
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other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of non-compliance;
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•
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heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;
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•
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the potential for political unrest, terrorism, hostilities or war;
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•
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management communication and integration problems resulting from cultural differences and geographic dispersion; and
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•
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multiple and possibly overlapping tax structures.
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•
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earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
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•
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changes in the valuation of our deferred tax assets and liabilities;
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•
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expiration of, or lapses in the research and development tax credit laws;
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•
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transfer pricing adjustments including the effect of acquisitions on our intercompany research and development and legal structure;
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•
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an increase in non-deductible expenses for tax purposes, including certain stock-based compensation expense, write-offs of acquired in-process research and development, and impairment of goodwill;
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•
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tax costs related to intercompany realignments;
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•
|
tax assessments resulting from income tax audits or any related tax interest or penalties that could significantly affect our income tax provision for the period in which the settlement take place;
|
•
|
a change in our decision to indefinitely reinvest foreign earnings;
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•
|
changes in accounting principles; or
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•
|
changes in tax laws and regulations including possible changes in the United States to the taxation of earnings of our foreign subsidiaries, and the deductibility of expenses attributable to foreign income, or the foreign tax credit rules, or changes to the United States income tax rate, which would necessitate a revaluation of our deferred tax assets and liabilities.
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•
|
delays in releasing our new products or enhancements to the market;
|
•
|
failure to accurately predict market demand in terms of product functionality and to supply products that meet this demand in a timely fashion;
|
•
|
failure of our sales force and partners to focus on selling new products;
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•
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inability to interoperate effectively with the networks or applications of our prospective end-customers;
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•
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inability to protect against new types of attacks or techniques used by hackers;
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•
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defects, errors or failures;
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•
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negative publicity about their performance or effectiveness;
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•
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introduction or anticipated introduction of competing products by our competitors;
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•
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poor business conditions for our end-customers, causing them to delay IT purchases;
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•
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easing of regulatory requirements around security; and
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•
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reluctance of customers to purchase products incorporating open source software.
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•
|
greater name recognition and longer operating histories;
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•
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larger sales and marketing budgets and resources;
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•
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broader distribution and established relationships with distribution partners and end-customers;
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•
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access to larger customer bases;
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•
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greater customer support resources;
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•
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greater resources to make acquisitions;
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•
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lower labor and development costs; and
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•
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substantially greater financial, technical and other resources.
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•
|
develop or enhance our products and services;
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•
|
continue to expand our sales and marketing and research and development organizations;
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•
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acquire complementary technologies, products or businesses;
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•
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expand operations, in the United States or internationally;
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•
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hire, train and retain employees; or
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•
|
respond to competitive pressures or unanticipated working capital requirements.
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•
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creating a classified board of directors whose members serve staggered three-year terms;
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•
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authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
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•
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limiting the liability of, and providing indemnification to, our directors and officers;
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•
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limiting the ability of our stockholders to call and bring business before special meetings;
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•
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requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
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•
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controlling the procedures for the conduct and scheduling of board and stockholder meetings; and
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•
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providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.
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|
High ($)
|
|
Low ($)
|
||
Fourth Quarter 2010
|
33.46
|
|
|
24.08
|
|
Third Quarter 2010
|
25.21
|
|
|
16.00
|
|
Second Quarter 2010
|
18.63
|
|
|
15.00
|
|
First Quarter 2010
|
20.11
|
|
|
15.69
|
|
Fourth Quarter 2009 (from November 18, 2009)
|
18.36
|
|
|
16.55
|
|
|
Fiscal Year
(1)
|
|||||||||||||
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|||||
|
($ amounts in 000's, except per share amounts)
|
|||||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|||||
Product
|
135,140
|
|
|
98,686
|
|
|
94,587
|
|
|
70,131
|
|
|
59,469
|
|
Services
|
172,046
|
|
|
139,172
|
|
|
105,292
|
|
|
74,152
|
|
|
39,590
|
|
Ratable product and services
|
17,510
|
|
|
14,257
|
|
|
11,912
|
|
|
11,083
|
|
|
24,407
|
|
Total revenue
|
324,696
|
|
|
252,115
|
|
|
211,791
|
|
|
155,366
|
|
|
123,466
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|||||
Product
(2)
|
51,944
|
|
|
42,166
|
|
|
41,397
|
|
|
35,948
|
|
|
24,166
|
|
Services
(2)
|
26,967
|
|
|
22,265
|
|
|
19,441
|
|
|
15,941
|
|
|
9,496
|
|
Ratable product and services
|
6,295
|
|
|
5,544
|
|
|
4,634
|
|
|
4,763
|
|
|
7,302
|
|
Total cost of revenue
|
85,206
|
|
|
69,975
|
|
|
65,472
|
|
|
56,652
|
|
|
40,964
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|||||
Product
|
83,196
|
|
|
56,520
|
|
|
53,190
|
|
|
34,183
|
|
|
35,303
|
|
Services
|
145,079
|
|
|
116,907
|
|
|
85,851
|
|
|
58,211
|
|
|
30,094
|
|
Ratable product and services
|
11,215
|
|
|
8,713
|
|
|
7,278
|
|
|
6,320
|
|
|
17,105
|
|
Total gross profit
|
239,490
|
|
|
182,140
|
|
|
146,319
|
|
|
98,714
|
|
|
82,502
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|||||
Research and development
(2)
|
49,801
|
|
|
42,195
|
|
|
37,035
|
|
|
27,588
|
|
|
21,446
|
|
Sales and marketing
(2)
|
111,968
|
|
|
96,291
|
|
|
87,717
|
|
|
72,159
|
|
|
54,056
|
|
General and administrative
(2)
|
22,380
|
|
|
18,320
|
|
|
16,640
|
|
|
20,544
|
|
|
12,997
|
|
Total operating expenses
|
184,149
|
|
|
156,806
|
|
|
141,392
|
|
|
120,291
|
|
|
88,499
|
|
Operating income (loss)
|
55,341
|
|
|
25,334
|
|
|
4,927
|
|
|
(21,577
|
)
|
|
(5,997
|
)
|
Interest income
|
1,815
|
|
|
1,981
|
|
|
2,614
|
|
|
3,507
|
|
|
2,376
|
|
Other income (expense), net
|
(815
|
)
|
|
198
|
|
|
1,710
|
|
|
(1,991
|
)
|
|
(503
|
)
|
Income (loss) before income taxes
|
56,341
|
|
|
27,513
|
|
|
9,251
|
|
|
(20,061
|
)
|
|
(4,124
|
)
|
Provision for (benefit from) income taxes
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
|
1,781
|
|
|
1,220
|
|
Net income (loss)
|
41,245
|
|
|
60,179
|
|
|
7,363
|
|
|
(21,842
|
)
|
|
(5,344
|
)
|
Net income (loss) per share
(3)
:
|
|
|
|
|
|
|
|
|
|
|||||
Basic
|
0.59
|
|
|
1.93
|
|
|
0.02
|
|
|
(1.13
|
)
|
|
(0.28
|
)
|
Diluted
|
0.53
|
|
|
0.78
|
|
|
0.02
|
|
|
(1.13
|
)
|
|
(0.28
|
)
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|||||
Basic
|
70,363
|
|
|
26,334
|
|
|
20,017
|
|
|
19,276
|
|
|
18,861
|
|
Diluted
|
78,203
|
|
|
65,219
|
|
|
26,642
|
|
|
19,276
|
|
|
18,861
|
|
(1)
|
Our fiscal years ended on
December 31, 2010
,
December 31, 2009
,
December 28, 2008
,
December 30, 2007
and December 31, 2006.
|
(2)
|
Includes stock-based compensation expense as follows:
|
(3)
|
Amounts related to 2008 have been corrected. See Note 7 to Consolidated Financial Statements.
|
|
As of Fiscal Year End
|
|||||||||||||
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
||||||
($ amounts in 000's)
|
||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|||||
Cash, cash equivalents and investments
|
387,460
|
|
|
260,314
|
|
|
124,190
|
|
|
90,161
|
|
|
64,041
|
|
Working capital
|
201,776
|
|
|
161,652
|
|
|
38,193
|
|
|
12,862
|
|
|
12,399
|
|
Total assets
|
545,422
|
|
|
387,213
|
|
|
199,105
|
|
|
145,192
|
|
|
109,311
|
|
Convertible preferred stock
|
—
|
|
|
—
|
|
|
94,368
|
|
|
94,368
|
|
|
94,368
|
|
Common stock including treasury stock and additional paid-in capital
|
249,000
|
|
|
201,340
|
|
|
20,854
|
|
|
13,438
|
|
|
4,087
|
|
Total stockholders’ equity (deficit)
|
232,454
|
|
|
142,452
|
|
|
(5,229
|
)
|
|
(18,925
|
)
|
|
(7,217
|
)
|
•
|
the continued realization of efficiency gains in our sales and marketing organization as well as efficiency gains in our overall headcount measured by revenue per employee;
|
•
|
growth in our high-end business and further penetration in certain verticals;
|
•
|
the significance of stock compensation as an expense;
|
•
|
the proportion of our revenue that consists of our product and service revenues and future trends with respect to service revenue as we renew existing services contracts and expands our customer base;
|
•
|
our royalty payments to Trend Micro;
|
•
|
the impact of our product innovation strategy;
|
•
|
trends in product revenues, costs of services revenue, service gross margin and overall gross margin;
|
•
|
trends in our operating expenses, including personnel costs, research and development expense, sales and marketing expense and general and administrative expense;
|
•
|
investments in research and development and sales and marketing staff to address market opportunities and to position ourselves for future growth;
|
•
|
the impact of seasonality on our business;
|
•
|
the sufficiency of our existing cash and cash equivalents to meet our cash needs for at least the next 12 months; and
|
•
|
the impact of inflation and foreign currency exchange rates;
|
|
Fiscal Year
|
|||||||||||||
2010
|
|
2009
|
|
2008
|
||||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
||||
($ amounts in 000's)
|
||||||||||||||
Total revenue
|
324,696
|
|
|
|
|
252,115
|
|
|
|
|
211,791
|
|
|
|
GAAP gross profit and margin
|
239,490
|
|
|
73.8
|
|
182,140
|
|
|
72.2
|
|
146,319
|
|
|
69.1
|
Stock-based compensation expense
|
1,030
|
|
|
0.3
|
|
760
|
|
|
0.3
|
|
467
|
|
|
0.2
|
Non-cash asset acquisition related write-offs
|
—
|
|
|
—
|
|
2,387
|
|
|
0.9
|
|
—
|
|
|
—
|
Non-GAAP gross profit and margin
|
240,520
|
|
|
74.1
|
|
185,287
|
|
|
73.4
|
|
146,786
|
|
|
69.3
|
GAAP income from operations and margin
|
55,341
|
|
|
17.0
|
|
25,334
|
|
|
10.0
|
|
4,927
|
|
|
2.3
|
Stock-based compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Cost of revenue
|
1,030
|
|
|
0.3
|
|
760
|
|
|
0.3
|
|
467
|
|
|
0.2
|
Research and development
|
2,339
|
|
|
0.9
|
|
1,963
|
|
|
0.8
|
|
1,049
|
|
|
0.5
|
Sales and marketing
|
3,810
|
|
|
1.2
|
|
3,020
|
|
|
1.2
|
|
2,512
|
|
|
1.2
|
General and administrative
|
2,136
|
|
|
0.4
|
|
1,718
|
|
|
0.7
|
|
1,271
|
|
|
0.6
|
Total stock-based compensation
|
9,315
|
|
|
2.8
|
|
7,461
|
|
|
3.0
|
|
5,299
|
|
|
2.5
|
Non-cash asset acquisition related write-offs
|
—
|
|
|
—
|
|
2,387
|
|
|
0.9
|
|
—
|
|
|
—
|
Non-GAAP income from operations and margin
|
64,656
|
|
|
19.8
|
|
35,182
|
|
|
13.9
|
|
10,226
|
|
|
4.8
|
|
Fiscal Year
|
||||||||||||||||
2010
|
|
2009
|
|
2008
|
|||||||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|||||||
($ amounts in 000's)
|
|||||||||||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GAAP research and development expenses
|
49,801
|
|
|
15.3
|
|
|
42,195
|
|
|
16.7
|
|
|
37,035
|
|
|
17.5
|
|
Stock-based compensation
|
(2,339
|
)
|
|
(0.9
|
)
|
|
(1,963
|
)
|
|
(0.8
|
)
|
|
(1,049
|
)
|
|
(0.5
|
)
|
Non-GAAP research and development expenses
|
47,462
|
|
|
14.4
|
|
|
40,232
|
|
|
15.9
|
|
|
35,986
|
|
|
17.0
|
|
Sales and marketing expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GAAP sales and marketing expenses
|
111,968
|
|
|
34.5
|
|
|
96,291
|
|
|
38.2
|
|
|
87,717
|
|
|
41.4
|
|
Stock-based compensation
|
(3,810
|
)
|
|
(1.2
|
)
|
|
(3,020
|
)
|
|
(1.2
|
)
|
|
(2,512
|
)
|
|
(1.2
|
)
|
Non-GAAP sales and marketing expenses
|
108,158
|
|
|
33.3
|
|
|
93,271
|
|
|
37.0
|
|
|
85,205
|
|
|
40.2
|
|
General and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GAAP general and administrative expenses
|
22,380
|
|
|
6.9
|
|
|
18,320
|
|
|
7.3
|
|
|
16,640
|
|
|
7.9
|
|
Stock-based compensation
|
(2,136
|
)
|
|
(0.4
|
)
|
|
(1,718
|
)
|
|
(0.7
|
)
|
|
(1,271
|
)
|
|
(0.6
|
)
|
Non-GAAP general and administrative expenses
|
20,244
|
|
|
6.5
|
|
|
16,602
|
|
|
6.6
|
|
|
15,369
|
|
|
7.3
|
|
Total operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GAAP operating expenses
|
184,149
|
|
|
56.7
|
|
|
156,806
|
|
|
62.2
|
|
|
141,392
|
|
|
66.8
|
|
Stock-based compensation
|
(8,285
|
)
|
|
(2.5
|
)
|
|
(6,701
|
)
|
|
(2.7
|
)
|
|
(4,832
|
)
|
|
(2.3
|
)
|
Non-GAAP operating expenses
|
175,864
|
|
|
54.2
|
|
|
150,105
|
|
|
59.5
|
|
|
136,560
|
|
|
64.5
|
|
|
Fiscal Year
|
|||||||
2010
|
2009
|
2008
|
||||||
($ and share amounts in 000's, except per share amounts)
|
||||||||
Net Income:
|
|
|
|
|
|
|||
GAAP net income
|
41,245
|
|
|
60,179
|
|
|
7,363
|
|
Stock-based compensation expense
(1)
|
9,315
|
|
|
7,461
|
|
|
5,299
|
|
Non-cash asset acquisition related write-offs
(1)
|
—
|
|
|
2,387
|
|
|
—
|
|
Provision for income taxes
(2)
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
Non-GAAP income before provision for income taxes
|
65,656
|
|
|
37,361
|
|
|
14,550
|
|
Tax effects related to non-GAAP adjustments
(3)
|
(21,010
|
)
|
|
(6,877
|
)
|
|
(2,948
|
)
|
Non-GAAP net income
|
44,646
|
|
|
30,484
|
|
|
11,602
|
|
Non-GAAP net income per share - diluted
|
0.57
|
|
|
0.47
|
|
|
0.17
|
|
Shares used in per share calculation - diluted
|
78,203
|
|
|
65,219
|
|
|
67,122
|
|
|
Fiscal Year
|
|||||||
2010
|
2009
|
2008
|
||||||
($ amounts in 000's)
|
||||||||
Billings:
|
|
|
|
|
|
|||
Revenue
|
324,696
|
|
|
252,115
|
|
|
211,791
|
|
Increase in deferred revenue
|
50,701
|
|
|
30,313
|
|
|
40,363
|
|
Total billings (Non-GAAP)
|
375,397
|
|
|
282,428
|
|
|
252,154
|
|
|
Fiscal Year
|
|||||||
2010
|
2009
|
2008
|
||||||
($ amounts in 000's)
|
||||||||
Cash Flow:
|
|
|
|
|
|
|||
Net cash provided by operating activities
|
103,383
|
|
|
61,971
|
|
|
37,686
|
|
Less purchases of property and equipment
|
(3,776
|
)
|
|
(4,589
|
)
|
|
(2,798
|
)
|
Free cash flow (Non-GAAP)
|
99,607
|
|
|
57,382
|
|
|
34,888
|
|
Net cash provided by (used in) investing activities
|
(283,710
|
)
|
|
13,757
|
|
|
(53,706
|
)
|
Net cash provided by financing activities
|
34,019
|
|
|
78,049
|
|
|
2,117
|
|
•
|
Product revenue
. Product revenue is generated from sales of our appliances and software. The substantial
|
•
|
Services revenue
. Services revenue is generated primarily from FortiCare technical support services for software updates, maintenance releases and patches, Internet access to technical content, telephone and Internet access to technical support personnel, and FortiGuard security subscription services related to antivirus, intrusion prevention, Web filtering and antispam updates. We recognize revenue from subscription and support services over the service performance period. Our typical contractual support and subscription term is one year from the date of registration. We also generate a small portion of our revenue from professional services and training services and we recognize this revenue upon completion of the project. As a percentage of total revenue, we expect our services revenue to remain at relatively comparable levels.
|
•
|
Ratable product and services revenue
. Ratable product and services revenue is generated from sales of our products and services in cases where the fair value of the services being provided cannot be segregated from the value of the entire sale. In these cases, the value of the entire sale is deferred and recognized ratably over the life of the service performance period. See “—Critical Accounting Policies and Estimates—Revenue Recognition.” In fiscal
2009
and
2010
, ratable product and service revenue represented approximately 5% to 6% of total revenue.
|
•
|
Cost of product revenue. A substantial majority of the cost of product revenue consists of third-party manufacturing costs. Our cost of product revenue also includes product testing costs, write-offs for excess and obsolete inventory, royalty payments, amortization and any impairment of applicable acquired intangible assets, warranty costs, shipping and allocated facilities costs, stock-based compensation costs, and personnel costs associated with logistics and quality control. Personnel costs include cash-based personnel costs such as salaries, benefits and bonuses. Royalties reflect amounts related to Trend Micro since 2006, which Trend Micro claims are owed through 2015, as discussed in “Item 3 - Legal Proceedings.” For fiscal 2009 and 2010, this royalty represented approximately 1% of total revenue and we do not expect this percentage to increase substantially in the foreseeable future.
|
•
|
Cost of services revenue. Cost of services revenue is primarily comprised of cash-based personnel costs associated with our FortiGuard Labs team and our technical support, professional services and training teams, as well as depreciation, supplies, data center, data communications, facility-related costs and stock-based compensation costs. We expect our cost of services revenue will increase as we continue to invest in subscription and support services to meet the needs of our growing customer base.
|
•
|
Cost of ratable product and services revenue. Cost of ratable product and services revenue is comprised primarily of deferred product costs and services-related costs.
|
•
|
Research and development. Research and development expense consists primarily of cash-based personnel costs. Additional research and development expenses include ASIC and system prototypes and certification-related expenses, depreciation of capital equipment, facility-related expenses and stock-based compensation expenses. The majority of our research and development is focused on both software development and the ongoing development of our hardware platform. We record all research and development expenses as incurred, except for capital equipment which is depreciated over time. Our development teams are primarily located in Canada, China, and the United States. We expect our spending for research and development to increase in absolute dollars and may increase modestly as a percentage of total revenue compared to fiscal 2010 results.
|
•
|
Sales and marketing. Sales and marketing expense is the largest component of our operating expenses and primarily consists of cash-based personnel costs including salary, benefits and commissions. Additional sales and marketing expenses include stock-based compensation, promotional and other marketing expenses, travel, depreciation of capital equipment and facility-related expenses. We intend to hire additional personnel focused on sales and marketing and expand our sales and marketing efforts worldwide in order to increase our presence in new geographic markets and enterprise verticals, add new customers and increase penetration within our existing customer base. Accordingly, we expect sales and marketing expenses to increase in absolute dollars and to continue to be our largest operating expense.
|
•
|
General and administrative. General and administrative expense consists of cash-based personnel costs as well as professional fees, stock-based compensation, depreciation of capital equipment and software, and facility-related expenses. General and administrative personnel include our executive, finance, human resources, information technology and legal organizations. Our professional fees principally consist of outside legal, auditing, accounting, information technology and other consulting costs. We expect that general and administrative expense will increase in absolute dollars as we hire additional personnel, make improvements to our information technology infrastructure, and defend our intellectual property.
|
•
|
Persuasive evidence of an arrangement exists.
Binding contracts or purchase orders are generally used to determine the existence of an arrangement.
|
•
|
Delivery has occurred.
Delivery occurs when we fulfill an order and title and risk of loss has been transferred or upon delivery of the service contract registration code.
|
•
|
The fee is fixed or determinable.
We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction. In the event payment terms differ from our standard business practices, the fees are deemed to be not fixed or determinable and revenue is recognized when the payments become due, provided the remaining criteria for revenue recognition have been met.
|
•
|
Collectability is probable.
We assess collectability based primarily on creditworthiness as determined by credit checks and analysis, as well as payment history. Payment terms generally range from 30 to 90 days from invoice date.
|
|
Fiscal Year
(1)
|
|||||||
|
2010
|
|
2009
(2)
|
|
2008
|
|||
|
($ amounts in 000's)
|
|||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|||
Revenue
|
|
|
|
|
|
|||
Product
|
135,140
|
|
|
98,686
|
|
|
94,587
|
|
Services
|
172,046
|
|
|
139,172
|
|
|
105,292
|
|
Ratable product and services
|
17,510
|
|
|
14,257
|
|
|
11,912
|
|
Total revenue
|
324,696
|
|
|
252,115
|
|
|
211,791
|
|
Cost of revenue
|
|
|
|
|
|
|||
Product
|
51,944
|
|
|
42,166
|
|
|
41,397
|
|
Services
|
26,967
|
|
|
22,265
|
|
|
19,441
|
|
Ratable product and services
|
6,295
|
|
|
5,544
|
|
|
4,634
|
|
Total cost of revenues
|
85,206
|
|
|
69,975
|
|
|
65,472
|
|
Gross profit
|
|
|
|
|
|
|||
Product
|
83,196
|
|
|
56,520
|
|
|
53,190
|
|
Services
|
145,079
|
|
|
116,907
|
|
|
85,851
|
|
Ratable product and services
|
11,215
|
|
|
8,713
|
|
|
7,278
|
|
Total gross profit
|
239,490
|
|
|
182,140
|
|
|
146,319
|
|
Operating expenses
|
|
|
|
|
|
|||
Research and development
|
49,801
|
|
|
42,195
|
|
|
37,035
|
|
Sales and marketing
|
111,968
|
|
|
96,291
|
|
|
87,717
|
|
General and administrative
|
22,380
|
|
|
18,320
|
|
|
16,640
|
|
Total operating expenses
|
184,149
|
|
|
156,806
|
|
|
141,392
|
|
Operating income
|
55,341
|
|
|
25,334
|
|
|
4,927
|
|
Interest income
|
1,815
|
|
|
1,981
|
|
|
2,614
|
|
Other income (expense), net
|
(815
|
)
|
|
198
|
|
|
1,710
|
|
Income before income taxes
|
56,341
|
|
|
27,513
|
|
|
9,251
|
|
Provision for (benefit from) income taxes
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
Net income
|
41,245
|
|
|
60,179
|
|
|
7,363
|
|
(1)
|
Our fiscal years ended on
December 31, 2010
,
December 31, 2009
and
December 28, 2008
.
|
(2)
|
Commencing in the third quarter of fiscal
2009
, we began operating and reporting financial results on a calendar quarter and year basis. This change in period end had the effect of increasing the number of days in fiscal
2009
by four days.
|
|
Fiscal Year
|
||||||
2010
|
|
2009
|
|
2008
|
|||
(as % of revenue)
|
|||||||
Revenue
|
|
|
|
|
|
||
Product
|
41.6
|
|
|
39.1
|
|
|
44.7
|
Services
|
53.0
|
|
|
55.2
|
|
|
49.7
|
Ratable product and services
|
5.4
|
|
|
5.7
|
|
|
5.6
|
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
Total cost of revenue
|
26.2
|
|
|
27.8
|
|
|
30.9
|
Total gross profit
|
73.8
|
|
|
72.2
|
|
|
69.1
|
Operating expenses
|
|
|
|
|
|
||
Research and development
|
15.3
|
|
|
16.7
|
|
|
17.5
|
Sales and marketing
|
34.6
|
|
|
38.2
|
|
|
41.4
|
General and administrative
|
6.9
|
|
|
7.3
|
|
|
7.9
|
Total operating expenses
|
56.8
|
|
|
62.2
|
|
|
66.8
|
Operating income
|
17.0
|
|
|
10.0
|
|
|
2.3
|
Interest income
|
0.7
|
|
|
0.8
|
|
|
1.3
|
Other income (expense), net
|
(0.2
|
)
|
|
0.1
|
|
|
0.8
|
Income before provision for income taxes
|
17.5
|
|
|
10.9
|
|
|
4.4
|
Provision for (benefit from) income taxes
|
4.6
|
|
|
(13.0
|
)
|
|
0.9
|
Net income
|
12.9
|
|
|
23.9
|
|
|
3.5
|
|
Fiscal Year
|
|
|
|
|
|||||||||
2010
|
|
2009
|
|
|
|
|
||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
$ Change
|
|
% Change
|
||||
($ amounts in 000's)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Product
|
135,140
|
|
|
41.6
|
|
98,686
|
|
|
39.1
|
|
36,454
|
|
|
36.9
|
Services
|
172,046
|
|
|
53.0
|
|
139,172
|
|
|
55.2
|
|
32,874
|
|
|
23.6
|
Ratable product and services
|
17,510
|
|
|
5.4
|
|
14,257
|
|
|
5.7
|
|
3,253
|
|
|
22.8
|
Total revenue
|
324,696
|
|
|
100.0
|
|
252,115
|
|
|
100.0
|
|
72,581
|
|
|
28.8
|
Revenue by Geography:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Americas
|
123,961
|
|
|
38.2
|
|
92,621
|
|
|
36.7
|
|
31,340
|
|
|
33.8
|
EMEA
|
121,604
|
|
|
37.5
|
|
95,886
|
|
|
38.1
|
|
25,718
|
|
|
26.8
|
APAC
|
79,131
|
|
|
24.3
|
|
63,608
|
|
|
25.2
|
|
15,523
|
|
|
24.4
|
Total revenue
|
324,696
|
|
|
100.0
|
|
252,115
|
|
|
100.0
|
|
72,581
|
|
|
28.8
|
|
Fiscal Year
|
|
|
|
|
|||||
2010
|
|
2009
|
|
$ Change
|
|
% Change
|
||||
($ amounts in 000's)
|
||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|||
Product
|
51,944
|
|
|
42,166
|
|
|
9,778
|
|
|
23.2
|
Services
|
26,967
|
|
|
22,265
|
|
|
4,702
|
|
|
21.1
|
Ratable product and services
|
6,295
|
|
|
5,544
|
|
|
751
|
|
|
13.5
|
Total cost of revenue
|
85,206
|
|
|
69,975
|
|
|
15,231
|
|
|
21.8
|
Gross margin (%):
|
|
|
|
|
|
|
|
|||
Product
|
61.6
|
|
|
57.3
|
|
|
4.3
|
|
|
|
Services
|
84.3
|
|
|
84.0
|
|
|
0.3
|
|
|
|
Ratable product and services
|
64.0
|
|
|
61.1
|
|
|
2.9
|
|
|
|
Total gross margin
|
73.8
|
|
|
72.2
|
|
|
1.6
|
|
|
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||||||
2010
|
|
2009
|
|
|||||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
|||||||
($ amounts in 000's)
|
||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development
|
49,801
|
|
|
15.3
|
|
42,195
|
|
|
16.7
|
|
7,606
|
|
|
18.0
|
Sales and marketing
|
111,968
|
|
|
34.5
|
|
96,291
|
|
|
38.2
|
|
15,677
|
|
|
16.3
|
General and administrative
|
22,380
|
|
|
6.9
|
|
18,320
|
|
|
7.3
|
|
4,060
|
|
|
22.2
|
Total operating expenses
|
184,149
|
|
|
56.7
|
|
156,806
|
|
|
62.2
|
|
27,343
|
|
|
17.4
|
|
Fiscal Year
|
|
|
|
|
||||||
2010
|
|
2009
|
|
$ Change
|
|
% Change
|
|||||
($ amounts in 000's)
|
|||||||||||
Interest income
|
1,815
|
|
|
1,981
|
|
|
(166
|
)
|
|
(8.4
|
)
|
Other income (expense), net
|
(815
|
)
|
|
198
|
|
|
(1,013
|
)
|
|
(511.6
|
)
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||
2010
|
|
2009
|
|
|||||||
($ amounts in 000's)
|
||||||||||
Provision for (benefit from) income taxes
|
15,096
|
|
|
(32,666
|
)
|
|
47,762
|
|
|
*
|
Effective tax rate (%)
|
26.8
|
|
|
(118.7
|
)
|
|
|
|
*
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||||||
2009
|
|
2008
|
|
|||||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
|||||||
($ amounts in 000's)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Product
|
98,686
|
|
|
39.1
|
|
94,587
|
|
|
44.7
|
|
4,099
|
|
|
4.3
|
Services
|
139,172
|
|
|
55.2
|
|
105,292
|
|
|
49.7
|
|
33,880
|
|
|
32.2
|
Ratable product and services
|
14,257
|
|
|
5.7
|
|
11,912
|
|
|
5.6
|
|
2,345
|
|
|
19.7
|
Total revenue
|
252,115
|
|
|
100.0
|
|
211,791
|
|
|
100.0
|
|
40,324
|
|
|
19.0
|
Revenue by Geography:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Americas
|
92,621
|
|
|
36.7
|
|
75,367
|
|
|
35.6
|
|
17,254
|
|
|
22.9
|
EMEA
|
95,886
|
|
|
38.1
|
|
79,755
|
|
|
37.7
|
|
16,131
|
|
|
20.2
|
APAC
|
63,608
|
|
|
25.2
|
|
56,669
|
|
|
26.7
|
|
6,939
|
|
|
12.2
|
Total revenue
|
252,115
|
|
|
100.0
|
|
211,791
|
|
|
100.0
|
|
40,324
|
|
|
19.0
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||
2009
|
|
2008
|
|
|||||||
($ amounts in 000's)
|
||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|||
Product
|
42,166
|
|
|
41,397
|
|
|
769
|
|
|
1.9
|
Services
|
22,265
|
|
|
19,441
|
|
|
2,824
|
|
|
14.5
|
Ratable product and services
|
5,544
|
|
|
4,634
|
|
|
910
|
|
|
19.6
|
Total cost of revenue
|
69,975
|
|
|
65,472
|
|
|
4,503
|
|
|
6.9
|
Gross margin (%):
|
|
|
|
|
|
|
|
|||
Product
|
57.3
|
|
|
56.2
|
|
|
1.1
|
|
|
|
Services
|
84.0
|
|
|
81.5
|
|
|
2.5
|
|
|
|
Ratable product and services
|
61.1
|
|
|
61.1
|
|
|
—
|
|
|
|
Total gross margin
|
72.2
|
|
|
69.1
|
|
|
3.1
|
|
|
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||||||
2009
|
|
2008
|
|
|||||||||||
Amount ($)
|
|
% of
Revenue
|
|
Amount ($)
|
|
% of
Revenue
|
|
|||||||
($ amounts in 000's)
|
||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development
|
42,195
|
|
|
16.7
|
|
37,035
|
|
|
17.5
|
|
5,160
|
|
|
13.9
|
Sales and marketing
|
96,291
|
|
|
38.2
|
|
87,717
|
|
|
41.4
|
|
8,574
|
|
|
9.8
|
General and administrative
|
18,320
|
|
|
7.3
|
|
16,640
|
|
|
7.9
|
|
1,680
|
|
|
10.1
|
Total operating expenses
|
156,806
|
|
|
62.2
|
|
141,392
|
|
|
66.8
|
|
15,414
|
|
|
10.9
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
||||||
2009
|
|
2008
|
|
||||||||
($ amounts in 000's)
|
|||||||||||
Interest income
|
1,981
|
|
|
2,614
|
|
|
(633
|
)
|
|
(24.2
|
)
|
Other income (expense), net
|
198
|
|
|
1,710
|
|
|
(1,512
|
)
|
|
(88.4
|
)
|
|
Fiscal Year
|
|
$ Change
|
|
% Change
|
|||||
2009
|
|
2008
|
|
|||||||
($ amounts in 000's)
|
||||||||||
Provision for (benefit from) income taxes
|
(32,666
|
)
|
|
1,888
|
|
|
(34,554
|
)
|
|
*
|
Effective tax rate (%)
|
(118.7
|
)
|
|
20.4
|
|
|
|
|
*
|
|
Three Months Ended
|
||||||||||||||||||||||
|
Mar 29,
2009 |
|
Jun 28,
2009 |
|
Sept 30,
2009
(1)
|
|
Dec 31,
2009 |
|
Mar 31,
2010 |
|
Jun 30,
2010 |
|
Sept 30,
2010 |
|
Dec 31,
2010 |
||||||||
|
($ amounts in 000's, except per share amounts)
|
||||||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
|
19,326
|
|
|
24,451
|
|
|
25,550
|
|
|
29,359
|
|
|
27,110
|
|
|
31,037
|
|
|
35,913
|
|
|
41,080
|
|
Services
|
31,573
|
|
|
33,473
|
|
|
36,712
|
|
|
37,414
|
|
|
38,625
|
|
|
40,964
|
|
|
44,527
|
|
|
47,930
|
|
Ratable product and services
|
3,295
|
|
|
3,421
|
|
|
3,602
|
|
|
3,939
|
|
|
4,060
|
|
|
4,330
|
|
|
4,531
|
|
|
4,589
|
|
Total revenue
|
54,194
|
|
|
61,345
|
|
|
65,864
|
|
|
70,712
|
|
|
69,795
|
|
|
76,331
|
|
|
84,971
|
|
|
93,599
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
(2)
|
8,305
|
|
|
10,316
|
|
|
10,428
|
|
|
13,117
|
|
|
11,314
|
|
|
11,822
|
|
|
13,263
|
|
|
15,545
|
|
Services
(2)
|
5,048
|
|
|
5,357
|
|
|
5,550
|
|
|
6,310
|
|
|
6,468
|
|
|
6,818
|
|
|
6,565
|
|
|
7,116
|
|
Ratable product and services
|
1,301
|
|
|
1,306
|
|
|
1,455
|
|
|
1,482
|
|
|
1,593
|
|
|
1,525
|
|
|
1,615
|
|
|
1,562
|
|
Total cost of revenue
|
14,654
|
|
|
16,979
|
|
|
17,433
|
|
|
20,909
|
|
|
19,375
|
|
|
20,165
|
|
|
21,443
|
|
|
24,223
|
|
Total gross profit
|
39,540
|
|
|
44,366
|
|
|
48,431
|
|
|
49,803
|
|
|
50,420
|
|
|
56,166
|
|
|
63,528
|
|
|
69,376
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development
(2)
|
9,876
|
|
|
10,534
|
|
|
10,797
|
|
|
10,988
|
|
|
11,934
|
|
|
12,676
|
|
|
12,389
|
|
|
12,802
|
|
Sales and marketing
(2)
|
21,763
|
|
|
24,341
|
|
|
23,468
|
|
|
26,719
|
|
|
26,723
|
|
|
27,777
|
|
|
26,987
|
|
|
30,481
|
|
General and administrative
(2)
|
4,672
|
|
|
4,516
|
|
|
4,490
|
|
|
4,642
|
|
|
5,059
|
|
|
5,933
|
|
|
5,993
|
|
|
5,395
|
|
Total operating expenses
|
36,311
|
|
|
39,391
|
|
|
38,755
|
|
|
42,349
|
|
|
43,716
|
|
|
46,386
|
|
|
45,369
|
|
|
48,678
|
|
Operating income
|
3,229
|
|
|
4,975
|
|
|
9,676
|
|
|
7,454
|
|
|
6,704
|
|
|
9,780
|
|
|
18,159
|
|
|
20,698
|
|
Interest income
|
714
|
|
|
535
|
|
|
428
|
|
|
304
|
|
|
268
|
|
|
399
|
|
|
514
|
|
|
634
|
|
Other income (expense), net
|
494
|
|
|
(282
|
)
|
|
(64
|
)
|
|
50
|
|
|
(250
|
)
|
|
87
|
|
|
(402
|
)
|
|
(250
|
)
|
Income before income taxes
|
4,437
|
|
|
5,228
|
|
|
10,040
|
|
|
7,808
|
|
|
6,722
|
|
|
10,266
|
|
|
18,271
|
|
|
21,082
|
|
Provision for (benefit from) income taxes
|
663
|
|
|
652
|
|
|
2,151
|
|
|
(36,132
|
)
|
|
2,504
|
|
|
3,397
|
|
|
4,254
|
|
|
4,941
|
|
Net income
|
3,774
|
|
|
4,576
|
|
|
7,889
|
|
|
43,940
|
|
|
4,218
|
|
|
6,869
|
|
|
14,017
|
|
|
16,141
|
|
Net income (loss) per share attributable to common stockholders
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
(0.07
|
)
|
|
—
|
|
|
0.11
|
|
|
1.02
|
|
|
0.06
|
|
|
0.10
|
|
|
0.20
|
|
|
0.22
|
|
Diluted
|
(0.07
|
)
|
|
—
|
|
|
0.10
|
|
|
0.62
|
|
|
0.06
|
|
|
0.09
|
|
|
0.18
|
|
|
0.20
|
|
(1)
|
Our transition to a calendar year and quarters beginning in the third quarter of fiscal
2009
had the effect of increasing the number of days in fiscal
2009
by four days relative to fiscal 2010.
|
(2)
|
Includes stock-based compensation expense and asset acquisition related write-offs as follows:
|
|
Three Months Ended
|
||||||||||||||||||||||
|
Mar 29,
2009 |
|
Jun 28,
2009 |
|
Sept 30,
2009 |
|
Dec 31,
2009 |
|
Mar 31,
2010 |
|
Jun 30,
2010 |
|
Sept 30,
2010 |
|
Dec 31,
2010 |
||||||||
|
($ amounts in 000's)
|
||||||||||||||||||||||
Cost of product revenue
|
24
|
|
|
27
|
|
|
25
|
|
|
26
|
|
|
24
|
|
|
26
|
|
|
26
|
|
|
25
|
|
Cost of services revenue
|
124
|
|
|
172
|
|
|
169
|
|
|
193
|
|
|
208
|
|
|
234
|
|
|
242
|
|
|
245
|
|
Research and development
|
378
|
|
|
498
|
|
|
516
|
|
|
571
|
|
|
554
|
|
|
587
|
|
|
600
|
|
|
598
|
|
Sales and marketing
|
644
|
|
|
692
|
|
|
767
|
|
|
917
|
|
|
866
|
|
|
897
|
|
|
1,017
|
|
|
1,030
|
|
General and administrative
|
380
|
|
|
404
|
|
|
459
|
|
|
475
|
|
|
496
|
|
|
520
|
|
|
549
|
|
|
571
|
|
Total stock-based compensation
|
1,550
|
|
|
1,793
|
|
|
1,936
|
|
|
2,182
|
|
|
2,148
|
|
|
2,264
|
|
|
2,434
|
|
|
2,469
|
|
Asset acquisition related write-offs
|
—
|
|
|
631
|
|
|
93
|
|
|
1,663
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total stock based compensation and asset acquisition related write-offs
|
1,550
|
|
|
2,424
|
|
|
2,029
|
|
|
3,845
|
|
|
2,148
|
|
|
2,264
|
|
|
2,434
|
|
|
2,469
|
|
(3)
|
See Note 7 to the Consolidated Financial Statements.
|
|
Three Months Ended
|
||||||||||||||||||||||
|
Mar 29,
2009 |
|
Jun 28,
2009 |
|
Sept 30,
2009 |
|
Dec 31,
2009 |
|
Mar 31,
2010 |
|
Jun 30,
2010 |
|
Sept 30,
2010 |
|
Dec 31,
2010 |
||||||||
|
($ amounts in 000's)
|
||||||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
|
19,326
|
|
|
24,451
|
|
|
25,550
|
|
|
29,359
|
|
|
27,110
|
|
|
31,037
|
|
|
35,913
|
|
|
41,080
|
|
Services
|
31,573
|
|
|
33,473
|
|
|
36,712
|
|
|
37,414
|
|
|
38,625
|
|
|
40,964
|
|
|
44,527
|
|
|
47,930
|
|
Ratable product and services
|
3,295
|
|
|
3,421
|
|
|
3,602
|
|
|
3,939
|
|
|
4,060
|
|
|
4,330
|
|
|
4,531
|
|
|
4,589
|
|
Total revenue
|
54,194
|
|
|
61,345
|
|
|
65,864
|
|
|
70,712
|
|
|
69,795
|
|
|
76,331
|
|
|
84,971
|
|
|
93,599
|
|
As a percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
|
35.7
|
|
|
39.9
|
|
|
38.8
|
|
|
41.5
|
|
|
38.8
|
|
|
40.7
|
|
|
42.3
|
|
|
43.9
|
|
Services
|
58.3
|
|
|
54.6
|
|
|
55.7
|
|
|
52.9
|
|
|
55.3
|
|
|
53.7
|
|
|
52.4
|
|
|
51.2
|
|
Ratable product and services
|
6.0
|
|
|
5.5
|
|
|
5.5
|
|
|
5.6
|
|
|
5.9
|
|
|
5.6
|
|
|
5.3
|
|
|
4.9
|
|
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
Three Months Ended
|
||||||||||||||
|
Mar 29,
2009 |
|
Jun 28,
2009 |
|
Sept 30,
2009 |
|
Dec 31,
2009 |
|
Mar 31,
2010 |
|
Jun 30,
2010 |
|
Sept 30,
2010 |
|
Dec 31,
2010 |
Gross Margin by Component of Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
57.0
|
|
57.8
|
|
59.2
|
|
55.3
|
|
58.3
|
|
61.9
|
|
63.1
|
|
62.2
|
Services
|
84.0
|
|
84.0
|
|
84.9
|
|
83.1
|
|
83.3
|
|
83.4
|
|
85.3
|
|
85.2
|
Ratable product and services
|
60.5
|
|
61.8
|
|
59.6
|
|
62.4
|
|
60.8
|
|
64.8
|
|
64.4
|
|
66.0
|
Total gross margin
|
73.0
|
|
72.3
|
|
73.5
|
|
70.4
|
|
72.2
|
|
73.6
|
|
74.8
|
|
74.1
|
|
Three Months Ended
|
||||||||||||||
|
Mar 29,
2009 |
|
Jun 28,
2009 |
|
Sept 30,
2009 |
|
Dec 31,
2009 |
|
Mar 31,
2010 |
|
Jun 30,
2010 |
|
Sept 30,
2010 |
|
Dec 31,
2010 |
Reconciliation of GAAP to non-GAAP gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross margin (%):
|
73.0
|
|
72.3
|
|
73.5
|
|
70.4
|
|
72.2
|
|
73.6
|
|
74.8
|
|
74.1
|
Stock-based compensation
|
0.3
|
|
0.3
|
|
0.3
|
|
0.3
|
|
0.4
|
|
0.3
|
|
0.3
|
|
0.3
|
Asset acquisition-related write-offs
|
—
|
|
1.0
|
|
0.1
|
|
2.4
|
|
—
|
|
—
|
|
—
|
|
—
|
Non-GAAP gross margin
|
73.3
|
|
73.6
|
|
73.9
|
|
73.1
|
|
72.6
|
|
73.9
|
|
75.1
|
|
74.4
|
|
As of Fiscal Year End
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
|
($ amounts in 000's)
|
|||||||
Cash and cash equivalents
|
66,859
|
|
|
212,458
|
|
|
56,571
|
|
Investments
|
320,601
|
|
|
47,856
|
|
|
67,619
|
|
Total cash, cash equivalents and investments
|
387,460
|
|
|
260,314
|
|
|
124,190
|
|
|
|
|
|
|
|
|||
Working capital
|
201,776
|
|
|
161,652
|
|
|
38,193
|
|
|
|
|
|
|
|
|||
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
|
($ amounts in 000's)
|
|||||||
Cash provided by operating activities
|
103,383
|
|
|
61,971
|
|
|
37,686
|
|
Cash provided by (used in) investing activities
|
(283,710
|
)
|
|
13,757
|
|
|
(53,706
|
)
|
Cash provided by financing activities
|
34,019
|
|
|
78,049
|
|
|
2,117
|
|
Effect of exchange rates on cash and cash equivalents
|
709
|
|
|
2,110
|
|
|
(937
|
)
|
Net increase (decrease) in cash and cash equivalents
|
(145,599
|
)
|
|
155,887
|
|
|
(14,840
|
)
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
|
($ amounts in 000's)
|
|||||||
Net income
|
41,245
|
|
|
60,179
|
|
|
7,363
|
|
Adjustments for non-cash charges
(1)
|
16,593
|
|
|
(15,166
|
)
|
|
9,574
|
|
Net income before non-cash charges
|
57,838
|
|
|
45,013
|
|
|
16,937
|
|
Increase in deferred revenue
|
50,701
|
|
|
30,313
|
|
|
40,363
|
|
Increase (decrease) in income tax payable and deferred tax assets, net
|
11,739
|
|
|
(6,996
|
)
|
|
(1,936
|
)
|
Increase in accrued payroll and compensation
|
5,465
|
|
|
630
|
|
|
5,030
|
|
Increase (decrease) in accounts payable and accrued liabilities, net
|
4,800
|
|
|
5,203
|
|
|
(2,644
|
)
|
Increase in accounts receivable
|
(17,784
|
)
|
|
(8,508
|
)
|
|
(18,350
|
)
|
Increase in inventories
|
(5,946
|
)
|
|
(2,012
|
)
|
|
(189
|
)
|
Increase in prepaid expenses and other assets, net
|
(3,794
|
)
|
|
(609
|
)
|
|
(294
|
)
|
(Increase) decrease in deferred cost of revenues
|
364
|
|
|
(1,063
|
)
|
|
(1,231
|
)
|
Net cash provided by operating activities
|
103,383
|
|
|
61,971
|
|
|
37,686
|
|
(1)
|
Non-cash charges primarily consist of stock-based compensation expense, depreciation and amortization, write-off of intangible assets, gain on disposal of fixed assets, amortization of investment premiums, excess tax benefit from employee stock option plans, and reversal of the valuation in fiscal 2009.
|
|
Payments Due by Period
|
|||||||||||||
|
Total
|
|
Less Than
1 Year
|
|
1-3
Years
|
|
4-5
Years
|
|
More Than
5 Years
|
|||||
|
($ amounts in 000's)
|
|||||||||||||
Operating leases
(1)
|
20,438
|
|
|
7,493
|
|
|
11,636
|
|
|
1,309
|
|
|
—
|
|
Purchase commitments
(2)
|
18,566
|
|
|
18,566
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Royalty commitments
(3)
|
4,000
|
|
|
1,000
|
|
|
2,500
|
|
|
500
|
|
|
—
|
|
Total
(4)
|
43,004
|
|
|
27,059
|
|
|
14,136
|
|
|
1,809
|
|
|
—
|
|
(1)
|
Consists of contractual obligations from non-cancelable office space under operating leases.
|
(2)
|
Consists of minimum purchase commitments with independent contract manufacturers.
|
(3)
|
Consists of minimum royalties claimed by Trend Micro pursuant to the January 2006 settlement and license agreement between Trend and Fortinet, which are subject to dispute. See “Item 3—Legal Proceedings.” We have accrued a total payment including interest of $4.3 million as of
December 31, 2010
, related to amounts under the settlement and license agreement with Trend Micro which have not been paid pursuant to the dispute.
|
(4)
|
No amounts related to ASC 740-10 (FIN 48) are included. As of
December 31, 2010
, we had approximately $11.2 million of tax liabilities,
|
|
Page
|
|
|
|
Fiscal Year
|
||||||||||
2010
|
|
2009
|
|
2008
|
|||||||
REVENUE:
|
|
|
|
|
|
||||||
Product
|
$
|
135,140
|
|
|
$
|
98,686
|
|
|
$
|
94,587
|
|
Services
|
172,046
|
|
|
139,172
|
|
|
105,292
|
|
|||
Ratable product and services
|
17,510
|
|
|
14,257
|
|
|
11,912
|
|
|||
Total revenue
|
324,696
|
|
|
252,115
|
|
|
211,791
|
|
|||
COST OF REVENUE:
|
|
|
|
|
|
||||||
Product
|
51,944
|
|
|
42,166
|
|
|
41,397
|
|
|||
Services
|
26,967
|
|
|
22,265
|
|
|
19,441
|
|
|||
Ratable product and services
|
6,295
|
|
|
5,544
|
|
|
4,634
|
|
|||
Total cost of revenue
|
85,206
|
|
|
69,975
|
|
|
65,472
|
|
|||
GROSS PROFIT:
|
|
|
|
|
|
||||||
Product
|
83,196
|
|
|
56,520
|
|
|
53,190
|
|
|||
Services
|
145,079
|
|
|
116,907
|
|
|
85,851
|
|
|||
Ratable product and services
|
11,215
|
|
|
8,713
|
|
|
7,278
|
|
|||
Total gross profit
|
239,490
|
|
|
182,140
|
|
|
146,319
|
|
|||
OPERATING EXPENSES:
|
|
|
|
|
|
||||||
Research and development
|
49,801
|
|
|
42,195
|
|
|
37,035
|
|
|||
Sales and marketing
|
111,968
|
|
|
96,291
|
|
|
87,717
|
|
|||
General and administrative
|
22,380
|
|
|
18,320
|
|
|
16,640
|
|
|||
Total operating expenses
|
184,149
|
|
|
156,806
|
|
|
141,392
|
|
|||
OPERATING INCOME
|
55,341
|
|
|
25,334
|
|
|
4,927
|
|
|||
INTEREST INCOME
|
1,815
|
|
|
1,981
|
|
|
2,614
|
|
|||
OTHER INCOME (EXPENSE)—Net
|
(815
|
)
|
|
198
|
|
|
1,710
|
|
|||
INCOME BEFORE INCOME TAXES
|
56,341
|
|
|
27,513
|
|
|
9,251
|
|
|||
PROVISION FOR (BENEFIT FROM) INCOME TAXES
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
|||
NET INCOME
|
$
|
41,245
|
|
|
$
|
60,179
|
|
|
$
|
7,363
|
|
Net income per share attributable to common stockholders (Note 7):
|
|
|
|
|
|
||||||
Basic
|
$
|
0.59
|
|
|
$
|
1.93
|
|
|
$
|
0.02
|
|
Diluted
|
$
|
0.53
|
|
|
$
|
0.78
|
|
|
$
|
0.02
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
70,363
|
|
|
26,334
|
|
|
20,017
|
|
|||
Diluted
|
78,203
|
|
|
65,219
|
|
|
26,642
|
|
|
Convertible
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In-
Capital
|
|
Accumulated
Other
Comprehensive
Income (loss)
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
Comprehensive
Income (loss)
|
|||||||||||||||||||||||||
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||||||||||||||
BALANCE—December 30, 2007
|
40,480
|
|
|
$
|
94,368
|
|
|
19,277
|
|
|
$
|
20
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
13,418
|
|
|
$
|
783
|
|
|
$
|
(127,514
|
)
|
|
$
|
(18,925
|
)
|
|
|
||
Exercise of stock options
|
—
|
|
|
—
|
|
|
1,443
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2,116
|
|
|
—
|
|
|
—
|
|
|
2,117
|
|
|
|
|||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,299
|
|
|
—
|
|
|
—
|
|
|
5,299
|
|
|
|
|||||||||
Net unrealized gain on investments—net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
|
$
|
65
|
|
|||||||
Net change in cumulative translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,148
|
)
|
|
—
|
|
|
(1,148
|
)
|
|
(1,148
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,363
|
|
|
7,363
|
|
|
7,363
|
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
6,280
|
|
|||||||
BALANCE—December 28, 2008
|
40,480
|
|
|
94,368
|
|
|
20,720
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
20,833
|
|
|
(300
|
)
|
|
(120,151
|
)
|
|
(5,229
|
)
|
|
|
|||||||||
Repurchase of convertible preferred shares
|
(3,004
|
)
|
|
(3,183
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,585
|
)
|
|
—
|
|
|
—
|
|
|
(12,768
|
)
|
|
|
|||||||||
Repurchase of common shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(704
|
)
|
|
(2,995
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,995
|
)
|
|
|
|||||||||
Convertible preferred shares converted to common shares in connection with initial public offering
|
(37,476
|
)
|
|
(91,185
|
)
|
|
37,476
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
91,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||
Proceeds from initial public offering, net of issuance costs
|
—
|
|
|
—
|
|
|
7,657
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
87,380
|
|
|
—
|
|
|
—
|
|
|
87,388
|
|
|
|
|||||||||
Exercise of warrants
|
—
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,875
|
|
|
—
|
|
|
—
|
|
|
1,875
|
|
|
|
|||||||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
1,414
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2,695
|
|
|
—
|
|
|
—
|
|
|
2,696
|
|
|
|
|||||||||
Proceeds from issuance of common stock
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
|
|||||||||
Warrants issued
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
725
|
|
|
—
|
|
|
—
|
|
|
725
|
|
|
|
||||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,461
|
|
|
—
|
|
|
—
|
|
|
7,461
|
|
|
|
|||||||||
Excess tax benefit from employee stock option plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,574
|
|
|
—
|
|
|
—
|
|
|
1,574
|
|
|
|
|||||||||
Net unrealized gain on investments—net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
|
$
|
(33
|
)
|
|||||||
Net change in cumulative translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,417
|
|
|
—
|
|
|
1,417
|
|
|
1,417
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,179
|
|
|
60,179
|
|
|
60,179
|
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
61,563
|
|
|||||||
BALANCE—December 31, 2009
|
—
|
|
|
—
|
|
|
67,517
|
|
|
67
|
|
|
(704
|
)
|
|
(2,995
|
)
|
|
204,268
|
|
|
1,084
|
|
|
(59,972
|
)
|
|
142,452
|
|
|
|
|||||||||
Exercise of stock options and warrants
|
—
|
|
|
—
|
|
|
7,568
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
29,102
|
|
|
—
|
|
|
—
|
|
|
29,110
|
|
|
|
|||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,315
|
|
|
—
|
|
|
—
|
|
|
9,315
|
|
|
|
|||||||||
Excess tax benefit from employee stock option plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,235
|
|
|
—
|
|
|
—
|
|
|
9,235
|
|
|
|
|||||||||
Net unrealized gain on investments - net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
98
|
|
|
98
|
|
||||||||
Net unrealized gain on derivatives qualifying as cash flow hedges
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
—
|
|
|
74
|
|
|
74
|
|
||||||||
Net change in cumulative translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
925
|
|
|
—
|
|
|
925
|
|
|
925
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,245
|
|
|
41,245
|
|
|
41,245
|
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
42,342
|
|
|||||||
BALANCE—December 31, 2010
|
—
|
|
|
$
|
—
|
|
|
75,085
|
|
|
$
|
75
|
|
|
(704
|
)
|
|
$
|
(2,995
|
)
|
|
$
|
251,920
|
|
|
$
|
2,181
|
|
|
$
|
(18,727
|
)
|
|
$
|
232,454
|
|
|
|
|
Fiscal Year
|
||||||||||
|
2010
|
|
2009
|
|
2008
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
||||||
Net income
|
$
|
41,245
|
|
|
$
|
60,179
|
|
|
$
|
7,363
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
5,696
|
|
|
5,935
|
|
|
4,234
|
|
|||
Write-off of intangible assets
|
—
|
|
|
2,387
|
|
|
—
|
|
|||
Gain on disposal of fixed assets
|
14
|
|
|
—
|
|
|
—
|
|
|||
Amortization of investment premiums
|
7,349
|
|
|
836
|
|
|
41
|
|
|||
Stock-based compensation
|
9,315
|
|
|
7,461
|
|
|
5,299
|
|
|||
Excess tax benefit from employee stock option plans
|
(5,781
|
)
|
|
(1,574
|
)
|
|
—
|
|
|||
Income tax benefit from release of valuation allowance
|
—
|
|
|
(30,211
|
)
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable—net
|
(17,784
|
)
|
|
(8,508
|
)
|
|
(18,350
|
)
|
|||
Inventory
|
(5,946
|
)
|
|
(2,012
|
)
|
|
(189
|
)
|
|||
Deferred tax assets
|
(4,278
|
)
|
|
(9,578
|
)
|
|
205
|
|
|||
Prepaid expenses and other current assets
|
(3,849
|
)
|
|
(190
|
)
|
|
(214
|
)
|
|||
Deferred cost of revenues
|
364
|
|
|
(1,063
|
)
|
|
(1,231
|
)
|
|||
Other assets
|
55
|
|
|
(419
|
)
|
|
(80
|
)
|
|||
Accounts payable
|
2,437
|
|
|
3,046
|
|
|
(1,864
|
)
|
|||
Accrued liabilities
|
2,363
|
|
|
2,157
|
|
|
(780
|
)
|
|||
Accrued payroll and compensation
|
5,465
|
|
|
630
|
|
|
5,030
|
|
|||
Deferred revenue
|
50,701
|
|
|
30,313
|
|
|
40,363
|
|
|||
Income taxes payable
|
16,017
|
|
|
2,582
|
|
|
(2,141
|
)
|
|||
Net cash provided by operating activities
|
103,383
|
|
|
61,971
|
|
|
37,686
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||||||
Purchase of investments
|
(416,376
|
)
|
|
(137,231
|
)
|
|
(80,588
|
)
|
|||
Maturities and sales of investments
|
136,380
|
|
|
156,126
|
|
|
31,742
|
|
|||
Purchase of property and equipment
|
(3,776
|
)
|
|
(4,589
|
)
|
|
(2,798
|
)
|
|||
Payments made in connection with asset acquisition, net
|
—
|
|
|
(549
|
)
|
|
(2,000
|
)
|
|||
Change in restricted cash
|
62
|
|
|
—
|
|
|
(62
|
)
|
|||
Net cash provided by (used in) investing activities
|
(283,710
|
)
|
|
13,757
|
|
|
(53,706
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||||||
Proceeds from exercise of stock options and warrants
|
29,110
|
|
|
3,978
|
|
|
2,117
|
|
|||
Proceeds from initial public offering
|
—
|
|
|
91,565
|
|
|
—
|
|
|||
Offering costs paid in connection with initial public offering
|
(872
|
)
|
|
(3,305
|
)
|
|
—
|
|
|||
Repurchase of convertible preferred shares
|
—
|
|
|
(12,768
|
)
|
|
—
|
|
|||
Repurchase of common shares
|
—
|
|
|
(2,995
|
)
|
|
—
|
|
|||
Excess tax benefit from employee stock option plans
|
5,781
|
|
|
1,574
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
34,019
|
|
|
78,049
|
|
|
2,117
|
|
|||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
|
709
|
|
|
2,110
|
|
|
(937
|
)
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(145,599
|
)
|
|
155,887
|
|
|
(14,840
|
)
|
|||
CASH AND CASH EQUIVALENTS—Beginning of period
|
212,458
|
|
|
56,571
|
|
|
71,411
|
|
|||
CASH AND CASH EQUIVALENTS—End of period
|
$
|
66,859
|
|
|
$
|
212,458
|
|
|
$
|
56,571
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
||||||
Cash paid for taxes
|
$
|
2,483
|
|
|
$
|
4,746
|
|
|
$
|
3,615
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
||||||
Purchase of property and equipment not yet paid
|
$
|
135
|
|
|
$
|
849
|
|
|
$
|
67
|
|
Accrued offering costs not yet paid
|
$
|
—
|
|
|
$
|
872
|
|
|
$
|
—
|
|
•
|
Persuasive evidence of an arrangement exists. Binding contracts or purchase orders are generally used to determine the existence of an arrangement.
|
•
|
Delivery has occurred. Delivery occurs when we fulfill an order and title and risk of loss has been transferred or upon delivery of the service contract registration code.
|
•
|
The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction. In the event payment terms differ from our standard business practices, the fees are deemed to be not fixed or determinable and revenue is recognized when the payments become due, provided the remaining criteria for revenue recognition have been met.
|
•
|
Collectability is probable. We assess collectability based primarily on creditworthiness as determined by credit checks and analysis, as well as payment history. Payment terms generally range from 30 to 90 days from invoice date.
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
Accrued warranty balance—beginning of the period
|
2,257
|
|
|
2,882
|
|
|
1,744
|
|
Warranty costs incurred
|
(1,337
|
)
|
|
(1,502
|
)
|
|
(1,030
|
)
|
Provision for warranty for the year
|
1,069
|
|
|
1,169
|
|
|
2,252
|
|
Accruals related to changes in estimates
|
(111
|
)
|
|
(292
|
)
|
|
(84
|
)
|
Accrued warranty balance—end of the period
|
1,878
|
|
|
2,257
|
|
|
2,882
|
|
|
Buy/Sell
|
|
Notional
|
|
To hedge operating cash outflows:
|
|
|
|
|
Currency
|
|
|
|
|
EUR
|
Buy
|
|
2,900
|
|
|
|
|
|
|
To hedge balance sheet accounts:
|
|
|
|
|
Currency
|
|
|
|
|
EUR
|
Buy
|
|
5,012
|
|
GBP
|
Buy
|
|
1,074
|
|
CAD
|
Buy
|
|
10,272
|
|
•
|
The delivered items have value to the customer on a standalone basis
|
•
|
If the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor.
|
•
|
VSOE of the selling price;
|
•
|
Third-party evidence (TPE) of the selling price – prices of the vendor’s or any competitor’s largely interchangeable products or services, in standalone sales to similarly situated customers; and
|
•
|
Best estimate of the selling price.
|
|
December 31, 2010
|
||||||||||
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities
|
51,989
|
|
|
—
|
|
|
(46
|
)
|
|
51,943
|
|
Corporate debt securities
|
213,237
|
|
|
159
|
|
|
—
|
|
|
213,396
|
|
Commercial paper
|
38,914
|
|
|
5
|
|
|
—
|
|
|
38,919
|
|
Municipal bonds
|
11,069
|
|
|
11
|
|
|
—
|
|
|
11,080
|
|
Term deposits
|
5,263
|
|
|
—
|
|
|
—
|
|
|
5,263
|
|
Total available-for-sale securities
|
320,472
|
|
|
175
|
|
|
(46
|
)
|
|
320,601
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2009
|
||||||||||
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities
|
2,000
|
|
|
—
|
|
|
(2
|
)
|
|
1,998
|
|
Corporate debt securities
|
27,279
|
|
|
44
|
|
|
—
|
|
|
27,323
|
|
Commercial paper
|
3,983
|
|
|
—
|
|
|
—
|
|
|
3,983
|
|
Municipal bonds
|
14,561
|
|
|
—
|
|
|
(9
|
)
|
|
14,552
|
|
Total available-for-sale securities
|
47,823
|
|
|
44
|
|
|
(11
|
)
|
|
47,856
|
|
|
December 31,
2010 |
|
December 31,
2009 |
||
Due within one year
|
246,651
|
|
|
47,856
|
|
Due after one year
|
73,950
|
|
|
—
|
|
Total
|
320,601
|
|
|
47,856
|
|
|
December 31, 2010
|
|
December 31, 2009
|
||||||||||||||
|
Aggregate
Fair
Value
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
|
|
Significant
Other
Observable
Remaining
Inputs
|
|
Aggregate
Fair
Value
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
|
|
Significant
Other
Observable
Remaining
Inputs
|
||||||
|
|
|
(Level 1)
|
|
(Level 2)
|
|
|
|
(Level 1)
|
|
(Level 2)
|
||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
51,943
|
|
|
—
|
|
|
51,943
|
|
|
1,998
|
|
|
—
|
|
|
1,998
|
|
Corporate debt securities
|
213,396
|
|
|
—
|
|
|
213,396
|
|
|
27,323
|
|
|
—
|
|
|
27,323
|
|
Commercial paper
|
52,415
|
|
|
—
|
|
|
52,415
|
|
|
3,983
|
|
|
—
|
|
|
3,983
|
|
Municipal bonds
|
11,080
|
|
|
—
|
|
|
11,080
|
|
|
14,552
|
|
|
—
|
|
|
14,552
|
|
Term deposits
|
5,263
|
|
|
5,263
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Money market funds
|
7,078
|
|
|
7,078
|
|
|
—
|
|
|
179,444
|
|
|
179,444
|
|
|
—
|
|
Foreign currency contracts
|
74
|
|
|
—
|
|
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
341,249
|
|
|
12,341
|
|
|
328,908
|
|
|
227,300
|
|
|
179,444
|
|
|
47,856
|
|
Reported as:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash equivalents
|
20,574
|
|
|
|
|
|
|
179,444
|
|
|
|
|
|
||||
Short-term investments
|
246,651
|
|
|
|
|
|
|
47,856
|
|
|
|
|
|
||||
Prepaid expenses and other current assets
|
74
|
|
|
|
|
|
|
—
|
|
|
|
|
|
||||
Long-term investments
|
73,950
|
|
|
|
|
|
|
—
|
|
|
|
|
|
||||
Total
|
341,249
|
|
|
|
|
|
|
227,300
|
|
|
|
|
|
|
December 31,
2010 |
|
December 31,
2009 |
||
Raw materials
|
2,593
|
|
|
1,904
|
|
Finished goods
|
10,924
|
|
|
8,745
|
|
Inventory
|
13,517
|
|
|
10,649
|
|
|
December 31,
2010 |
|
December 31,
2009 |
||
Evaluation units
|
10,607
|
|
|
8,449
|
|
Computer equipment and software
|
9,561
|
|
|
8,827
|
|
Furniture and fixtures
|
1,087
|
|
|
1,191
|
|
Leasehold improvements and tooling
|
4,548
|
|
|
4,134
|
|
Total property and equipment
|
25,803
|
|
|
22,601
|
|
Less: accumulated depreciation and amortization
|
(18,747
|
)
|
|
(16,214
|
)
|
Property and equipment—net
|
7,056
|
|
|
6,387
|
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
Numerator:
|
|
|
|
|
|
|||
Net income
|
41,245
|
|
|
60,179
|
|
|
7,363
|
|
Premium paid on repurchase of convertible preferred shares
|
—
|
|
|
(9,266
|
)
|
|
—
|
|
Income allocated to participating securities
|
—
|
|
|
—
|
|
|
(6,910
|
)
|
Net income attributable to common stockholders-basic
|
41,245
|
|
|
50,913
|
|
|
453
|
|
Undistributed earnings reallocated to common stock
|
—
|
|
|
—
|
|
|
90
|
|
Net income attributable to common stockholders-diluted
|
41,245
|
|
|
50,913
|
|
|
543
|
|
|
|
|
|
|
|
|||
Denominator:
|
|
|
|
|
|
|||
Basic shares:
|
|
|
|
|
|
|||
Weighted-average common shares outstanding-basic
|
70,363
|
|
|
26,334
|
|
|
20,017
|
|
Diluted shares:
|
|
|
|
|
|
|||
Weighted-average common shares outstanding-basic
|
70,363
|
|
|
26,334
|
|
|
20,017
|
|
Effect of potentially dilutive securities:
|
|
|
|
|
|
|||
Employee stock options
|
7,762
|
|
|
5,871
|
|
|
6,613
|
|
Warrants to purchase common stock
|
78
|
|
|
19
|
|
|
12
|
|
Convertible preferred stock
|
—
|
|
|
32,995
|
|
|
—
|
|
Weighted-average shares used to compute diluted net income per share
|
78,203
|
|
|
65,219
|
|
|
26,642
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
|
|||
Basic
|
0.59
|
|
|
1.93
|
|
|
0.02
|
|
Diluted
|
0.53
|
|
|
0.78
|
|
|
0.02
|
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
Options to purchase common stock
|
1,503
|
|
|
4,584
|
|
|
5,010
|
|
|
December 31,
2010 |
|
December 31,
2009 |
||
Product
|
4,466
|
|
|
4,141
|
|
Services
|
219,022
|
|
|
168,314
|
|
Ratable products and services
|
29,143
|
|
|
29,475
|
|
Total deferred revenues
|
252,631
|
|
|
201,930
|
|
Reported As:
|
|
|
|
||
Short-term
|
169,648
|
|
|
140,537
|
|
Long-term
|
82,983
|
|
|
61,393
|
|
Total deferred revenues
|
252,631
|
|
|
201,930
|
|
|
Rental
Payment
|
|
Royalty
(1)
|
||
Fiscal Years:
|
|
|
|
||
2011
|
7,493
|
|
|
1,000
|
|
2012
|
5,337
|
|
|
1,000
|
|
2013
|
4,031
|
|
|
1,000
|
|
2014
|
2,268
|
|
|
500
|
|
2015
|
1,309
|
|
|
500
|
|
Total
|
20,438
|
|
|
4,000
|
|
Reserved under stock option plans
|
18,790
|
|
|
Authorized
Shares
|
|
Outstanding
Shares
|
|
Amount
|
|||
Series A
|
4,000
|
|
|
4,000
|
|
|
900
|
|
Series B
|
5,000
|
|
|
5,000
|
|
|
2,794
|
|
Series C
|
6,000
|
|
|
6,000
|
|
|
8,689
|
|
Series D
|
15,000
|
|
|
15,000
|
|
|
28,663
|
|
Series E
|
10,500
|
|
|
10,480
|
|
|
53,322
|
|
Total
|
40,500
|
|
|
40,480
|
|
|
94,368
|
|
|
|
|
Options Outstanding
|
|||||||||||
|
Shares
Available
for Grant
|
|
Number
of Shares
|
|
Weighted-
Average
Exercise
Price ($)
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value ($)
|
|||||
Balance—December 30, 2007 (9,111 shares were vested at a weighted-average exercise price of $1.46 per share)
|
4,645
|
|
|
12,580
|
|
|
1.86
|
|
|
|
|
|
||
Additional shares authorized
|
5,000
|
|
|
—
|
|
|
—
|
|
|
|
|
|
||
Granted (weighted-average fair value of $2.46 per share)
|
(7,232
|
)
|
|
7,232
|
|
|
7.47
|
|
|
|
|
|
||
Forfeited
|
2,635
|
|
|
(2,635
|
)
|
|
3.95
|
|
|
|
|
|
||
Exercised (aggregate intrinsic value of $7,119)
|
—
|
|
|
(1,444
|
)
|
|
1.47
|
|
|
|
|
|
||
Balance—December 28, 2008 (9,125 shares were vested at a weighted-average exercise price of $2.26 per share)
|
5,048
|
|
|
15,733
|
|
|
4.12
|
|
|
|
|
|
||
Additional shares authorized
|
6,887
|
|
|
—
|
|
|
—
|
|
|
|
|
|
||
Granted (weighted-average fair value of $2.86 per share)
|
(4,203
|
)
|
|
4,203
|
|
|
7.99
|
|
|
|
|
|
||
Forfeited
|
1,317
|
|
|
(1,317
|
)
|
|
6.71
|
|
|
|
|
|
||
Exercised (aggregate intrinsic value of $10,490)
|
—
|
|
|
(1,414
|
)
|
|
1.91
|
|
|
|
|
|
||
Balance—December 31, 2009 (10,252 shares were vested at a weighted-average exercise price of $3.32 per share)
|
9,049
|
|
|
17,205
|
|
|
5.05
|
|
|
|
|
|
||
Granted (weighted-average fair value of $7.18 per share)
|
(2,416
|
)
|
|
2,416
|
|
|
19.40
|
|
|
|
|
|
||
Forfeited
|
912
|
|
|
(912
|
)
|
|
11.11
|
|
|
|
|
|
||
Exercised (aggregate intrinsic value of $117,934)
|
—
|
|
|
(7,464
|
)
|
|
3.89
|
|
|
|
|
|
||
Balance—December 31, 2010
|
7,545
|
|
|
11,245
|
|
|
8.42
|
|
|
|
|
|
||
Options vested and expected to vest—December 31, 2010
|
|
|
10,952
|
|
|
8.26
|
|
|
4.77
|
|
|
263,855
|
|
|
Options exercisable—December 31, 2010
|
|
|
6,006
|
|
|
4.79
|
|
|
4.16
|
|
|
165,530
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Exercise Prices ($)
|
|
Number
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Weighted-
Average
Exercise
Price ($)
|
|
Number
Exercisable
|
|
Weighted-
Average
Exercise
Price ($)
|
||||||
0.05–1.95
|
|
|
2,175
|
|
|
3.45
|
|
|
1.33
|
|
|
2,175
|
|
|
1.33
|
|
2.15–7.44
|
|
|
775
|
|
|
5.21
|
|
|
3.33
|
|
|
662
|
|
|
2.63
|
|
7.47
|
|
|
5,538
|
|
|
4.58
|
|
|
7.47
|
|
|
3,012
|
|
|
7.47
|
|
7.68–12.5
|
|
|
566
|
|
|
5.53
|
|
|
9.56
|
|
|
132
|
|
|
9.26
|
|
16.86
|
|
|
1,193
|
|
|
6.11
|
|
|
16.86
|
|
|
18
|
|
|
16.86
|
|
17.17
|
|
|
189
|
|
|
6.36
|
|
|
17.17
|
|
|
—
|
|
|
—
|
|
17.98
|
|
|
452
|
|
|
6.59
|
|
|
17.98
|
|
|
7
|
|
|
17.98
|
|
30.56
|
|
|
357
|
|
|
6.84
|
|
|
30.56
|
|
|
—
|
|
|
—
|
|
0.05–30.56
|
|
|
11,245
|
|
|
4.80
|
|
|
8.42
|
|
|
6,006
|
|
|
4.79
|
|
|
December 31, 2010
|
|
December 31, 2009
|
|
December 28, 2008
|
|||
Domestic
|
50,556
|
|
|
22,667
|
|
|
(65
|
)
|
Foreign
|
5,785
|
|
|
4,846
|
|
|
9,316
|
|
Total Pre-Tax Book Income
|
56,341
|
|
|
27,513
|
|
|
9,251
|
|
|
December 31,
2010 |
|
December 31,
2009 |
|
December 28,
2008 |
|||
Current:
|
|
|
|
|
|
|||
Federal
|
10,633
|
|
|
4,882
|
|
|
1,332
|
|
State
|
(82
|
)
|
|
1,003
|
|
|
589
|
|
Foreign
|
9,298
|
|
|
1,173
|
|
|
(243
|
)
|
Total current
|
19,849
|
|
|
7,058
|
|
|
1,678
|
|
Deferred:
|
|
|
|
|
|
|||
Federal
|
(4,119
|
)
|
|
(35,331
|
)
|
|
—
|
|
State
|
(626
|
)
|
|
(3,850
|
)
|
|
—
|
|
Foreign
|
(8
|
)
|
|
(543
|
)
|
|
210
|
|
Total deferred
|
(4,753
|
)
|
|
(39,724
|
)
|
|
210
|
|
Provision for (benefit from) income taxes
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
|
December 31,
2010 |
|
December 31,
2009 |
|
December 28,
2008 |
|||
Tax at federal statutory tax rate
|
19,719
|
|
|
9,629
|
|
|
3,237
|
|
Stock-based compensation expense
|
(2,308
|
)
|
|
1,311
|
|
|
1,049
|
|
State taxes—net of federal benefit
|
(1,098
|
)
|
|
821
|
|
|
573
|
|
Research and development credit
|
(948
|
)
|
|
(356
|
)
|
|
(199
|
)
|
Foreign income taxed at different rates
|
(1,066
|
)
|
|
(1,064
|
)
|
|
(3,047
|
)
|
Other
|
797
|
|
|
1,202
|
|
|
721
|
|
Change in valuation allowance
|
—
|
|
|
(44,209
|
)
|
|
(446
|
)
|
Total provision for income taxes
|
15,096
|
|
|
(32,666
|
)
|
|
1,888
|
|
|
December 31,
2010 |
|
December 31,
2009 |
||
Deferred tax assets:
|
|
|
|
||
Net operating loss carryforward
|
1,920
|
|
|
3,144
|
|
Deferred revenue
|
25,173
|
|
|
21,915
|
|
Nondeductible reserves and accruals
|
10,990
|
|
|
9,607
|
|
Depreciation and amortization
|
2,029
|
|
|
1,412
|
|
General business credit carryforward
|
1,243
|
|
|
1,574
|
|
Stock-based compensation
|
4,225
|
|
|
3,655
|
|
Other
|
21
|
|
|
16
|
|
Total deferred tax assets
|
45,601
|
|
|
41,323
|
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
Balance, beginning of year
|
3,387
|
|
|
1,952
|
|
|
1,928
|
|
Increases for tax positions related to the current year
|
8,696
|
|
|
440
|
|
|
24
|
|
Increases for tax positions related to the prior year
|
—
|
|
|
995
|
|
|
—
|
|
Balance, end of year
|
12,083
|
|
|
3,387
|
|
|
1,952
|
|
|
Fiscal Year
|
|||||||
Revenue
|
2010
|
|
2009
|
|
2008
|
|||
Americas
|
123,961
|
|
|
92,621
|
|
|
75,367
|
|
Europe, Middle East and Africa
|
121,604
|
|
|
95,886
|
|
|
79,755
|
|
Asia Pacific and Japan
|
79,131
|
|
|
63,608
|
|
|
56,669
|
|
Total revenue
|
324,696
|
|
|
252,115
|
|
|
211,791
|
|
|
|
|
|
|
|
|||
|
Fiscal Year
|
|||||||
Interest Income
|
2010
|
|
2009
|
|
2008
|
|||
Americas
|
1,798
|
|
|
1,953
|
|
|
2,596
|
|
EMEA
|
14
|
|
|
27
|
|
|
15
|
|
APAC
|
3
|
|
|
1
|
|
|
3
|
|
Total interest income
|
1,815
|
|
|
1,981
|
|
|
2,614
|
|
|
|
|
|
|
|
|||
Property and Equipment
|
December 31,
2010 |
|
December 31,
2009 |
|
|
|||
Americas
|
5,585
|
|
|
4,988
|
|
|
|
|
EMEA
|
616
|
|
|
504
|
|
|
|
|
APAC
|
855
|
|
|
895
|
|
|
|
|
Total property and equipment—net
|
7,056
|
|
|
6,387
|
|
|
|
1.
|
Financial Statements
: The information concerning Fortinet’s financial statements and the Report of Independent Registered Public Accounting Firm required by this Item 15(a)(1) is incorporated by reference herein to the section of this Form 10-K in Item 8, titled “Financial Statements and Supplementary Data.”
|
2.
|
Financial Statement Schedule
: The following financial statement schedule of Fortinet, Inc., for the fiscal years ended
December 31, 2010
,
December 31, 2009
and
December 28, 2008
, is filed as part of this Form 10-K and should be read in conjunction with the Consolidated Financial Statements of Fortinet, Inc.
|
|
Fiscal Year
|
|||||||
|
2010
|
|
2009
|
|
2008
|
|||
|
($ amounts in 000's)
|
|||||||
Allowance for Doubtful Accounts:
|
|
|
|
|
|
|||
Beginning balance
|
367
|
|
|
318
|
|
|
384
|
|
Charged to costs and expenses
|
8
|
|
|
161
|
|
|
191
|
|
Bad debt write-offs
|
(72
|
)
|
|
(112
|
)
|
|
(257
|
)
|
Ending balance
|
303
|
|
|
367
|
|
|
318
|
|
3.
|
Exhibits
: See Item 15(b) below. We have filed, or incorporated into this 10-K by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K.
|
|
FORTINET, INC.
|
|
|
|
|
|
By:
|
/s/ Ken Goldman
|
|
|
Ken Goldman, Chief Financial Officer
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Ken Xie
|
|
President, Chief Executive Officer and Director
|
|
February 25, 2011
|
Ken Xie
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Ken Goldman
|
|
Chief Financial Officer
|
|
February 25, 2011
|
Ken Goldman
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Michael Xie
|
|
Chief Technical Officer and Director
|
|
February 25, 2011
|
Michael Xie
|
|
|
|
|
|
|
|
|
|
/s/ Pehong Chen
|
|
Director
|
|
February 25, 2011
|
Pehong Chen
|
|
|
|
|
|
|
|
|
|
/s/ Hong Liang Lu
|
|
Director
|
|
February 25, 2011
|
Hong Liang Lu
|
|
|
|
|
|
|
|
|
|
/s/ Greg Myers
|
|
Director
|
|
February 25, 2011
|
Greg Myers
|
|
|
|
|
|
|
|
|
|
/s/ Christopher B. Paisley
|
|
Director
|
|
February 25, 2011
|
Christopher B. Paisley
|
|
|
|
|
|
|
|
|
|
/s/ John Walecka
|
|
Non-Executive Chairman of the Board and Director
|
|
February 25, 2011
|
John Walecka
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
Incorporated by reference herein
|
|
|
|
|
|
|
Form
|
|
Date
|
|
|
|
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
3.2
|
|
Amended and Restated Bylaws
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
4.1
|
|
Specimen common stock certificate of the Company
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
November 2, 2009
|
|
|
|
|
|
|
|
4.2
|
|
Third Amended and Restated Investors Rights Agreement, dated as of February 24, 2004, between the Company and certain holders of the Company’s capital stock named therein
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.1
†
|
|
Forms of Indemnification Agreement between the Company and its directors and officers
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.2
†
|
|
2000 Stock Plan and forms of agreement thereunder
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.3
†
|
|
2008 Stock Plan and forms of agreement thereunder
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.4
†
|
|
2009 Equity Incentive Plan and forms of restricted stock unit award and restricted stock agreement thereunder
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.5
†*
|
|
Forms of stock option agreement under 2009 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
10.6
†
|
|
Separation and Change of Control Agreement, dated as of August 7, 2009, between the Company and Ken Xie
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.7
†
|
|
Separation and Change of Control Agreement, dated as of August 7, 2009, between the Company and Michael Xie
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.8
†
|
|
Separation and Change of Control Agreement, dated as of August 7, 2009, between the Company and Ken Goldman
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.9
†
|
|
Separation and Change of Control Agreement, dated as of August 7, 2009, between the Company and John Whittle
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.10
†
|
|
Offer Letter, dated as of August 31, 2007, by and between the Company and Ken Goldman
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.11
†
|
|
Offer Letter, dated as of August 31, 2007, by and between the Company and John Whittle
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.12
†
|
|
Form of Change of Control Agreement between the Company and its non-executive officers
|
|
Registration Statement on Form S-l, as amended (File No. 333-161190)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
10.13
|
|
Fortinet, Inc. Bonus Plan
|
|
Current Report on Form 8-K
|
|
January 26, 2010
|
|
|
|
|
|
|
|
21.1
|
|
List of subsidiaries
|
|
Registration Statement on Form S-l, as amended (File No. 001-34511)
|
|
August 10, 2009
|
|
|
|
|
|
|
|
23.1*
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
24.1*
|
|
Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)
|
|
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1*
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
I.
|
NOTICE OF STOCK OPTION GRANT
|
|
Participant Name:
|
|
|
Address:
|
|
|
Grant Number:
|
|
|
Date of Grant:
|
|
|
Vesting Commencement Date:
|
|
|
Exercise Price per share:
|
|
|
Total Number of Shares Granted:
|
|
|
Total Exercise Price:
|
|
|
Type of Option:
|
|
|
Term/Expiration Date:
|
|
Shares Vesting
*
|
Vest Type
|
Begin Vest Date
|
End Vest Date
|
|
|
|
|
|
|
|
|
!Undefined Bookmark, SHARES_PE
|
|
7/6/2014
|
|
!Undefined Bookmark, SHARES_PE
|
|
|
|
OPTIONEE:
|
|
FORTINET, INC.
|
|
|
|
|
|
By
|
|
|
|
|
|
|
Date
|
|
Title
|
Submitted by:
|
|
Accepted by:
|
|
|
|
PURCHASER:
|
|
FORTINET, Inc
|
|
|
|
Signature
|
|
By
|
|
|
|
Print Name
|
|
Title
|
|
|
|
Address
:
|
|
|
|
|
|
|
|
|
|
|
Date Received
|
|
Optionee Name:
|
|
|
Address:
|
|
|
Grant Number:
|
|
|
Date of Grant:
|
|
|
Vesting Commencement Date:
|
|
|
Exercise Price per share:
|
|
|
Total Number of Shares Granted:
|
|
|
Total Exercise Price:
|
|
|
Type of Option:
|
Stock Option intending to comply with the requirements to obtain favorable French tax treatment
|
|
Term/Expiration Date:
|
|
Shares Vesting
*
|
Vest Type
|
Begin Vest Date
|
End Vest Date
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
10/11/2014
|
|
—
|
|
|
|
|
OPTIONEE:
|
|
FORTINET, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
|
Submitted by:
|
|
Accepted by:
|
|
|
|
PURCHASER:
|
|
FORTINET, Inc
|
|
|
|
Signature
|
|
By
|
|
|
|
Print Name
|
|
Title
|
|
|
|
Address
:
|
|
|
|
|
|
|
|
|
|
|
Date Received
|
1.
|
I have reviewed this Annual Report on Form 10-K of Fortinet, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
|
/s/ Ken Xie
|
|
Ken Xie
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of Fortinet, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
|
/s/ Ken Goldman
|
|
Ken Goldman
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
|
By:
|
/s/ Ken Xie
|
Date:
|
February 25, 2011
|
Name:
|
Ken Xie
|
|
|
Title:
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
|
|
|
|
By:
|
/s/ Ken Goldman
|
Date:
|
February 25, 2011
|
Name:
|
Ken Goldman
|
|
|
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|