惠普 (HPQ) 2004 Q4 法說會逐字稿

Thank you for standing by, and welcome to the Opsware Inc. fourth-quarter fiscal year 2005 conference call. (OPERATOR INSTRUCTIONS). Now at this time I would like to turn the conference over to the Director of Investor Relations, Ken Tinsley. Mr. Tinsley, please go ahead.

Thanks, everyone for joining us today. With me today at our headquarters in Sunnyvale are President and CEO Ben Horowitz and CFO Sharlene Abrams. Our Chairman Marc Andreessen is joining us by phone.

Before we begin, I would like to remind you that during the course of today's call we will make forward-looking statements regarding future events or our future financial performance, all of which are subject to risks and uncertainties. Actual events and results may differ materially from these statements. We assume no obligation to update the information provided on this call, to revise any forward-looking statements or to update the reasons actual events or results could differ materially from those anticipated in the forward-looking statements. Please review our Form 10-K filed with the SEC on April 15, 2004 and our reports on Forms 10-Q and 8-K filed with the SEC for discussions of important factors that may cause the actual events and results to differ from these forward-looking statements.

By now you should have received a copy of our press release that was distributed after the market closed today. If you have not, it is available on the Investor Relations section of our website. In addition, we are currently webcasting this call, and an audio replay will be available on our website following the conclusion of the call.

Now let me turn it over to Ben.

Thanks, Ken. Today I'm pleased to report a strong fourth quarter and successful year. Q4 revenue was $11.6 million, up more than 85 percent from last year and above our previously guided range. Full-year revenue was $37.8 million, up over 100 percent from the previous year and above our initial guidance of $35 to $37 million and at the top end of our most recent guidance.

Excluding EDS year-over-year revenue increased five-fold. Q4 cash flow from operations was $1.4 million. Excluding EDS, we are forecasting revenue growth of 80 to 155 percent for the next year, placing our overall revenue guidance at $53 to $66 million.

Finally, as we approach the inflection point in the market, we forecast the bookings growth rate this year will exceed the growth rate from last year.

While I am pleased with our results to date, I am even more excited about the year ahead. Last year we delivered solid results, growing non-EDS revenue by five-fold and exceeding our revenue guidance. This year we believe the IT automation market will reach the critical inflection employer where market adoption will accelerate and IT automation software will be a budgeted item in Enterprise and federal IT budgets. We forecast this inflection point based on a combination of factors including our pipeline data, industry analyst data, financial analyst data and customer behavior.

I want to highlight a few of these. First, our pipeline growth rate is accelerating as we've forecast a higher bookings growth rate this year than last year.

Second, industry analysts see a big rise in customer inquiries. Forrester Research for instance receive 20 inquiries a month from customers. In comparison, they had no meaningful call volume on this market last year.

Third, financial analysts see this software category appearing in IT budgets. JMP Securities recently surveyed customers on whether server automation and consolidation will be a budgeted item in 2005. 80 percent of the Company's indicated server automation will appear in their budgets this year versus zero percent last year.

Fourth, sales cycles are shortening. Customers are now educated in seeking solutions from known vendors in this space. As a result, incoming RFP volume has increased substantially. Specifically in Q4 20 percent of our bookings came from deals that closed in three months or less compared to our typical 6 to 9 month sales cycle.

The impending market acceleration and change in buying behavior led the META Group to state in a recent report that 2004 was a year of initial investment in these products, but 2005 will bring mainstream adoption. Given the strength of the market and our market leadership position, we are excited about the upcoming year.

Now turning to customers. Since our last call, we added many significant customers including the Home Depot, Sallie May, Chrysler, Wells Fargo, Rite Aid, Cadence Design Systems, BP, Daytech, Juniper Networks and Good Technology. I would like to highlight the significance of a few of these deals.

The Home Depot, the second largest retailer in the world, selected Opsware to automate all servers across their 1700 retail outlets and two major data centers. After a deep technical evaluation, the Home Depot selected Opsware over other automation products based on our clear product superiority in managing large-scale environments. Combined with our win at The Gap, we're pleased with our initial success in the retail segment.

Cadence, a $1 billion supplier of electronic design systems, has selected Opsware to automate thousands of servers and workstations in 11 facilities around the globe. Opsware will automate the complete lifecycle of Cadence's internal and external applications. Cadence selected Opsware after an evaluation of four other IT automation solutions.

Sallie May, the nation's leading provider of education funding, has selected Opsware to automate their server and network infrastructure. A key driver in selecting a solution was the vendor's ability to automate both servers and network devices with a particular emphasis on Sarbanes-Oxley compliance. After a deep head-to-head technical evaluation, Sallie May selected Opsware over several other solutions.

Good Technology, a leader in wireless handheld computing and software and services, has selected Opsware to automate their servers, network infrastructure and all customer facing applications. Good Technology required integrated management of servers and network devices.

On the international front, we added BP, one of the world's largest energy companies.

On the product front, we acquired network automation leader, Rendition Networks. This acquisition gives us a dramatic competitive advantage making Opsware the only solution that offers complete automation of servers, software, network devices and applications. Over the last 10 years, network devices have evolved from providing simple connectivity to becoming an integral part of the application. As a result, solutions that could not automate network devices were limited. We demonstrated this competitive advantage in recent deals such as Sallie May and Good Technology where the ability to manage both servers and network devices to support their applications was a key buying criteria.

The Opsware System continues to be the clear market leader. Industry analysts recognize our extensive capabilities across servers, networks and applications. In January Forrester Research published a comprehensive report on our market which evaluated eight vendors. They once again ranked Opsware number one.

In summary, I'm pleased with the progress we made this year. As the IT automation market is approaching a critical inflection point, Opsware is the company best positioned to take advantage for the following reasons. Our server automation product is ranked number one. Our network automation product is also number one. We have the largest R&D team in this space. We have over $100 million in cash. Our bookings growth rate is accelerating.

Now here is Sharlene to provide more detail on our financial results and outlook.

Thanks, Ben. Net revenue for the quarter ended January 31, 2005 was $11.6 million, up more than 85 percent from the fourth quarter last year. Revenue for the full year was $37.8 million, up more than 100 percent over last year. Non-EDS revenue was $17.6 million for the full year, up over five times from last year. EDS represented 54 percent of total revenue for the year, down from 83 percent last year.

To reiterate how we treat and record customer contracts, there are three categories other than revenue into which a customer contract can fall.

First, if we sign a contract and have completed all deliverables, the amounts are recorded as deferred revenue. Second, if we sign a contract and have received cash but have not completed all deliverables, the amounts received are included in advances from customers. Or third, if we sign a contract, have not received any cash and have not completed all deliverables, the contract is not reflected anywhere on the financial statement.

Cost of revenue in Q4 was $2.6 million, which translates to a gross margin of approximately 78 percent. Operating expenses totaled approximately $11.1 million for the quarter. Operating expenses have been trending upwards due to R&D staffing and sales hiring. We have invested heavily in R&D, growing the staff aggressively to 112 currently to solidify and accelerate our technology leads. We have also addressed the impending market inflection point by increasing our sales coverage from 10 quota carriers at the beginning of the year to 25 quota carriers on three continents. Average sales quotes this year increased to approximately $2.5 million per rep. GAAP EPS loss for Q4 was 2 cents.

Turning to the balance sheet, we ended the year in a very strong position. First, you will note the large increase in cash from last quarter due to the capital raise of $62 million completed in December. Additionally, deferred revenue and advances grew to $19.3 million, up from $17.6 million last quarter.

Now turning to guidance for the fiscal year ending January 31, 2006. We expect full-year revenue to range between $53 and $66 million. We forecast non-EDS customers will account for $32 to $45 million, which implies an 80 to 155 percent year-over-year increase. Approximately two-thirds of the low-end of our revenue range for next year is already booked. EDS will account for approximately 30 to 38 percent of full year revenue next year, down from 54 percent last year and 83 percent a year before. We estimate that Q1 revenue will be in the $11.6 to $12.6 million range.

As an update on VSOE progress, we have booked enough new deals to achieve VSOE. However, based on new revenue controls we adopted this quarter in conjunction with Sarbanes-Oxley, we believe that the appropriate evidence to satisfy VSOE is the renewal of the maintenance contracts for our existing customers. We expect many of these to renew maintenance during the first half of this year; therefore, the impact of achieving VSOE will be visible on our balance sheet starting on July 31. At that point, the advances from customers line will diminish gradually over the subsequent quarter, and new bookings will hit deferred revenue directly as soon as they are billed.

As we previously stated, achieving VSOE will have minimal impact on our revenue because most of our revenue will continue to be recognized ratably.

On February 3rd, we closed the Rendition acquisition. Since we closed this transaction after our year end, there was no impact on our financial statement. However, in Q1 the full impact of the acquisition will be seen. The total consideration for the transaction was $30 million, consisting of $15 million in cash and 2.68 million shares of stock. The January 31st balance sheet does not yet reflect the $15 million payment made in February.

So as of the end of Q1, the acquisition, including the purchase price allocation, will have the following impact on the financial statement. You'll see a charge for in process R&D of approximately $1.2 million. On the balance sheet, we estimate between $6 and $7 million of intangible assets and approximately $25 million of goodwill.

With the acquisition of Rendition, we added about 40 employees, most of whom are in R&D. These additions will increase our expense run-rate by approximately $1.5 to $1.8 million per quarter in fiscal year '06. As we discussed last quarter, we expect that Rendition will run cash flow negative for Q1, but be overall cash flow accretive for the full fiscal year. Therefore, we expect that overall operating cash flow will be negative in the first quarter due to the Rendition integration. After the initial transition quarter, we expect to run the business to positive operating cash flow.

As Ben mentioned, the IT automation market is accelerating, and we forecast it will reach a critical inflection point in market adoption in 2005. Thus far in just two years as a software company, we have created an extremely robust product and established Opsware as a market leader. In fiscal year '06, we plan to make the investments necessary to further our technology leads and increase our salesforce coverage to continue to lead this fast-growing market. This is the time to invest in our growth. Therefore, we are not projecting a positive operating margin on the P&L for fiscal year '06. However, as I previously mentioned, we plan to continue to run the business cash flow positive for the year, except for Q1 during the Rendition integration.

To summarize the financial metrics that we are providing today, sales headcount. We certainly have 25 quota carriers, up from 21 on our last call and up from 10 a year ago.

Average sales quotas this fiscal year. A new metric we are providing today has increased to approximately $2.5 million. Q1 revenue will be between $11.6 and $12.6 million. Full-year revenue for fiscal '06 will range between $53 and $66 million. Non-EDS revenue in fiscal '06 will be between $32 and $45 million, up from $17.6 million last year. EDS revenue will be $20 million or 30 to 38 percent of full year revenue.

Cash flow from the ongoing operations of the software business will be negative in Q1 due to the impact of the Rendition acquisition and then positive for the rest of the year. We expect the bookings growth rate this year to exceed the rate of growth we achieved last year, and as previously defined, our average deal size, excluding EDS, remains above $600,000. We expect this is the last quarter we will provide this metric as we plan to replace it with more meaningful metrics that will help you evaluate the progress we are making in our business.

And with that, we now invite your questions.

(OPERATOR INSTRUCTIONS). Joseph Craigen, Needham & Co.

A lot of the numbers here to go through, just first off a clarification. When we are talking about bookings growth next year or excuse me for this year being faster than last year, are we talking about what is visible from the balance sheet, or are you including the off-balance sheet component of bookings as well?

We are including everything, and we are talking about non-EDS bookings.

Right. And we are talking about the deals that we signed. So it is our best sort of indicator of what is happening on the sell-side. So these are signed deals in the revenue against -- or I'm sorry, the dollars against the signed deals, which will over the course of this year and next year roll into deferred and then revenues.

Okay. Will bookings also grow faster than revenue this year? And if it is, can you speak to that and why that dynamic is?

Yes, I would expect that bookings do grow faster than revenue for exactly -- like the bookings, year-over-year bookings increased faster than the year-over-year revenue increase because the bookings rate -- it follows the bookings rate increase from last year to this year. You know revenue exactly follows, just lags bookings. So think of it that way.

Okay. Just to switch gears, could you speak to a little bit about the competitive landscape and in particular pricing? What is going on there?

Sure. So we were actually very excited about the results in the fourth quarter, and it has made us even more bullish on our ability to convert the pipeline going into next year. If I just run through some of the deals that we talked about, some of our recent deals and the competitors, so at The Gap we competed with Veritas. The Home Depot, we competed with BMC who is the incumbent. At Cadence, we competed with Veritas. AT Good Technology, we competed with Veritas and BladeLogic. At Sallie May, we competed with CA, BladeLogic, and HP Novadyne. And you know they varied in terms of the level of intensity of the competition. In the instance of Good Technology and Sallie May, they were very detailed evaluations, and by that I mean side-by-side with Sallie May and Good running the evaluations and doing their diligence to test each product in their environment on their servers. So very detailed technical evaluation from pretty smart companies technically, and we won all of those accounts pretty nicely. And I think that the results of our very strong competitive position and our unmatched capability to manage both networks and servers we have had a very good time with pricing over the last quarter. In fact, we feel like our pricing is pretty solid right now. So that has led us to feel pretty good about the year going forward again based on our competitive position.

Okay and just last question and then I will get back in the queue here. But you mentioned the sales cycle is shortening. What should we attribute that to? Is that a function of what is going on competitively, of more market acceptance, just what is that dynamic there?

Definitely market acceptance. So I think that people are bringing us understanding much more what they are looking for and that there are solutions available in this space and having budgets that are starting to get baked going in. So in the past we have always had to either find budgets or get budget established, whereas now for the first time, we are seeing people have budgeted projects that we are walking into and executing against. So primarily a function of the market.

David Rudow, Piper Jaffray.

How is the Rendition integration coming along, and what has been the customers comments on the product so far?

So we are really pleased with how Rendition has gone so far. As I said on the call, right off the bat we were able to spill the integrated solution at both Good and Sallie May very quickly. People are really impressed with the networking product. As you know, it won InfoWorld product of the year. It is widely recognized as the best product in the space. The engineering team, we brought over 100 percent. So everybody signed off our letter to come over to Opsware, which we were really excited about, and we feel good about our ability to retain and grow that team, which it is quite a good team as you can see from the results they are getting.

And the initial response from the market on both their functionality and what we are doing in terms of integrating the products has been outstanding. So our improved -- a lot of our competitive position, which we feel quite good about, comes from our ability to solve the whole problem now.

And what are the average selling prices of the Rendition productline? I forget what that was.

Yes and they had -- yes -- I don't believe that we gave a number for that in the past. But it was -- I can tell you this, that our pricing per node just since we have taken it over has gone up quite a bit from what they were running stand-alone. So it is not yet reflected. The metric that we gave on average deal size again was greater than $600,000 average deal size since we have been measuring that. We are going to replace that with a metric that makes more sense given the network product, given where we are with the Opsware product and the ability to modularize it. And so that will be coming next quarter. But we do not have a better metric for you this time.

Then what about on the sell-side? How are you guys going about selling this? Is this an individual priced product then, or is it bundled into the total solution?

Well, we really -- what the market wants and what we are delivering primarily is an integrated solution for managing networks and servers. Now it is possible that people take one module before the other. But in terms of the packaging and the way we are selling it, it is the Opsware System. There is Opsware System network automation system and server automation system are the two big parts of the line. We also have asset management system as the third leg on the stool. But it is really from a sales standpoint we're selling the Opsware System to the head of operations who typically owns networks and servers.

Okay. So it's a similar person you are going to actually sell Rendition and the Opsware product to then?

Right, right. Very similar at the high-level in the organization. It does differ once we get down into the people actually using the product, but yes, the same value proposition, same salesforce.

And, Sharlene, could you give us the share count post the Rendition acquisition? Give us an idea what that number should be looking out to Q1?

Yes, we are about 90 -- a little over 95 million -- 97 million.

97 million. And that would be the weighted average for Q1 expectations, right?

I think that it should be.

And then geo split, did you give details around what you did internationally?

Internationally it was a little under 10 percent this quarter.

10 percent? Anything out of Asia?

Yes. That includes that.

Okay. And then on the partner side, any partner contributions you can talk about during the quarter?

Yes. On the partner front, you know in general it has been pretty consistent from this quarter to last quarter. We did have -- we made some good progress with NEC this quarter in both business and setting up for a good year next year. Then EDS continues to be our strongest partner, and they are doing extremely well with their deployment and continue to be a big part of our revenue.

Beyond those two, which are the biggest contributing partners, we continue to have good success with our smaller integrators and doing deployments such as August Schell and ENTESSA and many of the others. So no big changes on the partner front this quarter, although we would -- we do expect this coming year to do a few significant things on the partner front.

Amy Feng, JMP Securities.

Yes. I wanted to talk a bit more about your revenue guidance, particularly since it is a very wide range for the non-EDS business. Can you give us a sense of what revenue contributions you expect from Rendition Networks for fiscal '06? And given your revenue recognition practice of ratably recognizing your revenues on a monthly basis for 12 months, what has to happen in the year for you to come in at the high end of your range?

Okay, Amy. Let me take the first part, and then I will pass it to Sharlene for the second part.

In terms of Rendition as a revenue percentage, again, as I said before, we are really -- what the market wants is an integrated solution, and that is really what we're delivering. As a result of that, it does not make much sense for us to break out the forecast by product line, and in addition probably a little early for us to, even if we wanted to do such a thing, probably a little early on for us to forecast Rendition just because we have not sold it even for a full quarter yet.

Let me pass it to Sharlene for the second part.

Okay. And so what I will give you is a range of factors that go into determining our revenue range. That includes deployment time, customer acceptance, and it also obviously includes the timing of fiscal year '06 bookings. So that is basically how we come up with the range, and we think that based on all those factors that is the appropriate range to give.

Are you expecting to make any quota changes for fiscal '06? And as well at year end fiscal '06, how many quota carriers do you expect to have?

So first, we did make changes in the quotas, and at this point, they have actually increased to about 2.5 million. I know that is the first-time we have given that metric.

You know as far as expanding the salesforce, of course, we plan to expand the salesforce, and we're very methodical in the process. You know we make sure people get up the productivity because we are disciplined about that.

Any sense as to what numbers quota carriers you will have at the year-end?

We're not forecasting quota carriers at the end of the year. We have 25 today average quota of 2.5 million.

Seihun Kong, ThinkEquity Partners.

Thanks a lot. I actually dropped off for a second. I fell out of queue, but I don't know if you actually answered this question. But on your revenue guidance estimate, you know I know under certain situations, particularly if a partner is involved, that there are certain situations where you have to take a deal on a perpetual basis. Post-VSOE is there any expectation that some of the revenue will be done on a perpetual versus ratable, and is that baked into the revenue guidance?

So as I have continued to believe, most of our revenue would be recognized on a ratable basis. It would not necessarily matter whether it came through a channel or not, honestly. And just so you know, it's not a matter of choice, but it's a result of applying the RevRec rules based on the circumstances of each contract. And I'm happy to walk through that in great detail later on with you.

Okay. And just to clarify one issue related to Rendition, you know I guess after July when you have reached VSOE on your core products, if any deal includes a component of Rendition, which I understand does not have VSOE at this point, will that remain off-balance sheet until the cash is collected, or will it fall back to the status of your core products?

Once -- if we don't have VSOE, then we cannot show it on the balance sheet until we have collected the cash.

Right and then any product sold with another product that does not have VSOE even if it has VSOE causes the entire sale be treated as though neither product had VSOE.

And we would have to recognize it ratably.

Got you and there is no minimum threshold on that? It can be even a $1.00 out of $1 million sale for example?

Well, you would have no way to establish that fair value, but yes, that is true.

Okay. You talked about Sallie May and Good Technology and it sounded like this included some aspect of Rendition. So can we assume that these particular deals were closed in the current quarter, or were they closed in Q4 before the Rendition Networks acquisition was actually closed?

They were closed in Q4 before the closing of the acquisition. That is accurate.

Okay, and so the revenue associated with Rendition is not going to be recognized?

Correct.

Got you. Is the Home Depot deal also on the balance sheet at this time or, has the cash been collected?

I believe that that is in deferred revenue at this point. I'm sorry, in advances from customers, I'm sorry.

Vik Khullar, Wachovia Securities.

Thank you. You guys had some pretty good service gross margins this quarter, jumping nicely from 27 percent the previous quarter. What should we attribute this jump to? Is it just better utilization? And how should we view this number going forward both for fiscal Q1 as well as fiscal '06?

So I actually look at gross margin overall, and you know the goal is to have that around the 80 percent number. But this quarter there was actually you see a little bit of an anomaly on the service revenue side, that it was a large service contract associated with a particular license deal. And so that skewed the -- that moved the needle a little bit more on the margin there for this quarter.

Okay. And in terms of operating margin, should we expect Opsware to be EBIT to margin positive by fiscal Q4 of this year?

I actually said during the call that we plan on investing the business and that we would not be showing profitability this year. You know we said that -- you would not want us to expand the margins this year. We're working on capturing the leadership in a $5 billion market, so that would actually be premature. We're still going to be disciplined on spending levels, and we plan on running the business to generate positive cash flow.

Okay. And then another quick question on your partnership with VMware. Are you seeing any traction or any sort of deals originating out of your relationship with VMware? Then I have a follow-up.

Yes, we are seeing some pretty good traction on our relationship with VMware, and they are in the form of leads as opposed to deals. So they have contributed to our pipeline growth which we're really really quite excited about, which has led us our projection that our bookings rate is growing faster this year than the previous year.

Great. And then Altiris has obviously keenly associated itself on focusing on the server management software market. They made an acquisition of a small private company that deals in application level automation. Any thoughts on how you are going to sort of address the growing thread of a company such as Altiris which is coming in from decline into the server management software market?

So so far, and we think Altiris is quite a good company and they have executed well. So we would certainly treat them with respect in that regard. However, the products -- the feedback that we get from customers is that the products are really quite different, and actually the only competitive situation that we end up seeing with Altiris tend to be with our desktop inventory products that we acquired from -- when we bought Tangram.

On the server side in terms of management of the lifecycle, the server they don't or they seem to be different enough from us that if you wanted an Altiris solution you would probably wouldn't talk to Opsware, and if you wanted an Opsware solution, you probably wouldn't talk to Altiris. And that may change. Although we don't see the acquisition that they made changing that in that did not bring them any closer to us, it may have brought them closer to something like a Micromuse or a Mercury but not closer to Opsware.

Is that foreign to the server management software market, or I guess the increased emphasis has that impacted pricing in any way?

Not at all. Not at all. I mean like I have said we've never seen them -- we have never actually had a technical evaluation against Altiris, so pretty early on people figure you want this or you want that. And not to get too much into the detail, but you have to understand that a desktop, if you walk into an environment and they have got 50,000 desktops and they might have three to four different images that go on those 50,000 desktops, if they have got 5000 servers, they might have 4500 different configurations of those servers run under. So it ends up being quite a different kind of a problem, and I think there are certain kinds of servers like file and print servers that you might effectively apply Altiris to, but when you get into the things that we manage, they just don't show up.

Great. Than finally, can you talk about what sort of attach rates did you see for your Multimaster software margin behind software options?

Yes. I don't know that -- I don't have a great number for you on that off the top of my head, but Multimaster is probably a bit over 50 percent of the deal.

Nicholas Aberle, Caris & Company.

First question. Ben, I was wondering if you could elaborate on the customer relationship with the Department of Defense, what that contribution was this year, and how you expect that relationship to expand over the next year or two?

Yes. So the Department of Defense is actually a pretty significant contributor to revenue in particular this year. And off the top of my head, I don't know, but they were certainly between 10 and 20 percent I think is probably a safe bet in terms of government overall between U.S. government, between 10 and 20 percent I should say. We see that business growing very nicely in the year to come. Whether it stays at that higher percentage, probably not I would say because I believe the rest of the business is going to grow at a similar faster rate in that we got off to quite a running start with the U.S. government. But the growth in the U.S. government sector looks really good, and for those of you who follow defense contracts and things like that, I am sure you probably hear our name quite a bit because there are a few pretty interesting deals that we are competing for now that are up for bid.

And building on a question that was asked earlier about the guidance, looking at fiscal '06 bookings when is feasibly the last month or time period you guys could book a contract in fiscal '06 and still have it contribute to revenues in that same year?

Usually I mean based -- usually based on the point in time, it's like more than a quarter away.

Yes, probably a little more than a quarter, so as you know sometime in the third quarter.

Sometime in the third quarter? So at that point in time, would the guidance range be narrowed more than likely?

More than likely.

And then the last question I had was, you know looking at the revenue guidance, I mean this is really evidence of what you guys have been able to accomplish in calendar 2004. Looking at the pipeline for this year, could you give us any color as to what revenues could look like in fiscal '07?

Right. So I will first preface by saying you know we have not forecast that far out yet. However, at this point, I would not plan on more than 100 percent non-EDS revenue growth for your modeling purposes.

Andy Schroepfer, Tier 1 Research.

I found it interesting that Veritas was mentioned repeatedly when you went through the competitive profile of some of your deals. Was that just coincidence, or are they the one that you see most often?

I think that they probably are the ones that we see most often. They had a very special incentive over the last half of the year for their sales reps where they were bent on getting the OpForce product in a deal whether or not -- I mean you know, almost independent of the revenue that it brought in. So they had a special incentive for just selling outsource -- OpForce with the rest of the line. So I think that caused them to kind of amp up from a coverage standpoint and show up in a lot more places than they had previously.

However, since the Symantec acquisition, it seems like, although it is pretty early yet, it seems like they have lost a little bit of steam on that, but we will see how that goes.

And then, Sharlene, you had said in one of your statements that roughly two-thirds of your guidance is already booked. Is that relative to the low-end of the range, the midpoint, or if you can clarify that statement, that would be helpful?

Yes. I had said that it is two-thirds of the low-end of our revenue guidance. It is already under contract going into the year.

Got you. And one of the questions that was already asked, I just wanted to re-ask it for a little more detail. To hit the high-end guidance range, that would require the government deals that Ben alluded to coming in. Does that involve a Herculean effort by the new salesforce that has come on board recently, or is that not a Herculean effort?

I think that I would not describe anything about the range as unusual. That is where we expect it to be, and we -- you know as soon as you get into a low probability, so if you think of it as the distribution curve, we try and keep the range a standard deviation off the mean. (multiple speakers) -- so I would say no.

Fair enough.

Herculean efforts would be upside to that.

Okay. And then maybe just a high-level question. This isn't meaning to be a softball, but I'm actually looking for any practical answer you can give. You call this year ahead the inflection year, and I think at least all the questions I have received from people that that is one of the key questions they are looking for. So maybe any more data points, or is there different feedback or any tactical or real stuff that we can get our hands around about why you chose now to be the time to state that versus last quarter or three quarters from now?

Yes. So the things -- there are a couple of things that really moved it for us, and they are more to do with -- you can think of it is like we heard things from certainly analysts prior to this and people making predictions prior to this. But from a kind of military example, I don't know that we had seen the whites of the eyes in terms of like really same sales cycle shortening until now, and we also had seen the really huge change in our own pipeline that would indicate an inflection point. So we didn't really -- so you know pipelines tend to grow predictably when they grow a lot beyond that and sales cycles shortened, and that has always been the kind of thing that we put on the board, like as when that happens, then we would be ready to forecast something like a turn in the market or the knee in the curve or however you want to refer to it. So more internal factors in terms of what we're seeing directly than what we are hearing in the marketplace led us to this timing.

This does conclude today's question-and-answer session. I would like to turn the conference back to the speakers for any additional or closing remarks.

Okay. Thanks everyone for your participation today. As always, if you have any questions, please contact us here in Sunnyvale.

Again, this does conclude today's conference call. We would like to thank everyone for their participation and wish you a good afternoon.