8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): July 14, 2006

F5 Networks, Inc.

(Exact name of registrant as specified in its charter)

Washington	000-26041	91-1714307
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

401 Elliott Avenue West
Seattle, WA 98119

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (206) 272-5555

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On July 20, 2006, F5 Networks, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended June 30, 2006. The press release is attached hereto as Exhibit 99.1. The information in this Item 2.02 shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a)   As previously announced, the Company’s Board of Directors (the “Board”) has formed a special committee of the Board (the “Special Committee”) to conduct a review of the Company’s practices relating to the granting of stock options. This review by the Special Committee, which is being assisted by independent legal counsel and forensic accountants, has not yet been completed, and the Special Committee has not communicated any final findings to the Company.

Although this review is ongoing, in the course of furnishing information to the Special Committee, the Company identified at least one occasion on which the accounting measurement date used in the Company’s financial statements for option awards granted to certain employees, officers and directors of the Company was different from the accounting measurement date called for under the requirements of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). In order to correct this accounting measurement date error, the Company expects to record an additional non-cash, stock-based compensation expense related to these options. In addition, because the Company believes that such expense is material under applicable SEC standards, the Company will restate its financial statements for fiscal years 2001 through 2005 and balance sheets for the first two quarters of fiscal 2006. The Company has not completed its assessment of the amount or effect of any such adjustments. However, any such adjustments are not expected to affect the Company’s current cash position or previously reported revenues, but will likely affect the Company’s income statements through fiscal 2005 and balance sheets through the present.

On July 18, 2006 the Audit Committee of the Board (the “Audit Committee”) determined, after consultation with management, that the Company’s financial statements and all earnings releases and similar communications relating to fiscal periods beginning on or after October 1, 2000, the first day of the Company’s fiscal year 2001, should no longer be relied upon. The Company intends to file its restated financial statements as soon as practicable pending completion of the Special Committee’s review of the Company’s stock option grants and related practices.

The Audit Committee has discussed the matters disclosed in this Item 4.02(a) with the Company’s independent registered public accounting firm; however, as the Special Committee’s review has not been completed, the final conclusions of its review are not yet known to the independent registered public accounting firm.

Any additional non-cash, stock-based compensation expense recorded for the periods in question would have the effect of decreasing income from operations, net income, and net income per share (basic and diluted) in periods in which the Company reported a profit, and increasing loss from operations, net loss, and net loss per share in periods in which the Company reported a loss. The Company presently believes that additional non-cash, stock-based compensation expenses under APB 25 will not likely affect the Company’s current cash position, or previously reported revenues and will be offset by corresponding increases in additional paid-in capital, thus leaving total shareholders’ equity unaffected.

Because the Special Committee’s review of the Company’s stock option grant practices has not been completed, it is possible that additional issues may be identified for one or more of the periods under review, including the possible findings that the amounts recorded as compensation expense for other options granted in the periods under review should be adjusted. Moreover, the Audit Committee may determine, prior to the completion of the Special Committee’s review, that the accounting of other historical stock option grants was incorrect. For this reason, the Company may determine that the financial statements issued by the Company with respect to additional fiscal periods beginning prior to October 1, 2000 should not be relied upon.

Additionally, the Company is evaluating Management’s Report on Internal Control Over Financial Reporting as set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005. The Company has not yet completed its analysis of the impact of this situation on its internal controls over financial reporting.

On July 20, 2006, the Company issued a related press release announcing the expected restatement. The full text of the press release is attached as Exhibit 99.1 to this report and is hereby incorporated by reference herein.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

(d) On July 14, 2006, the Board approved an increase in the number of directors of the Company from six to seven and appointed Deborah Bevier to the Board as a Class II Director to fill the newly created vacancy. Ms. Bevier’s term on the Board will expire at the Annual Meeting of Shareholders to be held in 2007. A copy of the press release the Company issued on July 20, 2006 announcing the appointment of Ms. Bevier to the Board is attached to this report as Exhibit 99.2.

In connection with her appointment to the Board, a determination was made that Ms. Bevier is “an independent director as defined by the Nasdaq Marketplace Rules (as independence is currently defined in Rules 4200(a)(15) and 4350(d) therein). Ms. Bevier has been appointed to serve on the Special Committee that is reviewing the Company’s practices related to stock option grants and related matters. The other member of the Special Committee is A. Gary Ames.

As a member of the Board, Ms. Bevier will receive $30,000 per year as an annual retainer, as well as reimbursement of certain expenses in connection with attendance at Board meetings and Board committee meetings. In addition, she will receive $1,000 for each regular in-person Board meeting she attends and $750 for each in-person or teleconference Board committee meeting attended. Upon her appointment to the Board, Ms. Bevier received a one-time grant of 5,000 restricted stock units (“RSUs”) under the terms of the Company’s 2005 Equity Incentive Plan. These RSUs will fully vest, and the underlying shares of the Company’s common stock will be issued, on the day prior to the Annual Meeting of Shareholders to be held in 2007, subject to her continued service on the Board.

There are no arrangements or understandings between Ms. Bevier and any other person pursuant to which she was appointed as a director. Since the beginning of the Company’s last fiscal year, there was no transaction or series of similar transactions, nor is there any currently proposed transaction or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $60,000 and in which Ms. Bevier, or members of her immediate family, had or will have a direct or indirect material interest, other than compensation that Ms. Bevier will receive as a non-employee director of the Company.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

99.1 Press Release of F5 Networks, Inc. dated July 20, 2006 announcing third quarter revenues and an expected restatement.

99.2 Press Release of F5 Networks, Inc. dated July 20, 2006 announcing the appointment of Deborah Bevier to the F5 Board of Directors.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	F5 NETWORKS, INC.
	(Registrant)
Date: July 20, 2006	By:	/s/ John McAdam
		John McAdam
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of F5 Networks, Inc. dated July 20, 2006 announcing third quarter revenues and an expected restatement.
99.2	Press Release of F5 Networks, Inc. dated July 20, 2006 announcing the appointment of Deborah Bevier to the F5 Board of Directors.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT:	Investor Relations
	John Eldridge
	(206) 272-6571
	j.eldridge@f5.com
	Public Relations
	Alane Moran
	(206) 272-6850
	a.moran@f5.com

F5 Networks Announces Revenue for Third Quarter of Fiscal 2006; Expected Restatement

SEATTLE, WA—July 20, 2006—For the third quarter of fiscal 2006, F5 Networks announced revenue of $100.1 million, up 6 percent from $94.1 million in the prior quarter and 37 percent from $73.1 million in the third quarter of fiscal 2005.

F5 president and chief executive officer John McAdam said that during the third quarter the company achieved solid sequential growth in Europe, Asia-Pacific and the Americas. As expected, Japan revenue was down from the prior quarter, reflecting the seasonal weakness that characterizes the first quarter of Japan’s fiscal year. Year over year, Japan revenue grew 72 percent.

During the third quarter, revenue growth was driven by continuing strength in BIG-IP sales and increasing demand for the company’s recently acquired WAN optimization products. Reflecting increased competition and ongoing softness in the SSL-VPN market, overall security revenue dipped sequentially, despite a steady ramp in revenue from application security products.

Service revenue for the quarter was $22.9 million, up 7 percent sequentially and 44 percent year over year. Deferred revenue increased 12 percent from the prior quarter to $53.5 million.

For the fourth quarter, ending September 30, 2006, Mr. McAdam said management has set a revenue target of $104 million to $106 million.

Expected Restatement arising from Stock-Based Compensation

As previously announced, a special committee of F5’s board of directors has been conducting a review of the company’s practices relating to the granting of stock options. This review, which is being assisted by independent legal counsel and forensic accountants, has not yet been completed, and the special committee has not communicated any final findings to the company. However, in the course of furnishing information to the special committee, the company has identified at least one occasion on which the accounting measurement date for option awards granted to certain employees,

F5 Networks Announces Revenue for Third Quarter of Fiscal 2006; Expected Restatement page 2 of 4

officers and directors of the company was different from the correct accounting measurement date determined under applicable accounting rules. As a result, the company expects to record an additional non-cash, stock-based compensation expense related to these options. In addition, because the company believes such expense is material under applicable SEC standards, the company will restate its financial statements for fiscal years 2001 through 2005, and for the first two quarters of fiscal 2006. The company has not completed its assessment of the amount or effect of any such adjustments. However, such adjustments are not expected to affect the company’s current cash position or previously reported revenues, but will likely affect the company’s income statements through fiscal 2005 and balance sheets through the present.

Because the special committee’s review of the company’s stock option grant practices has not been completed, it is possible that additional issues concerning the company’s historical stock option grants could be identified. As a result:

• the company will not be in a position to publish financial statements for the third quarter until the special committee has completed its review and appropriate stock-based compensation adjustments have been determined;

• today’s announcement of results for the third quarter of fiscal 2006 does not include a current income statement or balance sheets or other GAAP financials for the third quarter and prior periods; and

• it is unlikely the special committee’s review will be completed in time for the company to file its Quarterly Report on Form 10-Q for the third quarter ended June 30, 2006, by the SEC deadline of August 14, 2006.

The company intends to publish financial statements for the quarterly period ended June 30, 2006, and to file its Quarterly Report on Form 10-Q, together with any restated historical financial statements, as soon as practicable after the completion of the special committee’s review.

In light of the expected restatement of the company’s financial statements to reflect the additional compensation expense for 2001 option grants described above, and the possibility that the special committee’s review may identify the need for additional historical adjustments, the company’s financial statements and earnings releases and similar financial communications relating to fiscal periods commencing on or after October 1, 2000, the first day of the company’s fiscal year 2001, should no longer be relied upon. Moreover, the company may determine, prior to the completion of the special committee’s review, that the accounting of other historical stock option grants was incorrect. For this reason, the company may determine that the financial statements issued with respect to additional fiscal periods beginning prior to October 1, 2000 should not be relied upon.

About F5 Networks

F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that make applications secure, fast, and available for everyone, helping organizations get the most out of their investment. By adding intelligence and manageability into the network to offload applications, F5

F5 Networks Announces Revenue for Third Quarter of Fiscal 2006; Expected Restatement page 3 of 4

optimizes applications and allows them to work faster and consume fewer resources. F5’s extensible architecture intelligently integrates application optimization, protects the application and the network, and delivers application reliability — all on one universal platform. The company is headquartered in Seattle, Washington with offices worldwide. For more information, go to www.f5.com.

Forward Looking Statements

Statements in this press release concerning the continuing strength of F5’s core business, sequential growth, the target revenue range and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others: customer acceptance of our new traffic management, security, application delivery and WAN optimization offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; F5’s ability to sustain, develop and effectively utilize distribution relationships; F5’s ability to attract, train and retain qualified product development, marketing, sales, professional services and customer support personnel; F5’s ability to expand in international markets; and the unpredictability of F5’s sales cycle.

Moreover, this press release contains forward-looking statements concerning the special committee’s continuing review of the Company’s stock option grant practices and related accounting as well as the company’s expected restatement of its historical financial statements. The risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the possibility that the company, in consultation with the company’s independent registered public accounting firm and/or the Securities and Exchange Commission (SEC), will determine that the proper accounting for the company’s prior stock option grants differs from the accounting treatment upon which the assumptions and forward-looking statements in this release are based; that the scope of the issues as to the timing and accuracy of measurement dates for option awards and the timing of formal corporate approvals may change; that the amount and timing of additional stock-based compensation expenses and other additional expenses to be recorded in connection with affected option grants, and the corresponding restatement of our financial statements, may change based upon the special committee’s ongoing review; that our ability to file required reports with the SEC on a timely basis may be impaired; that our ability to meet the requirements of the Nasdaq Stock Market for continued listing of our shares may be impaired; that potential claims and proceedings may arise relating to such matters, including additional shareholder litigation and action by the SEC or other governmental agencies, that might impact the outcome of the special committee’s review; that other actions may be taken or required as a result of the special committee’s review; and that the anticipated accounting

F5 Networks Announces Revenue for Third Quarter of Fiscal 2006; Expected Restatement page 4 of 4

adjustments and other factors described above could have negative tax or other implications for the company.

F5 has no duty to update any matters discussed in this press release. More information about potential risk factors that could affect F5’s business and financial results is included in the company’s annual report on Form 10-K for the fiscal year ended September 30, 2005, and other public filings with the Securities and Exchange Commission.

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EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE

CONTACTS:	Alane Moran	Holly Hagerman
	F5 Networks, Inc.	Connect Public Relations
	206/272-6850	801/373-7888
	a.moran@f5.com	hollyh@connectpr.com

Deborah Bevier Appointed to F5 Networks Board of Directors

Financial services expert brings valuable experience to F5 Board

SEATTLE, JULY 20, 2006 – F5 Networks, Inc. (NASDAQ: FFIV), the global leader in Application Delivery Networking, today announced the appointment of Deborah Bevier, Sr. Consultant for Waldron Consulting in Seattle, to the F5 Networks Board of Directors effective July 14, 2006.

Formerly chairman and CEO for KeyBank of Washington Bevier also served as president and CEO for Laird Norton Financial Group, Inc. and has held a number of key positions in the financial services industry. Highlights of her career include significantly increasing the regional and national visibility of the Laird Norton Financial Group, where assets under management grew from $3 billion to $7 billion. During 23 years with KeyCorp, she led the start-up of Key Bank USA N.A., a direct response marketing bank, and Key Corp Leasing Ltd., an equipment leasing company.

In addition to her professional endeavors, Bevier has also been active in the Seattle community, serving as a board member for the Greater Seattle Chamber of Commerce and the Boys & Girls Club of King County, among others.

“Deborah’s expertise in the financial services industry and her experience as a corporate and community leader will make her a valuable addition to the F5 board,” said John McAdam, president, CEO and director of F5 Networks. “Along with the other members of the board, I look forward to working with her.”

Bevier also serves as a director on the boards of Fisher Communications, Inc. and Coinstar, Inc.

About F5 Networks

F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that make applications secure, fast and available for everyone, helping organizations get the most out of their investment. By adding intelligence and manageability into the network to offload applications, F5 optimizes applications and allows them to work faster and consume fewer resources. F5’s extensible architecture intelligently integrates application optimization, protects the application and the network, and delivers application reliability — all on one universal platform. Over 10,000 organizations and service providers worldwide trust F5 to keep their applications running. The company is headquartered in Seattle, Washington with offices worldwide. For more information, go to www.f5.com.

All brands, names, or trademarks mentioned in this document are the property of their respective owners. This press release may contain forward looking statements relating to future events or future financial performance that involve risks and uncertainties. Such statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms or comparable terms. These statements are only predictions and actual results could differ materially from those anticipated in these statements based upon a number of factors including those identified in the Company’s filings with the SEC.

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