Radware Ltd (RDWR) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Radware Ltd. third-quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct question-and-answer session, and instructions will be given at that time. (Operator Instructions). As a reminder, today's conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Roy Zisapel, President and CEO. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Radware's third-quarter 2012 earnings conference call. Joining me today, Meir Moshe, our Chief Financial Officer. Meir will start the call by reviewing the financial results. And afterwards, I will discuss the business highlights of the first-quarter results. After my comments, we will open the discussion for Q&A.

Meir?

Thank you, Roy, and welcome, everyone, to our third-quarter conference call. First I would like to read you the Safe Harbor language.

During the course of this conference call, we will make projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution you that such statements are just predictions, and that actual events or results may differ materially, including but are not limited to general business conditions and our ability to address changes in our industry; changes in demand for our products; the timing and amount of orders; and other risks detailed from time to time in Radware's filings. We refer you to documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's last Form 20-F, filed in March 2012.

And now, ladies and gentlemen, for the financials. In spite of difficult economic conditions, specifically in Europe, revenues for the third quarter increased to a record of $47.5 million, representing 13% year-over-year growth.

Non-GAAP EPS amounted to $0.45. Non-GAAP operating expenses amounted $28.9 million. Non-GAAP operating margin amounted to $10.1 million, or 21.3%. The non-GAAP net income for the third quarter of 2012 amounted to $10.4 million, or $0.45 per share, compared to a net income of $7.8 million or $0.34 per share for the first quarter last year.

Stock-based compensation expenses in the amount of $1.4 million, amortization of intangible assets in the amount of $700,000, and exchange rate expenses in the amount of $60,000 brings the GAAP net profit this quarter to $8.2 million, or $0.35 per share, compared to a net gain of $5.4 million or $0.24 per share in the third quarter of 2011.

Non-GAAP gross margin remained at 82%, as in the previous quarter. The headcount for the end of the quarter was 788 employees.

During the third quarter, we generated cash in the amount of $15 million. But our cash position, including [debt], long-term and short-term bank deposits and marketable securities, increased this quarter to $465 million, or $12 per share -- outstanding shares. And we have no debt. Shareholders' equity amounted to $260 million.

Guidance for the fourth quarter -- we expect revenues to range between $49.5 million to $50.5 million; 82% percent gross margin; operating expenses between $30 million to $30.4 million; financial income at $1.3 million; and non-GAAP EPS to range between $0.45 to $0.49.

As you can see, ladies and gentlemen, revenues are up, profitability continues to improve, cash is up by $15 million, and we expect better results in the next quarter.

And now, I'd like to turn the call over to Roy.

Thank you, Meir. We are pleased with our third-quarter results, demonstrating solid execution amid a challenging economic environment. Special note is our continued product revenue growth and in particular growth in North America. Consistent with prior quarters, the growth in North America is well balanced across enterprise customers, online and carriers.

Both our attack mitigation solutions and our application delivery solution, with its leading neutralization architecture, are gaining traction, and we are securing wins with major new customers. This past quarter, we had record revenues result from new customers in North America, and we believe we are gaining share in the region.

To demonstrate, this past quarter we announced a major North American mobile carrier that chose our Alteon 10000 to support their mobile data unit. Mobile data traffic has skyrocketed due to the huge increase in smartphone and tablet usage, together with the rising popularity of mobile video streaming services and other [applicable] applications. This explosion of mobile data requires operators to diligently optimize and manage traffic by dynamically sealing it based on user, application, location, and content awareness.

The two mobile carriers purchased Alteon 10000 to fully and cost-effectively address these emerging mobile data challenges. The Alteon 10000 delivers high-end processing capacity and performance superiority in all Layer 4 through 7 metrics, coupled with the most advanced [cross-ex] peering and mobile data acceleration capabilities.

In addition, the Alteon 10000 is a great fit for large carriers with its ATCA standard-based architecture and our [value] capabilities that allow our customers to consolidate up to 256 ADC instances into one platform, 16 times higher than the competition.

Another excellent example of the strength of this solution comes from our recent win with one of the world's largest mobile carrier groups, who purchased over $1 million of our Alteon 10000 platform. Beyond supporting the huge demand for mobile data and video services, the Alteon 10000 leading ADC consolidation and vADC density capabilities enable this carrier to consolidate legacy ADC devices into fewer platforms, reducing both the required data surface space, electricity and cooling costs, as well as simplifying the day-to-day operations for significant CapEx and other savings.

Continuing on the product front, we seem very well positioned with our end-to-end platform line of virtual appliances. We have strong competitive advantage in the market with our VADI architecture. First, we're a [joint] vendor that can run multiple ADC instances in every form factor and across all required market capacities, from 1 gig to 80 gig, enabling our customers to consolidate application delivery devices and run multitenant virtualized environments successfully.

Second, we lead the market with the density of ADC's platform, from 24 instances at 1-gig capacity to 256 instances in 80-gig capacity.

Third, through Radware vDirect, we are the only vendor offering application delivery [subjects] that allows our customers to automatically provision, decommission and scale application delivery services across the complete data center, with full integrations of the [fletching] system from VMware, OpenStack, VNC and so on.

A [brief point to this] is our recent partnership announcement with VMware, where Radware Alteon VA is the first virtual ADC appliance integrated with VMware's vFabric Application Director. Furthermore, our platform's [leading market and] performance in Layers 4 to 7 [PPS] and provide our customers with our on-demand licensing, virtualization, and 10-gigabit ports supporting all platforms, a complete future-proof architecture for their environment.

Lately, we released to the market two major introductions -- FastView and APM -- that we see as a major competitive advantage for us going forward. To recap, FastView is fully integrated Web performance optimization module that significantly accelerates the response time of Web portals and internal mission-critical applications.

Coupled with FastView, we also released an application performance monitoring, or APM, module, that enables users to monitor end-to-end Web application response time with the ability to drill down to the application, transaction and user locations, and compare the actual response time to the defined estimate. We have received strong positive feedback for our customers for these capabilities and believe they will expand our addressable share of wallet in enterprise and carrier data [programs].

Moving now to security, we continue to see a rapid increase in the number of attack incidents across the world and the sophistication [that these] hackers are using to undermine the availability of mission-critical infrastructures. Our Attack Mitigation System, or AMS, was built with the sole purpose of protecting our customers against any type of cyber-attack and attack vector used against them.

Our Attack Mitigation Solution is the market-leading solution that uniquely integrates line-of-service protection, intrusion prevention, network behavioral analysis, anti-scanning, Web application firewall, and [theme] for real-time protection against cyber attacks.

We have seen this past quarter continued traction for our Attack Mitigation Solution as more and more enterprises and carriers recognize that traditional security devices such as firewalls, intrusion detection systems, and antivirus cannot block the current attack vectors.

The growing need for enterprise and online businesses to defend cyber attacks also lead hosting and cloud providers to provide attack mitigation as a service. In the past quarter, we announced a major win with FireHost. FireHost offers secure usage-based hosting with enterprise-grade protection from data centers in Dallas, Phoenix, London, and Amsterdam.

FireHost relies on Radware AMS for securing its network infrastructure and for providing real-time attack protection of mission-critical systems for its clients. FireHost chose our solution to replace its existing infrastructure, as Radware AMS offers extremely rapid detection and mitigation of network attacks, including denial of service, network and application attacks, and zero-day attacks. This capability allows FireHost to provide continuous uptime to its clients, even when they are under attack from hackers.

While in the last 30 to 60 days we might see a more cautious spending environment, we believe there are several major opportunities in the market that, as I outlined, we are very well positioned for -- first, the data center consolidation and virtualization opportunity; second, the growing clout data center market; third, the need for mobile data traffic steering to accommodate strong mobile data growth; and fourth, the need to effectively mitigate cyber attacks in critical applications and data centers around the world.

In addition, we believe that the recent announcement by Cisco regarding their ACE product line will create more ADC replacement projects in the market, and we are very focused on this new market opportunity.

To summarize, today we have a leading position in the market as it relates to our product and solution offerings. We've introduced key innovations into the market with our VADI strategy, FastView and APM and our attack mitigation solutions. We have consistently grown revenues and demonstrated increased efficiency over the past several years, and we continue to forecast additional improvements in our operational results.

Before concluding, I would like to thank our customers and partners for their continued support and trust. And I would like to thank the whole Radware team for their efforts, commitment and success in growing our business.

With that, I would like to open the discussion for Q&A.

(Operator Instructions). Mark Sue, RBC Capital Markets.

Thank you. Good morning, gentlemen. If we could get a sense of how you are perceiving the macro, would you classify it as still challenging, or it actually is getting more challenging, particularly as we finish the calendar year? What are your customers saying in terms of urgency, deal sizes, and also just the need to upgrade at the near term? That would be helpful.

Good morning. Your question was more specifically or overall?

Overall. Maybe if you want to add some color on Europe and North America and Asia, that would be great.

So currently we're seeing very different market conditions. In Europe, I think the environment is challenging, but at least what we are seeing, both in carriers and large enterprises, and we are not seeing a lot of growth or momentum for our business here.

In North America, on the other hand, we see a lot of investments by both large enterprise and carriers. Those investments are very focused on creating their cost-effective environment. So we are seeing them doing consolidation projects, we are seeing them doing data center integration and virtualization projects. On the carrier side, there are certain investments that definitely cannot wait, as is the scale of the mobile traffic. So we are seeing different environments now in different markets.

Okay, that's helpful. And then if I look at your partnerships, any thoughts in terms of, now that we're into it a little bit, which one is going better, which one is below plan, and which one can actually be incremental as we finish the year, Check Point, Juniper and others?

So I don't want to relate to the others category right now. But between Check Point and Juniper, we're definitely seeing very good momentum now with Check Point. Q3 was only the first quarter of this alliance, being announced end of June. But we think this will hold up for Q4, is getting better and better, and also will do for next year. So definitely we are seeing currently a lot of momentum with Check Point.

Okay. Lastly, if I look at Cisco and I look at the potential upgrades, all your competitors are saying it's an opportunity for them. Is there a way to quantify what this means for Radware? Should we just look at market share and say it's going to be divided up among the players? Cisco, for its part, with Citrix will say they are not going to cede any market share, so just kind of tactically what you're going to do to kind of replace a competitor that's leaving the market.

I think definitely the Cisco opportunity over the calendar year or two years can be significant, given the -- not only the recent market trends, but the [fit] of the overall installed base. And I think the opportunity is focused on larger customers by nature. And I believe that our product line, and especially the VADI architecture, fits very well into what Cisco will be featuring as their main product benefit, which used to be the virtual context they had.

So I think architecture -- from an architecture point of view, I think we have a perfect solution. And now it's about reaching the customers. While Cisco will be recommending or referring customers to Citrix, I do believe that the fact that Cisco announced publicly they are going to reduce investments in the product line in core customers, we have data, a complete valuation of the product in the industry.

And being today third in market share, plus the leader in phone, I think our probability of being invited to build [take-ups] has increased, given Cisco going out. Once we are in, once we are in the second set of valuation, I think Radware is doing extremely well. So I do believe, and we are looking for, gaining more than our market share in the Cisco replacement opportunity.

In order to achieve that, obviously we are very important on the Cisco customer installed base. And we have unique capabilities in integrating with Cisco infrastructure to our Radware infrastructure, and our [pins] and channels are all equipped I think with the right tools and knowledge to [assist them with this].

All righty. That's helpful. Thank you so much, gentlemen.

Alex Henderson, Needham & Company.

Hey guys. I had a little crackle on my line when you gave the gross margin guide and the OpEx guide. Can you just give that again? And then, second, I was wondering if you could discuss the geographic percentages for us.

So maybe I'll repeat the entire guidance for the quarter. Revenue ranged between $49.5 to $50.5 million; gross margin, 82%; Operating expenses, $30 million to $30.2 million; financial income, $1.3 million; and non-GAAP EPS range between $0.45 to $0.49.

Thanks.

You asked about the split between regions this quarter. It was 32% in North America; in EMEA, 26%, in Asia-Pac, 42%.

So the growth looks like it was a little bit more skewed on a geographic basis to Asia-Pac in the quarter. Am I reading that correctly?

I think it's Asia-Pac and the US -- yes.

And within the US marketplace, can you talk a little bit about the win rates that you're seeing versus the competition when you get in -- particularly when you're going up against big IP customers, which don't virtualize, versus your virtualization-capable products in your stackable versions. It seems to me like the biggest issue for you guys really is seeing the deals in the US. Could you talk about win rates and how that might look in the marketplace, particularly in rackables?

In the US, I think the win rate is very high when we get into the competition. I think in every project metric -- I tried to discuss it in my comments -- I think we have a big advantage over the big IT stackable line of products. [What did we say] performance, [shield] transaction to second; whether it's the on-demand that a customer can buy from us a 1 gig platform, and scale would be all the way to 16 gig without the need to change platforms; whether it's our longevity commitment of five years more [in the] eight years support, versus every three change of platforms. Or, either way, like you've mentioned, that virtualization where we allow them to round multiple applications with isolations between them and guarantee that's a rate which you cannot achieve with [rapid NP].

We're adding to that now in FastView and APM. I think you know we have the very strong position, very competitive; I think it's becoming even more competitive, and our key focus is extending our reach -- channel, sales teams, and so and so, we are [in modium].

So going back to the point, if you go in and pitch against a big IP that doesn't have the ability to virtualize, because it's a lack of VM density for the vADC s -- and they come back with a VIPRION, doesn't that give you a substantial competitive edge to take advantage of? It seems to me that that would be a critical variable. How often does that conversation come up? I know VM deployments are a fairly small portion of the total, but it seems like that's a pretty good cutting-edge advantage. How often does that come up in the competitive bid?

It depends when the sales team and channel we are working against it past. Some of them will try to speak in appliance versus appliance, and try to convince the customer that consolidation, or running instant [stir] application is not needed. And we try then to compete one-to-one. Others when they see -- especially when they understand the customer has fully bought in to the architecture of application isolation and consolidation, we'll try to offer the VPN 2400 in a very steep discount.

But I think, also, versus the 2400 with a single blade, only allowing four instances -- in our low-end 5224 we can run 24 instances. So I think once we are leading the customer into the application [service and] consolidation, virtualization discussion, and there is a need for that, I think we are in an extremely good position to win the deal.

Could you tell us what percentage of your product sales were sold with VM licensing, or vADC licensing operative, as opposed to sold as conventional transactions?

I don't have that in front of me. But, currently, we are pushing only product at least with two vADCs. It's not guaranteed that the customer would use these [two on], that he sees the value in this platform. If viewed from a shipment perspective and not thinking in perspective, all our platforms are capable and shipping with two built-ins.

So you don't know what percentage actually turned it on. Do you know if the percentage of people actually turning on the license increased quarter-to-quarter, or whether there is any change in that?

We are seeing their gigabit of ADC capacity an increasing amount of licenses. So we definitely see a big increase in the density of the ADC instances, and certain amount of instances that customers are using; which means that they are using more and more, not only from a box consolidation architecture, but they are actually moving all the way to an instance [there up] -- architecture.

Could we try one more last try at it? And then I will cede the floor. Can you give us a sense of what the growth rate of licenses, given the growth rate of active licenses or some other metric that tracks the portion of vADC, some metric that we can use to track it?

We are not sharing it, but let's just say it's huge. We can find a good metric for the future (inaudible) to share with, the audience to show the traction that we have in this market. But in general, our revenues from the [generation] growth is dramatically higher than the overall company grows we would come back with a better [leading] (inaudible).

Do you think it's triple-digit, year-over-year?

In terms of amount of instances, I do. Yes.

Thank you.

Ittai Kidron, Oppenheimer.

Thank you. I'd like to thank the previous analyst for letting others ask questions as well. Roy, can you talk about Juniper and Check Point on a combined basis? Can you talk about the trajectory of that revenue in the September quarter versus June, and how do you think about it into December?

We had some increase. Check Point was really very low and didn't really start. We will see, we believe, a pickup in December, and also from the combination we believe both will be growing next year. In Juniper the numbers are more lumpy. They are dependent on carrier wins; on carrier infrastructure wins. In Check Point, it's more a transactional business, with sales for both enterprise and carriers across the world. We are seeing some -- our current information, and again it's very early from the Check Point relationship given a sales cycle of 6 to 9 months. The first real deals will start to close [some there] and more in Q1. But from what we are seeing in Check Point, I think that there is a lot of growth there; and also our ability for us to leverage that for ADC sales in the future.

Got you. Going back to the regional splits, can you give us, also, the split between enterprise and service provider? And also, Roy, when you look at your service provider business right now, can you talk about it from a feature standpoint? What is the one feature that you are seeing the biggest traction with, with carriers? And what are others that you think can come along over time?

(inaudible) split -- enterprise was 75%, and carrier and service provider was 25% this quarter. Okay, turning to the features of applications, we are seeing a lot of traction on the cloud business as they are using cloud, and then they meet many instances with ADC. The part of new cloud buildout, we are seeing a lot of traction there. Secondly -- and I've mentioned some of (inaudible) in my remarks -- is the mobile traffic steering into the growth in daytime requirements for optimization; and third, with the attack mitigation, carriers are becoming more and more worried. We've seen the latest attack on AT&T this past quarter that brought down its unit service. So we are seeing carriers deploying attack mitigation systems [loads] for protecting own infrastructure, as well as starting to create services, security services for their customers. Those, I would say, are the three big areas we are seeing traction today.

Very good. Good luck, guys. And I'll cede the floor to others. Thanks.

Joseph Wolf, Barclays.

Hi. Thanks. Just one more detail question on the revenue mix. Could you give us maybe small but -- just the cloud business and how you see that shaking up, either as a percentages sales or a growth rate in terms of the opportunity right now, given the -- and with which products how you're competing there. And then when you look at the customer activity and economic environment, could you go through the differences, perhaps, between the AGC and the attack mitigation sides of the business, as you look at the fourth quarter in particular, given the macro weakness?

So I'll answer the second question about the split, and then let me answer the revenue breakdown. And regarding the split between (inaudible) and the Institute one poll, we see both markets growing nicely. And we do have some slight differences from quarter to quarter, but overall I think both resemble the growth rates of the Company. The security business is more tied to the number and intensity of attacks around the world. Definitely when there is a big attack wave, like the one that hit the US banking industry several weeks ago, we are seeing very high live interest project budget for this type of solution.

In other areas, we don't experience a lot of attacks, that's left is advertising lest they are not in our type of solution. So that's in general. And I don't think I think of ADC and security, especially when we speak about ADC in the specific market opportunities I've mentioned --like cloud being down, mobile traffic steering, data center consolidation -- I do believe that those product trends are critical even in economic downturn.

And I would say there are agency opportunities like a general upgrade of an existing appliance supporting one share point application that obviously may be deferred. Our focus as a company is on [dual]opportunities and markets, and has been for quite some time -- that we see, A, we have a very large advantage; and B, the investment is critical. So if necessary we will be replacing a competitor -- given A, the need; and B, our competitive advantage.

Let's talk the split. In this way we don't share it with the market.

How about any directional, or some sort of color on that opportunity?

Of course, this is up every quarter -- more opportunities; but, again, at this stage we don't share too much.

Maybe just I'll end by going back to Roy's comments. If you look at your wins right now, how much of it is your own business, and how much of it do you think is where you're replacing other companies and taking market share, if you look at the win rates?

I think, today, large enterprises and carriers, they all have an ADC vendor. Different (inaudible) security vendor. In ADC that vendor might not be strategic, and it might be -- for example, in a carrier, that ADC vendor is controlling the mobile side, and now they are building the cloud environment, which is new. But from a customer perspective, at least in the larger -- the large or high end of the market, there is no greenfield opportunities. So most of them are penetration into a competitive environment. We are doing this, again, by a very focused approach to specific market opportunities.

In security, the attack mitigation space, or denial of service protection, is a new market. None of the existing security tools are able to protect. And that's why you're seeing all these attacks being very successful. I think it's another proof point with us, is the only OEM relationship with Check Point. Obviously, Check Point is a very broad network security offering, from intrusion prevention to firewalls, to VPN and so on. And still, they saw the need to augment that with our solution. So in attack mitigation, most of the opportunities are greenfield as well; you know, the customer has established security vendors.

Thank you.

Jess Lubert, Wells Fargo.

Thank you for taking my question. A couple questions -- can you talk about linearity in the quarter, and perhaps help us understand if there was a change in visibility towards the end of the period, and maybe when you started to see some weakness?

That (inaudible) of the quarter was 30% in the first month; 20% and the second month; and in September, was 50%. The ability -- there was no real change. The only point I can -- would like to highlight on the call is that [you or we were] expecting until the very last minute of the quarter, better results. And still we were not able to -- so we really saw only Europe issues in closing and [outflow]. Our team was very optimistic and some of these deals can be -- [they left], and were not able to close.

And where there any big deals that you thought would close that didn't close, or any metrics surrounding big deals? Some of your competitors suggested there were fewer big deals this quarter versus others. And if there were deals that slipped, do they slip into Q4? Or do you think they are a little bit further out on the horizon?

We didn't see any specific issue with big deals or some small deals. In fact, some of the wins that I've mentioned were significant -- over $1 million orders, and we get others as well. We did see something specific to large deals. And so we saw Europe, at least, a mix of deals. And you know, when deals are slipping, some are closing very quickly, and some are pushed back [30]. So I think we are in the same behavior here.

And then final question from me, with respect to Cisco, can you talk about what you're doing to make sure the Cisco base is aware of your solutions, your trade-in program? And maybe walk through how you're planning to build brand awareness, talk about your hiring plan. Some of your competitors are hiring fairly aggressively. They're going after the same opportunity. And then, maybe you can talk a little bit about how you're planning to balance the need to invest versus grow, I think that would be helpful. It does seem like you are backing away from your prior goal of exiting the year at 23% operating margins.

So in terms of the Cisco opportunity, there is several ways of doing that and we are trying to [probe the gate] a multichannel approach. Of course, with our sales team across the world, you're being invited to watch to the customers that we know, the large ones; that we know that there is a large installed base of 8 products. Using our channel -- and some of our channels were combined Cisco and value channels, so through them. And we think we have good access to where they sold Cisco 8, or where they know they lost Cisco 8 business.

And third, we are doing marketing to contain events that are targeting this environment; so -- and all the regular tools to be sold. In terms of hiring, and we are focusing our hiring where we are seeing a lot of success. And we are adding around-the-world carrier teams. We are adding more capability, especially in the US, and [color] to cause the low markets, so more sales teams that are targeting the regular enterprise and [liened] accounts, and so on.

In terms of balancing the investment versus growth, I think we've done a relatively good job in this aspect over several years, and we plan to continue to do so. We are not seeing a step function of investments that needs to be done in order to support growth. It's more a continued approach, relative to business that finds new investment, both in R&D but of course a lot in sales and marketing, to support the future growth and so on; and by doing that, expanding the operational margins of the Company.

Very good. Thanks, guys.

Rohit Chopra, Wedbush.

Thanks very much. I'm going to ask you three questions. One, can you give us a status update on IBM, and how that's progressing after a couple quarters of them pushing out peer systems? Can you also talk, Roy, about average deal sizes? About a year ago, you mentioned that average deal sizes had moved from the 80,000 range to about a 100-something range, low-100s -- maybe where that is today. And then there has been some talk about competition on this call, especially with Cisco. But could you talk a little bit about some of the others out there? If you're seeing any desperation or any aggressive pricing, maybe at the lower end, that's impacting the overall market? And I'll leave it there.

Can you repeat your first question, I didn't hear it well.

The last question just on the competitive environment, Roy -- just, are you seeing any pricing at the mid- and low-end? Any aggression by some of the smaller vendors out there?

Sorry, I was asking for the first question.

Oh, the first one. Just wanted to get a status update on IBM.

Okay. On IBM, I don't have anything new to update. We have the alliance from the fuel system side, and that's [leaking] the channel. And customers -- I think, overall, whole IBM relationship is progressing well, and in multiple programs. But I don't have anything specific currently to offer on the call.

In regards to average deal size, it did move up, but I think it's relatively flat. We're not seeing it going up or down in the recent quarters, between the low, as I take an average in the last three quarters or so, it's been below 100 in [EBIT]. Regarding pricing, we don't see a lot of price pressure, real price pressure. Of course in every deal that you become competitive and you are [tendering], there are some discounts. But if you look at our gross margin, I think on our old form, some of our large competitors' gross margins, those are pretty solid. And it's a combination of some reduced pricing may be on the bill, net [some of] the balance, I would call it, offset by more and more capabilities and licenses that we are seeing customers buy. So I don't think there's a major pressure on price, even in this environment.

Thanks, Roy.

(Operator Instructions). Alex Henderson, Needham & Company.

Hey, guys. So glad everybody had plenty of time to ask questions. Just wanted to ask one more question on the channel build. Obviously a big part of the deal with Check Point is your ability to go in to the VARs that they have been using, which is one of the better VAR channels out there, and get an introduction. Can you talk a little bit about your initial response, as you've gone out to talk to VARs through that introduction, along with the DDoS protector, and what their receptivity is to pushing the ADC product line?

It's very early on in the cycle. First, we are doing the field meetings with Check Point sales team and channel managers. And then we are deciding with them what would be the right approach for a [dock] channel, or certain channels, and then the [process] VARs. We also switched our focused to make these channels successful, selling the Check Point [virus] protector. And then they gain confidence, and they also see the Radware distribution, the Radware technology, and trying to upsell that in to the ADC.

It's very early in the process, but we've started, of course, the field engagements with Check Point, and slowly they're introducing us to the channels. I think you will see more activity once those channels have started to complete their third sales cycles, with the DDoS protector; not before.

One last question along the same lines -- can you give us the break between ADC and security, and what the relative growth rates were?

Usually we don't break it, again, between lines. But this is the same as we discussed sometime this call; like 20% to 25%, which was the security.

Thank you.

(Operator Instructions). I'm showing no further questions at this time. I would like to turn the conference back over to management for any closing remarks

I would like to thank everybody for joining us today, and have a great day. Thank you.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, and have a wonderful day.