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Check Point Software Reports Record Financial Results for the Second Quarter 2009

-- Revenue: $223.6 Million Representing 12 Percent Growth Year Over Year

REDWOOD CITY, CA -- (Marketwire) -- 07/28/09 -- Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced record financial results for the second quarter ended June 30, 2009.

"I'm pleased to report record quarterly results. Our quarterly results came in at the high-end of our projections with 12 percent year over year growth in revenues and non-GAAP earnings per share. Revenue growth came from all regions and represented our highest quarterly revenues to date," said Gil Shwed, Chairman and Chief Executive Officer at Check Point. "The synergies associated with the successful acquisition of Nokia's Security Appliance business contributed to these record results and enabled us to achieve non-GAAP operating margin of 52 percent."

Financial Highlights for the Second Quarter of 2009

  • Total Revenues: $223.6 million, an increase of 12 percent, compared to $199.6 million in the second quarter of 2008, and sequential quarterly growth of 15 percent.
  • GAAP Operating Income: $86.7 million, up from $83.6 million a year ago. The GAAP operating income in the second quarter of 2009 included amortization of intangible assets in the amount of $4.6 million and restructuring charges of $9.0 million related to the Nokia security business acquisition.
  • Non-GAAP(1) operating income: $116.4 million, an increase of 15 percent compared to $100.9 million a year ago. Non-GAAP operating margin was 52 percent, compared to 51 percent a year ago.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $75.6 million compared to $79.2 million in the second quarter of 2008. Earnings per share were $0.36 for both periods. The GAAP net income in the second quarter of 2009 included amortization of intangible assets in the amount of $4.6 million ($0.02 per diluted share) and restructuring charges of $9.0 million ($0.04 per diluted share) related to the Nokia security business acquisition. Net of taxes these charges totaled $11.9 million ($0.06 per diluted share).
  • Non-GAAP(1) Net Income and Earnings per Diluted Share: Non-GAAP net income was $100.9 million, compared to $92.7 million in the second quarter of 2008 and EPS was $0.48, an increase of 12 percent, compared to $0.43 in the second quarter of 2008.
  • Deferred Revenues: As of June 30, 2009, we had deferred revenue of $362.1 million, which represented an increase of $82.9 million, or 30 percent compared to deferred revenues as of June 30, 2008.
  • Cash Flow: Cash flow from operations was $112.7 million, an increase of 37 percent, compared to $82.6 million in the second quarter of 2008. We had $1.63 billion in cash and investments as of June 30, 2009.
  • Share Repurchase Program: During the second quarter of 2009, we repurchased 2.2 million shares at a total cost of $50.0 million.

(1) For information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of Non-GAAP to GAAP Financial Information."

Business Highlights

Mr. Shwed continued, "During the quarter we expanded our product portfolio with the introduction of our Power-1 11000 high end appliance series, the SMART-1 management appliances and the acquisition of the IP series appliance business from Nokia. We also added over 300 people as part of the acquisition, primarily in sales and marketing, R&D and technical services. As a result, we have increased our investment in future product development and have provided further resources to support our customers and partners even given today's economy."

During the second quarter of 2009 we expanded its security hardware appliance portfolio, giving customers more options to deploy our leading security software. In April, we completed the acquisition of the Nokia Security Appliance Business and delivered the new Check Point IP appliance line that utilizes our revolutionary new software blade architecture. This allows prior Nokia appliance customers the ability to take advantage of integrated Intrusion Prevention System (IPS) for the first time, and was followed by the introduction of the Power-1 11000 series appliances designed for high performance environments, based on our revolutionary Software Blade architecture.

Also in the second quarter, we introduced the SMART-1 appliances, representing the next step in our efforts to simplify security management for enterprises while providing the highest level of security. SMART-1 utilizes the benefits of Check Point's Software Blade architecture and provides flexibility and extensibility to the network administrator by unifying network, IPS and endpoint security policy management.

Additionally, in July during our Check Point Experience in the Asia Pacific region we introduced our latest management blade, SmartWorkFlow, which enables customers to streamline security operations and achieve higher levels of compliance. We also announced our latest endpoint security solution, Endpoint Security R72, our latest version of the industry's only single agent for endpoint security that utilizes our patent-pending WebCheck(TM) browser virtualization security technology to protect enterprise PCs against Web-based threats. Furthermore, to ease the end-user experience, Endpoint Security R72 OneCheck single authentication unlocks all endpoint security subsystems and VPN Auto-Connect simplifies remote access.

Mr. Shwed concluded: "I am proud of the record results we achieved this quarter. During my meetings with customers I encountered a great deal of enthusiasm for our strategy that was primarily focused on our software blade architecture and expanded appliance portfolio. I'd like to thank our partners and customers for their continued support of Check Point's business."

Conference Call and Webcast Information

Check Point will host a conference call with the investment community on July 28, 2009 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at http://www.checkpoint.com/ir. A replay of the conference call will be available through August 12, 2009 at the company's website http://www.checkpoint.com/ir or by telephone at +1 201.612.7415, passcode # 327789, account # 215.

About Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd. (www.checkpoint.com), worldwide leader in securing the Internet, is the only vendor to deliver Total Security for networks, data and endpoints, unified under a single management framework. Check Point provides customers uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology. Today, Check Point continues to innovate with the development of the Software Blade architecture. The dynamic Software Blade architecture delivers secure, flexible and simple solutions that can be fully customized to meet the exact security needs of any organization or environment. Check Point customers include tens of thousands of businesses and organizations of all sizes including all Fortune 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft.

©2003 - 2009 Check Point Software Technologies Ltd. All rights reserved.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Check Point uses non-GAAP measures of net income, operating income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123R, amortization of acquired intangible assets, restructuring-related charges and the related tax affects. Check Point's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Check Point's on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such has determined that it is important to provide this information to investors.

Safe Harbor Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, our beliefs and expectations regarding our product introductions and enhancements. Because these statements pertain to future events they are subject to various risks and uncertainties, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to: general market conditions in Check Point's industry; economic and political uncertainties; the financial and business conditions affecting our customers; the impact of political changes and weaknesses in various regions of the world, including hostilities or acts of terrorism in Israel, where Check Point's international headquarters are based; inclusion of network security functionality in third-party hardware or system software; any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; rapid technological advances and changes in customer requirements to which Check Point is unable to respond expeditiously, if at all; a shift in demand for products such as Check Point's; factors affecting third parties with which Check Point has formed business alliances; and the timely availability and customer acceptance of Check Point's new and existing products. The forward-looking statements contained in this press release are subject to other factors and risks, including those discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2008, which is on file with the Securities and Exchange Commission. The statements made in this press release are based on Check Point's expectations or beliefs as of the date hereof, and Check Point assumes no obligation to update information concerning its expectations or beliefs.

                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
              CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                 (In thousands, except per share amounts)


                                  Three Months Ended    Six Months Ended
                                --------------------  --------------------
                                     June 30,               June 30,
                                --------------------  --------------------
                                   2009       2008      2009       2008
                                ---------  ---------  ---------  ---------
                               (unaudited)(unaudited)(unaudited)(unaudited)
Revenues:
 Products and licenses         $   82,801  $  84,973  $ 154,545  $ 162,352
 Software updates, maintenance
  and services                    140,840    114,633    264,108    228,851
                                ---------  ---------  ---------  ---------
Total revenues                    223,641    199,606    418,653    391,203
                                ---------  ---------  ---------  ---------

Operating expenses:
 Cost of products and licenses     16,837      9,693     26,463     18,686
 Cost of software updates,
  maintenance and services         10,775      7,101     16,604     13,851
 Amortization of technology         7,230      5,800     13,030     12,954
                                ---------  ---------  ---------  ---------
Total cost of revenues             34,842     22,594     56,097     45,491

 Research and development          23,468     23,824     43,255     46,569
 Selling and marketing             56,939     56,588    104,011    110,248
 General and administrative        12,680     13,005     27,297     26,571
 Restructuring                      9,034          -      9,034          -
                                ---------  ---------  ---------  ---------
Total operating expenses          136,963    116,011    239,694    228,879
                                ---------  ---------  ---------  ---------

Operating income                   86,678     83,595    178,959    162,324
Financial income, net               8,130      7,949     16,543     20,312
                                ---------  ---------  ---------  ---------
Income before income taxes         94,808     91,544    195,502    182,636
Taxes on income                    19,205     12,371     38,978     25,205
                                ---------  ---------  ---------  ---------
Net income                      $  75,603  $  79,173  $ 156,524  $ 157,431
                                =========  =========  =========  =========

Earnings per share (basic)      $    0.36  $    0.37  $    0.75  $    0.72
                                =========  =========  =========  =========
Number of shares used in
 computing earnings per share
 (basic)                          209,521    215,030    209,835    217,568
                                =========  =========  =========  =========

Earnings per share (diluted)    $    0.36  $    0.36  $    0.74  $    0.71
                                =========  =========  =========  =========
Number of shares used in
 computing earnings per share
 (diluted)                        211,615    217,951    211,847    220,192
                                =========  =========  =========  =========



                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
       RECONCILIATION OF SELCTED GAAP MEASURES TO NON GAAP MEASURES
                 (In thousands, except per share amounts)

                                --------------------  --------------------
                                 Three Months Ended     Six Months Ended
                                --------------------  --------------------
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
                               (unaudited)(unaudited)(unaudited)(unaudited)

GAAP operating income           $  86,678  $  83,595  $ 178,959  $ 162,324
Stock-based compensation (1)        7,271      8,385     15,074     17,456
Amortization of intangible
 assets (2)                        13,453      8,893     22,346     19,196
Restructuring (3)                   9,034          -      9,034          -
                                ---------  ---------  ---------  ---------
Non-GAAP operating income       $ 116,436  $ 100,873  $ 225,413  $ 198,976
                                =========  =========  =========  =========

GAAP net income                 $  75,603  $  79,173  $ 156,524  $ 157,431
Stock-based compensation (1)        7,271      8,385     15,074     17,456
Amortization of intangible
 assets (2)                        13,453      8,893     22,346     19,196
Restructuring (3)                   9,034          -      9,034          -
Taxes on stock-based
 compensation, amortization of
 intangible assets and
 restructuring (4)                 (4,499)    (3,753)    (6,622)    (8,017)
                                ---------  ---------  ---------  ---------
Non-GAAP net income             $ 100,862  $  92,698  $ 196,356  $ 186,066
                                =========  =========  =========  =========

GAAP Earnings per share
 (diluted)                      $    0.36  $    0.36  $    0.74  $    0.71
Stock-based compensation (1)         0.03       0.04       0.07       0.08
Amortization of intangible
 assets (2)                          0.07       0.05       0.11       0.10
Restructuring (3)                    0.04          -       0.04          -
Taxes on stock-based
 compensation, amortization of
 intangible assets and
 restructuring (4)                  (0.02)     (0.02)     (0.03)     (0.04)
                                ---------  ---------  ---------  ---------
Non-GAAP Earnings per share
 (diluted)                      $    0.48  $    0.43  $    0.93  $    0.85
                                =========  =========  =========  =========

Number of shares used in
 computing Non-GAAP earnings
 per share (diluted)              211,615    217,951    211,847    220,192
                                =========  =========  =========  =========

(1) Stock-based compensation:
  Cost of products and
   licenses                     $      13  $      15  $      21  $      27
  Cost of software updates,
   maintenance and services           107        194        300        377
  Research and development          1,515      1,204      2,773      2,301
  Selling and marketing               976      1,926      2,716      4,166
  General and administrative        4,660      5,046      9,264     10,585
                                ---------  ---------  ---------  ---------
                                    7,271      8,385     15,074     17,456
                                ---------  ---------  ---------  ---------

(2) Amortization of intangible
 assets:
  Cost of products and
   licenses                         7,230      5,800     13,030     12,954
  Selling and marketing             6,223      3,093      9,316      6,242
                                ---------  ---------  ---------  ---------
                                   13,453      8,893     22,346     19,196
                                ---------  ---------  ---------  ---------

(3) Restructuring                   9,034          -      9,034          -
                                ---------  ---------  ---------  ---------

(4) Taxes on stock-based
 compensation, amortization of
 intangible assets and
 restructuring                     (4,499)    (3,753)    (6,622)    (8,017)
                                ---------  ---------  ---------  ---------
Total, net                      $  25,259  $  13,525  $  39,832  $  28,635
                                =========  =========  =========  =========



                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                CONDENSED CONSOLIDATED BALANCE SHEET DATA
                              (In thousands)
                                  ASSETS


                                                     June 30,  December 31,
                                                       2009        2008
                                                    ----------- -----------
                                                    (unaudited) (audited)
Current assets:
Cash and cash equivalents                           $   714,094 $   543,190
Marketable securities and deposits                      307,291     371,197
Trade receivables, net                                  187,185     251,771
Other current assets                                     39,222      28,372
                                                    ----------- -----------
Total current assets                                  1,247,792   1,194,530
                                                    ----------- -----------

Long-term assets:
Marketable securities                                   608,795     529,445
Property, plant and equipment, net                       41,104      40,248
Severance pay fund                                        5,862       5,817
Deferred income taxes, net                               17,353      19,003
Intangible assets, net                                  137,749     123,151
Goodwill                                                708,458     664,602
Other assets                                             22,293      16,820
                                                    ----------- -----------
Total long-term assets                                1,541,614   1,399,086
                                                    ----------- -----------

Total assets                                        $ 2,789,406 $ 2,593,616
                                                    =========== ===========



                              LIABILITIES AND
                           SHAREHOLDERS' EQUITY


Current liabilities:
Short-term deferred revenues                    $    329,985  $    289,998
Trade payables and other accrued liabilities         141,472       112,556
                                                ------------  ------------
Total current liabilities                            471,457       402,554
                                                ------------  ------------

Long-term deferred revenues                           32,106        40,799
Income tax accrual                                   109,737       101,230
Deferred tax liability, net                           17,605        22,225
Accrued severance pay                                 10,638        10,943
                                                ------------  ------------

Total liabilities                                    641,543       577,751
                                                ------------  ------------

Shareholders' equity:
Share capital                                            774           774
Additional paid-in capital                           513,862       503,408
Treasury shares at cost                           (1,151,758)   (1,105,250)

Accumulated other comprehensive income  (loss)         7,717        (4,673)
Retained earnings                                  2,777,268     2,621,606
                                                ------------  ------------
Total shareholders' equity                         2,147,863     2,015,865
                                                ------------  ------------
Total liabilities and shareholders' equity      $  2,789,406  $  2,593,616
                                                ============  ============

Total cash and cash equivalents and marketable
 securities                                     $  1,630,180  $  1,443,832
                                                ============  ============



                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                   SELECTED CONSOLIDATED CASH FLOW DATA
                              (In thousands)


                                Three Months Ended     Six Months Ended
                               --------------------- ---------------------
                                      June 30,             June 30,
                               --------------------- ---------------------
                                  2009       2008       2009      2008
                               ---------- ---------- ---------- ----------
                              (unaudited)(unaudited) (unaudited)(unaudited)
Cash flow from operating
 activities:
Net income                     $   75,603 $   79,173 $  156,524 $  157,431
Adjustments to reconcile
 net income to net cash
 provided by operating
 activities:
Depreciation and amortization
 of property, plant and
 equipment                          2,223      2,145      5,035      4,293
Decrease (increase) in trade
 and other receivables, net         4,393    (11,301)    85,100     36,867

Increase in deferred revenues,
 trade payables and other
 accrued liabilities               16,159      1,213      9,275      4,544
Realized loss on marketable
 securities                             -          -      1,896          -
Stock-based
 compensation                       7,271      8,385     15,074     17,456

Amortization of
 intangible assets                 13,453      8,893     22,346     19,196
Excess tax benefit from
 stock-based compensation          (2,043)    (2,681)    (4,514)    (6,029)
Deferred income taxes, net         (4,352)    (3,268)    (6,242)    (8,323)
                               ---------- ---------- ---------- ----------
Net cash provided by
 operating activities             112,707     82,559    284,494    225,435
                               ---------- ---------- ---------- ----------

Cash flow from investing
 activities:
Cash paid in conjunction with
 the acquisition of Protect
 Data, net                              -     (9,042)         -     (9,042)
Cash paid in conjunction with
 the acquisition of Nokia         (57,540)         -    (57,540)         -
Investment in property, plant
 and equipment                     (1,207)    (2,591)    (2,601)    (4,526)
                               ---------- ---------- ---------- ----------
Net cash used in investing
 activities                       (58,747)   (11,633)   (60,141)   (13,568)
                               ---------- ---------- ---------- ----------

Cash flow from financing
 activities:
Proceeds from issuance of
 shares upon exercise of
 options                           18,514      9,304     42,303     15,772
Purchase of treasury shares       (49,998)   (50,000)  (102,286)  (123,000)
Excess tax benefit from
 stock-based compensation           2,043      2,681      4,514      6,029
                               ---------- ---------- ---------- ----------
Net cash used in financing
 activities                       (29,441)   (38,015)   (55,469)  (101,199)
                               ---------- ---------- ---------- ----------

Unrealized gain (loss) on
 marketable securities, net        14,842     (8,844)    17,464     (9,404)
                               ---------- ---------- ---------- ----------

Increase in cash and
 cash equivalents,
 deposits and marketable
 securities                        39,361     24,067    186,348    101,264

Cash and cash equivalents,
 deposits and marketable
 securities at the beginning
 of the period                  1,590,819  1,318,706  1,443,832  1,241,509
                               ---------- ---------- ---------- ----------

Cash and cash equivalents,
 deposits and marketable
 securities at the end of
 the period                    $1,630,180 $1,342,773 $1,630,180 $1,342,773
                               ========== ========== ========== ==========

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