F5 Networks Inc (FFIV)’s First Quarter 2015 Earnings Conference Call Transcript

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Operator

Next question from Brent Bracelin, Pacific Crest Securities. Your line is open.

Brent Bracelin, Pacific Crest Securities

Thanks. Two quick follow-ups if I could. On the million dollar deals, if you look across the broader enterprise, we’ve actually seen a trend toward — and you did as well — up until this quarter an increasing number of larger deals that closed. Do you think what you saw on December was company-specific or do you think there were other factors here at play?

John McAdam, President and Chief Executive Officer

Yeah, that’s a really hard one. We don’t know the answer to that, Brent. We just don’t do the answer I think as more company announced that there may be some more news here. I certainly wouldn’t call it out and that’s why we’re not calling as micro either, quite frankly. The other side of the coin is that create rate that we had is probably the biggest create rate we’ve seen, if not the biggest then certainly one of the biggest, and I am talking about large deals, so, time will tell in terms of whether it’s a bigger issue or not.

Brent Bracelin, Pacific Crest Securities

Okay, fair enough. Then the follow-up question is back to software, and as we kind of compare-contrast the software growth rate versus your reported product growth rate, it was 44% software growth rate this quarter versus 10% product growth. If I look at your Analyst Day you’re talking about I think 41% security software growth rate versus 17% product growth rate. So there is a widening gap there between some of the growth in software versus product of appliance overall. Why shouldn’t we expect slightly more tempered growth going forward with the mix shift to software given the trends over the last couple quarters? And frankly now given some announcements around new products where you’re going to be pricing those products on a subscription basis.

John McAdam, President and Chief Executive Officer

I think if you take a medium to longer term view, that’s correct, that is absolutely correct. You’re going to see is selling more and more software, we’ve done that now. We pushed the sales force to do that, it is our competitive edge. It is obviously very, very plausible. We think we are in great shape in terms of BIG-IQ orchestration for managing software across close and close across data center et cetera. So you will see that. I don’t think it’s going to be a complete revolutionary process. I think it’s going to be evolutionary. If you look at the — it’s interesting if you look at Gi firewall opportunities, the software content of course is very significant, but so, it’s actually the hardware content because it needs to call with the significant amount of traffic, either on the detail side of things or just in pure mobile traffic firewall protection, so I think the trends is going to be there but to pick one quarter from Q4 to Q1 and say that’s a trend would be very dangerous. We don’t believe that.

Brent Bracelin, Pacific Crest Securities

Fair enough. Thank you.

Operator

Next question James Faucette Morgan Stanley. Your line is open.

James Faucette, Morgan Stanley

Thank you very much. Most of my questions have been answered so I want to dig a little bit just around more of the edges if you will. First, wondering if you could talk a little bit about what you think what’s happening in Japan and APAC. You called out that Japan was a little bit below your forecast. And then conversely, what you think was going right in EMEA, in particular with weakness of the Euro. Seems like that could have been subject to a little more weakness than what you saw. And I guess just a follow up to that, is there going to be a point at which you feel like to have to reprice products for that market? And how should we take that into account? Thanks.

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