Good day, ladies and gentlemen and thank you for standing by. And welcome to the Fortinet Q3 2011 Earnings Announcement Conference Call. Currently, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions for questions will be given at that time. (Operator Instructions) As a reminder, this conference may be recorded. And now, I will turn the call over to Ken Goldman. Sir, the floor is yours. Ken Goldman – Chief Financial Officer: Good afternoon and thank you all for joining us in this conference call to discuss Fortinet’s financial and operating results for the third quarter of 2011. Joining me today are Ken Xie, Founder, President, and CEO of Fortinet; and Michelle Spolver, Vice President of Corporate Communications. In terms of structure of the call, I will begin with a view of our operating results before I turn the call over to Ken to provide additional perspective of the performance of our business. I will then conclude with some thoughts on outlook for the fourth quarter fiscal 2011. We will open our fiscal 2011 before we open up for questions. As a reminder today we are holding two calls. Following this call, we will hold a second conference call to provide an opportunity for financial analysts to ask more detailed financial questions. And by the way I would make a comment all are welcomed to join our call. Second call will begin at 03:30 PM Pacific and will also be webcast from our Investor Relations website and is accessible as detailed in the earnings release. Let me also read the disclaimer Safe Harbor statement. Please note some of the comments we make today are forward-looking statements, including those regarding the financial guidance for fourth quarter, fiscal 2011 and fiscal 2012 market opportunities, introduction of…

Thank you, sir. (Operator Instructions) Our first question in queue was Philip Rueppel with Wells Fargo. Please go ahead. Philip Rueppel – Wells Fargo: Great, thanks very much. Just curious about little more granularity on the rebound in Europe or EMEA in particular, I mean you had mentioned that Middle East have been an issue in the past or did you see the rebound both in billings and revenue due to just serve stable macro environment due to better execution or some of the big deals or the pent-up demand, it didn’t close last quarter, thanks.

And our overall perspective is just better execution all the way through in terms of work with the pipeline closely deals in the timeline that we had expected, I mean is still opportunities you mentioned Middle East we’re still working to, we think there is more improvement made there. We’ve done a lot in terms of hiring in several countries including the UK. So, there is more work to be done. So, we think with the stable point. I would add to the company to grow, I mean clearly our goal that’s what I’m trying to provide guidance. But our goal the company is to grow well over 20%, only way we can do that is to have from the ability’s point of view you may have also grow either in the high teens or 20% because we do expect some of the other areas we have relatively lowest share than more opportunities for larger growth. So, well we made progress, there is still more to be done. But I don’t think it’s more in particular in Europe as suppose to do a better managing the business throughout the quarter and particularly in September. Philip Rueppel – Wells Fargo: Okay. And then just one quick one on sort of the guidance for Q4, you in the high end suggests on a revenue basis that it sort of flattish sequentially. Are you thinking any – are you pointing to any issues that you see about slowing in any regions or anything like that they would preclude you from servicing normal seasonality or yearend budget flush or is it just too early to tell, thanks.

Well, (indiscernible) anything negative at all actually the reality is in Q3, we had a very favorable and I said it in Q2 and it’s not always going to happen. But we had a very favorable product mix. So, in terms of the billing, we had a good percentage of the billing they wanted to basically bundle products. And in terms of that percentage, we had a number of products that didn’t had services initially with them sometimes in people buy non-Fortinet products or approximately used more as buy well is that we were able to recognize a greater amount of those revenues in Q3. And that’s always a little bit hard to predict and so with reasonable caution I’m trying to make sure we don’t get ahead of our sales for Q4 because that’s just a higher number to predict. In terms of the percentage of billing, they go to products versus services and as you noted I do expect from a higher percentage of our billings in Q4 to be at the renewal nature versus product nature. Philip Rueppel – Wells Fargo: Okay, great, thanks very much.

Thank you. Our next question in queue is Michael Turits with Raymond James. Your line is now open. Please go ahead. Michael Turits – Raymond James: Hey guys, one of the question on the guide, first fillings guide and the point it looks like it’s around 20%, which is a deceleration. So on any thoughts there and then also it seemed to like the deferred revenue grew a lot slower again on the long-term or the short-term. I was just wondering how long what’s going on in terms of the trend seems to a shorter term likes, which I seen what’s driving that and what kind of impact and might have in billings or cash were going to next year.

Yeah, I guess maybe repeat your first question, but on the second question the sales there a little bit is how often do we do multi-year deals. And so that we don’t just to be very clear, we don’t provide real incentives to do multiyear deals, sometimes customer and customers wanted to do because they want to lock in the budgets and expenses. But we don’t provide overall real incentive to do that so. So, therefore a launch and deferred that we want to do multiyear deals in our long-term deferred growth is much and that can move around a little bit, but that’s the real reason. I would also say as we are able to recognize more of our billings upfront. Over time, those numbers will attract little closes. So, you’ll see revenue and billing exactly we’re closed to each other than this past year. That’s what I make is a sort of same thing I said a little while ago, we clearly internally target the numbers hired and then we would over time, then we would guide, we are trying to gain shares, very important for us to gain shares, but I don’t feel it’s prudent to provide those numbers guidance, because there is a lot of moving parts of this model. Michael Turits – Raymond James: Right. Yeah, my other question Ken was just on the guide for next quarter in terms of billings, which at the midpoint looks like it’s around 20% growth, so it’s a bit of a deceleration, so any thoughts on that why we would see that?

Yeah, we look that we want to be cognizant of the environment that we still feel is little bit uncertain out there. So, we are looking at that. Honestly, we have a number of as I said before shortages. I think we are concerned of the timing of that and our abilities, how much will cover all of that this quarter. I get in some respect now than on the other respect is a lousy prob now, because we are missing opportunities. So, that’s a little bit and that’s been sort of in the medium end product lines and lot of the newer products as well as part of my thinking there relates to the ability to recover if you will from some product shortages that did impact our last quarter. Michael Turits – Raymond James: Okay, great. Good luck Ken. Thanks very much.

Thank you.

Thank you, sir. Our next question is Jayson Noland with Robert W. Baird. Please go ahead. Jayson Noland – Robert W. Baird: Thank you and congratulations on the quarter gentlemen. I wanted to ask about inventory shortages first, Ken were those driven by supply constraints or just surprisingly high levels of demand?

Yeah, Ken would tell me it’s my fault, but we are trying to balance availability of product versus not having backlog, but having backlog is really anathema in this business because when you have a channels based business, when you have backlog it means you don’t supply your customers your channel partners on time and you give your competitors an opportunity. So, it’s not good. So, the answer to your specific question is primarily the demand for certain of our products was well above not only our forecast, but the trend here that we have. So, the data was quite a bit above any expectations we would have had either by looking at what the forecast were looking at history. And so I am not going to ascribe any blame to our vendors versus our ability to forecast and then seeing some demand, and sometimes EMEA came in toward the end of the quarter where we would able to react quick enough to bring in product to meet that. Jayson Noland – Robert W. Baird: You don’t expect any supply constraints in the Q4?

Well, I am not sure. I made that comment a little while ago as we still today have some supply constraints and going out in the third quarter we will see. Jayson Noland – Robert W. Baird: Okay. Follow-up…

Being a little cautious on my billings guidance. Jayson Noland – Robert W. Baird: Okay. Follow-up question on new products, 50, 140 came out for the carrier market 300C and others for corporate, is there still more to come, it sounds like in Q4 and as the margin profile of these products are roughly in line with corporate average today?

Definitely (indiscernible) and I have recorded a late release of field product to just this quarter, we try to get the low end as we leverage our seasonal ship we feel has a huge advantage over competitors, because we integrate a multiple function chip together, hence, the performance you would solve for a firewall company can only depend on the CPU and also the middle range also we have a much better price performance compared to a competitor. So, that’s also ahead of our expectation, because in the past if you look and we are marketing in the high end in the carrier space, but even some of competitor more label us into the SMB or some low-end, but actually our percentage, our low end actually is smaller than our high end. So, that’s where with the new product we hope we can penetrate all these SMBs some low end market, which dominant back kind of different competitor compared to the high-end. So, I think the new product will keep come in the next few quarters. Jayson Noland – Robert W. Baird: No, margin profile is in line with the corporate average?

Yes. Jayson Noland – Robert W. Baird: Okay, thank you gentlemen.

Thank you, sir. Our next questionnaire in queue is Keith Weiss with Morgan Stanley. Your line is now open. Please go ahead.

Hi, Keith. Keith Weiss – Morgan Stanley: How are you doing?

Good. Keith Weiss – Morgan Stanley: Very nice quarter. I just wanted to go back to the billings growth versus revenue growth plus one more time just to make sure that were clear on that. This is the second quarter in the row where you are talking about revenue growth in mid 30s, with mid 20s billings growth and because product revenue are so strong in the quarter, this is thus from the outside like there is something of a services or subscription attach as you’re going on that’s causing that separation. I just wanted to make sure that we are of why billing process has been sustaining – why revenue growth is sustaining so far both billings growth. And what’s the sort of the catalysts for this due to comeback together and to the comeback together more so in line with the billings growth or with the revenue growth?

I see the (indiscernible) put in question right, let’s kind I mean there is a variety with this happen revenue this year, one of which is yeah we do have the benefit as I said about $5 million of revenue that would not have been recognized in the ‘08. So, the revenue earlier little bit of pickup in revenue because the new revenue rows. We did have – we are seeing more non-FortiGate products in our billings. So that’s helping the revenue components because as you look at I think you said before we have a little bit great percentage of our billings is going to highly related during the services and then within that we have a higher related percentage going into with the non-bundle hardware, which does not had service. Because I’m trying to benefit customer using at more as a (indiscernible) firewall you may not you won’t have the subscription base that you have otherwise. So, there are some things there then the other point is year-over-year, you may happen to have a very strong multiyear renewals last year in Q3, we didn’t have that this year. So, let me go forward and the talk as we think about clearly we are the simple math you can’t keep on forever having revenue growth higher in billings and so, we are very focused on having going to do in faster, my own sense is it will take us into ‘12 to do that. We will focus based on better supply the products that I talked about before, still improving your ticket is grow somewhat higher and we had before and also increasing a global footprint across the board. So, the pricing that we are doing that I think we get the 30% growth, but we certainly right to get higher growth and have a number the on the 20 somewhere in terms of both those numbers. Have settle out make a long story show here, I’m not trying to guide to that right now and we’ll be proven if you will in our guidance for ’12 and hopefully we can continue to improve upon that as we get more data points during the year. Keith Weiss – Morgan Stanley: Excellent, if I could tell in one point for clarity, the patents of a $2.6 million that you gave from (indiscernible). What is exactly what will made that a revenue event versus something in other income or is that like. And just was that included in the 118 billings numbers is that part of that number?

Yeah, what exactly while is the sale so therefore is a revenue item and that’s both how we handle internally and gets reviewed externally. So now we did that and this is the one off we may do some deals from some time-to-time both in terms of selling competence as well as frankly buying competence and it’s not going be at every quarter phenomena, but we were expect to buy sometimes overtime in to their case, it will hit our expenses from an amortization point of view. Keith Weiss – Morgan Stanley: Excellent, thank you guys.

Thank you, sir. Our next questioner in queue is Walter Pritchard with Citi. Please go ahead. Your lines now open. Walter Pritchard – Citi: Hi Ken, just a couple of questions on the numbers, just on product gross margins looks like those take down a bit quarter-to-quarter and I know you said not very too much into that, but it was part of the biggest thing we’ve seen from one core to the next and just want to get any detail on that.

I think it went down about two percentage points from 63 to 61 and again I look at that number is anything over 60 is consistent with our thinking. It will be affect a function of the million of mix between the high and medium low end, but sometimes the mix within those ranges. So, it’s time to little bit noise in terms of our ability to forecast and see would actually results between 61, 63. If it goes below 60, the absolute revenue will be concerned because I am very focused on and slightly over time, we also give a number of more than 65%, 67% because of that how we can get a overall gross margins up. I think we’ve always done a couple of percentage points are not mistaken Q2 to Q3. Walter Pritchard – Citi: Got it. And then just on related on cash taxes, you talked a little about next year. I’m just wondering cash taxes next year any change in what you see next year versus what you saw this year.

Yeah, great, yes, I’d say – let’s say that the – we did a lot of review of that and I would say we expect to in the assumptions I gave is that we expect cash taxes to be very well in Q4 and as we seen today, our cash taxes again some people asking questions on this. But in terms of we actually pay for taxes in cash will be approximately the same in ’12 as there is in ’11 and that’s primarily as we get a better handle on our stock option deductions and what’s been achieve so far this year and we have going forward that’s our best feel at this point. So, I think our cash taxes will be basically in the single-digit millions. Walter Pritchard – Citi: And then for 10 digits on the new products, how should we think about the ramp-up of some of those – I know some of those are higher end and may take a while, but how should we think about impact in Q4 versus is that really impact next year that we see those.

Probably more impacting first half on next year because once the new product introduced you to take two quarter ramp-up and I think it probably will see the benefit next year. Walter Pritchard – Citi: Okay, great thanks a lot.

Thank you, sir. Our next question in queue is Shaul Eyal with Oppenheimer. Please go ahead. Shaul Eyal – Oppenheimer: Thank you, operator. Good afternoon guys, good quarter. Couple of quick questions in mind, the inventory shortage that you talked about, I think you mentioned that for the shortage the revenue would have been even higher. Is that short of kind of baked into the fourth quarter assumptions?

You’re right, I think I said as you rate about revenue although the real impact was also on billings because we couldn’t bill for surprise that we didn’t have. And we’ve made assumptions as to the timing of solving the critical at the inventory shortages and so forth would be little cautious because the problem we had sometimes is to extent it’s low end products and your channel doesn’t have it. The chance you could move that business to a competitor so, that’s the hard for us to gaze right now. So, we try to be prudent to be little cautious that the trend we want to use in terms of our forecast for both billings and revenues in Q4. Shaul Eyal – Oppenheimer: And also some of the component that lead-time could be a few mine some on the event to me take a longer time to bring that out.

Yeah, we tend to mentioned there are some components with a venue or too in some of the products we used it’s nothing negative on then, but they do have longer lead times that were used to and so that more affects our ability to upside some numbers and then make our forecast. Shaul Eyal – Oppenheimer: In the small kind of the chip related or the spot related or...

Chip related. Shaul Eyal – Oppenheimer: Got it, that’s fair. Ken, would you be filled the pattern to some ask?

Yeah, I’m looking on my from the general counsel here and you’re saying to me we are not announce that I think (indiscernible) so, we’re getting answer. Shaul Eyal – Oppenheimer: And just kind of one final on capitalization any new thinking on that end?

Capitalization meaning. Shaul Eyal – Oppenheimer: Okay, how do you use the $500 million so…

Yeah, there is no actually fair question. We haven’t really fact anything new in that as to we certainly consider does it make sense to buy back stock, we had not made decisions around that. We do look at from time-to-time both some small and little bit bigger than small acquisitions if you will, still have not pulled the quarter many of that as well. So for right now, it will build up and that’s all I do really say, but we are mindful of it’s certainly a basically a zero percentage net income, it’s not earning us very much. Shaul Eyal – Oppenheimer: Thank you very much, good quarter.

Yeah, a new response yet to. Shaul Eyal – Oppenheimer: Thank you.

Thank you sir. Our next question in queue is Aaron Schwartz with Jefferies. Your line is now open. Please go ahead. Aaron Schwartz – Jefferies: Good afternoon. Just had a follow-up question for some of the other ones earlier, but in terms of the – it seems like the less away revenue with deferral rate in the period. Is that just more a function of scheduled renewals that you had in the period or you actually seeing a customer preference for shorter term deals?

It’s more the former, it is, and that we have to go, because we got 50 questions this last quarter. We did a lot of work and study on this and there is a seasonality to our renewals that does recur more so in Q4. And so the renewal opportunity in Q4 was quite a bit higher than Q3. And as I pointed out before we did have several renewals in Europe last quarter in Q3 which for multi-years and we didn’t – so, therefore, you couldn’t renew that this past quarter. And then I can’t really had much more than what I said before as you look at the mix of billings in terms of prices, services, and then within that how much is the bundled hardware, how much of that goes to hardware, how much of that is bundled versus does come to services if you will, because the nation of products we ship. In terms of long-term, I think it goes back before I think sometimes there are certain customers like to lock it in. There are other times when frankly we don’t provide and we actually – people asked me this why would people do long-term, because we don’t provide favorable discounts or anything else. And so sometimes we get those deals, sometimes we don’t in the last few quarters customers have been more willing to, more desirous if you will just to do one year deals. Aaron Schwartz – Jefferies: Okay. So, that shift maybe done one-time deals and I am just trying to get a sense I guess for the seasonality into Q4, but do you get the sense or maybe don’t have better enough data, but a shift to the shorter term deal is sort of macro related?

I don’t think that’s macro right now, I actually don’t think. I think it’s more specific the nature of our business and what customers looking to do from time-to-time, I don’t really think it’s macro-related. Aaron Schwartz – Jefferies: Okay, terrific. And then second question for me if I could and I apologize you provided this earlier, but in terms of the larger transaction that you talked on the quarter was that a 10% customer in the quarter in terms of recognized revenue?

Now, I am glad you asked. The nice thing about that customer is it’s in the millions, but not a big millions if you will, because I think you remember I said in the call, so now it’s not even close to 10% customer. And it will be deployed over several quarters into ‘12. Aaron Schwartz – Jefferies: Okay. And that will just be billed in each of the quarters?

Yes. And so we only bill and ship as they deploy, you remember, I talked about 8,000 stores, so they deployed for us, 8,000 stores, we only deploy and ship to basically a series of dates over that period time. Aaron Schwartz – Jefferies: Okay terrific. Thanks for taking my questions.

So, therefore it’s not really in backlog, it’s not in deferred, it’s just – it will be billed and shipped as a contract that gets billed and shipped each quarter.

Thank you, sir. Our next questionnaire in queue is Jonathan Ruykhaver with Morgan Keegan. Please go ahead. Your line is now open. Jonathan Ruykhaver – Morgan Keegan: Hi guys good afternoon. And Ken, can you disclose the percentage of non-FortiGate products and product revenue and how that number might compare to last quarter and year ago?

I don’t have that percentage as yet. We’ll look at it whether we may have for the Q. The number is growing and we make some progress still not, but still good opportunity for us, the best way of saying it. And again net profit as well as the extent that customers as we play (indiscernible) in the pure firewall business you will get some customers that therefore don’t need the subscription part of the service. Jonathan Ruykhaver – Morgan Keegan: Right. That’s what I am trying to get a feel for how much of that revenue while performance is due strictly to pure firewall and other is non- FortiGate products…

But I am trying to prefer not to actually provide that number at this point. Jonathan Ruykhaver – Morgan Keegan: The sense as you go into large enterprise where throughput might be the primary decision or factor decision-making that, that continues to be the case?

I think it’s a little bit as how we market ourselves as we go into some of the various enterprise financial services opportunities, where it maybe more of a firewall opportunity and the UTM opportunity. And so it’s in some respect I would argue with opening up another market for us than we have really focused on the past. Ken may have a different perspective but that’s the way I would sort of look at it.

The only thing also I would add Jonathan is that a lot of deals that we have talked about in the last couple of quarters and I think one this quarter were very high performance and low latencies, key drivers tend to be firewall deals. Jonathan Ruykhaver – Morgan Keegan: Right, okay. Sorry Ken.

I call Michelle is driving, because FortiGate also being used as a firewall, which pretty much, no need followed my subscription, that’s probably the majority of some additional product side. The non-FortiGate is very small is probably 3% more, because the FortiGate is due prior the supermajority of a growth and the non-FortiGate does sometimes sell together with FortiGate, but it’s lower small percentage. Jonathan Ruykhaver – Morgan Keegan: Right, okay. That’s a good explanation, I guess intended to follow on you mentioned financial services here suggested there is some opportunities in that vertical with improve in concepts. Can you just update from what are the opportunities might be?

Yeah, I think financial service we see some good growth and because we build a team about nine months ago and starting kind of a engage a lot of a deal and we see a largest growth potential there. The other new market we see really the education market so, you must grew that said is already we’re in a few major university and also we’re starting getting a lot of university. So, this quarter we’re starting to building team dedicate for the education market so, what differ in education market or the customer tend to be lot technical. They do a lot of test in the evaluation himself as much less influenced by the marketing some other opinion, but some marketing firm. So that’s what we see the huge benefit because our product basically technically lower strong both on the performance and now on the security side. But it probably do a less marketing compared with amount of firm. So, we found that education markets really at the pretty strong technical background (indiscernible) testing the product and you see the real benefit so, that’s we see potential huge growing in this education market for us. Jonathan Ruykhaver – Morgan Keegan: Okay, great. Thanks guys.

Thank you.

Thank you, yep.

Thank you, sir. The next question in queue is Sterling Auty with JPMorgan. Please go ahead. Your line is now open. Sterling Auty – JPMorgan: Yeah, would you quantify the impact of the shortages of products billings has been greater than the impact, the benefit of the sale of times or less than.

The 240 or 241.5 right now is timing, I’m obviously guess that specific I think I said several million and I think I’ll leave it at several million it’s and by the way it’s always it’s a little hard to know exactly, I mean we know what we didn’t shift, but we never quite know whether you never at zero backlog either so, I would just say several million. Sterling Auty – JPMorgan: Okay. And then on the improvement in EMEA, I think historically talked about some of the countries that have made up the bigger contribution, you gave some examples like UK and what our fields, but how would you described the mix of revenue with EMEA in terms of where you are seeing the strength or where is may be from further areas of improvement.

Now as I look at the I think I talked about we did quite well in France let me just sit down here and take a look at some of these numbers here, yeah, we start doing pretty well and in areas like surprisingly Italy, we did show improvement in the UK this past quarter as well, but then as some other regions in the Middle East we still have a ways to go and then some other regions I would say were flattish quarter-to-quarter in Europe, but overall we saw improvement and we are extremely focused in more improvement in Q4. Sterling Auty – JPMorgan: Okay. And then last question for Ken Xie the Check Point is not true refresh the product line, they are very high end is playing some very high throughput numbers. When you look at some of the big hosts that you have in the quarter and so the real world testing, how would you kind of backup the performance of the leading vendors out there when it comes to just kind of careful powers in the overall UTM and the UTM of permutation.

I think so far in we don’t quite the Check Point in the service provider, we do see in the enterprise area, we get service provider they need a special box to be at (indiscernible) and also across the new execution, which need do you have a lot of high reliability and also we don’t have there. And so that’s need a more special higher design also we shift space compared with a blade basis, which is more in the server market of software base. So, I think we see trip on probably sell more appliance compared before and but I have to say in the high end we do see more Cisco, Juniper and still not much in Check Point yet. But on another side, Cisco and Juniper the lack of the function whether on the higher in the antivirus of institutional function compared to we have. So, that’s pretty much the high-end that we see today. Still a lot of service provider and we took had some vertical market like enterprise and the finance service, which we see more Check Point there. Sterling Auty – JPMorgan: Got it. Thanks guys.

Thank you.

Thank you. Our next question in queue comes from Kiera Kilkowski with Bank of America Merrill Lynch. Your line is now open. Please go ahead.

Hello, this is (indiscernible) Kiera’s line. I have just one question about revenue breakdown by regions. Because when I look at the sequential growth, which is about the $13 million roughly, $10 million come from the Americas if my numbers are right? And there is a $3 million in Asia Pacific. So, if you focused on the Americas, I’m wondering if you can on top of this if you can related this $3.5 million you refer to the beginning, which region was it allocated to. And second, what happen to federal, I think Ken, you went through it very quickly to beginning I just couldn’t write it fast enough. What happened to federal we’ve seen very strong orders, I shouldn’t say federal, I should say government. We have seen very strong orders from other companies this quarter and I’m wondering if it explains some of this $10 million sequential increase. Thanks.

Yeah, you mentioned the much with $3.5 million you’re referring to.

I think you said at the beginning maybe I’m wrong with the number, the beginning you said there is a one-time, sorry for the patency that you sold.

Yeah, that was 2.6.

2.6, I apologise, yes.

2.6 yeah and the net debt obviously was all Americas yeah, I don’t think there is anything else unique in terms of the various breakdowns of revenue, I think as meant our dollars accordingly happy to see the growth in all three regions on from year-over-year revenue per y was quite comparable if you will and relative percentage. Interesting now in the federal part of the government we still work to do. We still not which we’re making progress in the other hand there wasn’t great amount of revenue, we didn’t have a big revenue quarter of those put in federal this past quarter in Q3. We had a number of problems there that didn’t get funded in Q3 and therefore we’re hopeful that will come in Q4, but we’ll see.

So the growth in the Americas if you excluded $2.6 million the growth in the Americas is coming up. Can you identify any specific segments or is it across the Board?

Well, it’s actually consistent with let me go back to some data I showed before. It was consistent with some of the data I said in Q3 relative to the percentage of our billings by each segment and so in this case service provider was about 28% of our total business that we did have a good service provider a quarter in the Q3. Government was a 11%, which is I said before of the year it is 15 so little less than we’ve done for the year and connect with our government not just federal. The area that I mentioned was high was retail, which was 14% versus 10 for the year. And I commented going to one particularly deal, but a number of other deals in retail that we did see a billions in revenue in the Americas.

Got it. Second and last question, the difference between bookings and revenues, if I go back year-over-year, quarter-over-quarter or even your guidance, there is quite a good difference between bookings and revenues, is this particular quarter in September, there was only $2 million of difference in the question, but then there was $2.6 million also in the mix or maybe if I remove that maybe $4.6 million I’m not sure how we goes into the booking side. Can you just speak about the difference you’ve mentioned it briefly on one of the answers, but why is it different only in 3Q, but not in 2Q or 4Q or for the year or last year. What is so…

Well, again this comes back to the point I made earlier as we are recognizing more of the actually and in our number of crises, we call our ability as we actually don’t going to us is bookings in the different number for us which we don’t really disclosed. It’s pretty close to billings, but the number I suppose billings, which means is really what we billed out primarily to our partners. And then revenue is was what we can recognize, but we have had a narrowing between those two numbers for the last couple of quarters probably because the higher mix of products in the billings, which I described before therefore is upfront, probably because the ratable deferred is going down and we work that ratable off, and again because product gives the new revenue roles. Remember the comment I made, one of the last comments I made was we expected that number to be $15 million to $20 million increase in deferred in Q4 as we have more renewals coming up to be renewed in Q4 from a tiny point of view than we had in Q3. We are finding more of our customers creating coterminous, so they are making the deals to renew sort of at the end of the year if you will. So therefore, we have a lot more renewal opportunities in Q4, which will be billings for services, but won’t have any revenue to them. So, it’s better to see a bigger difference between billings and revenues. I have mentioned earlier, $15 million to $20 million in Q4 vis-à-vis, the very few million we had in Q3.

The other point, the backlog, the few million dollar backlog will be in the booking will not be in the buildings, so that also contributed a little bit mix since the number to our close.

Got it. Thank you, guys.

Any questions?

Yes, sir. Our next question in queue is Jonathan Ho with William Blair. Your line is now open. Please go ahead. Jonathan Ho – William Blair: Hey guys. Great quarter. In your preliminary outlook for 2012, you talked a little bit about your expectations for the security spending environment, can you give us a little bit more of a sense of what you are hearing from various CIOs and other folks that you are talking to for 2012?

I’ll let Ken answer that, but I was giving expectations for our own business primarily as I see it’s not necessary for the industry at large as I didn’t give a number industry large other than standing quantitatively it looks good.

I think it’s certainly very few years the enterprise and it will be refreshed, replaced whatever the network security what they have today. So, we do see the trend starting few years ago that integrated solution whether you call UTM or called next generation firewall which is the same function or the same feature kind of starting to take over as the new trend there. So, I think we are continuing to see this new integrated solution get into that enterprise in the next few years. That’s where we introduce a few new products with few what will be customer benefit from the multifunction, the price performance with this UTM or integrated solution. So, I think even the whole economy environment maybe slowdown a little bit, but the integrated solution tend to be more cost savings. So, the customer will benefit from that. The other thing like I mentioned is really the performance study kind of more and more important, especially in the vehicle cloud data center environment, and the past, the service provider which offer all these kind of added service. That also will help to drive the growth a lot. One thing we also keep in trying to improve is really the SMB, we see now because especially in the emerging new markets, there is still kind of try to deploy more internet to the SMB to the biz zone in there. So, we see the smaller and user SMB side also have a pretty quick growing, especially in the new emerging market. So, I think overall we feel probably the network security space probably will be grow faster than the overall anti-security and then the integrated solution definitely will be grow faster than the overall network security growing. So, I think that the whole IT security probably…

I think it’s a kind of different strategy for U.S. and also for international wise. The U.S. I think we do have all the major distributor walk with us, but on honest that, we also need to working with a most specialized system integrator. So that’s probably not quite focus in the past, because this specialist integrator they are worked us certain vertical market like we mentioned what in the finance surveys in education and healthcare. So we definitely will keep enhance to working with the system integrator and a few fund of distributor. On the international wide, I think there is few a lot of a green space that up in the area when you keeping expanding ourselves. At the same time, certain larger country overseas we’re all thinking try to specialize the team focusing sort of vertical market compared to right now we put it might all focus by country by region like we did in U.S. a few years ago. So, but the U.S. in starting like two, three years ago, we’re starting more focus in some vertical markets that we see the bigger deal with CSM, some huge rent because once we focus in certain vertical market which tend to be bigger deal, but also take a longer time to cross the deal. So that’s the sales starting kind of a more focus to get a bigger deal down, I think we are keeping expanding in the U.S. in certain vertical market especially the system integrator product and international also starting try to vertical our focus certain vertical market also. Jonathan Ho – William Blair: Great, thank you.

Thank you.

Thank you, sir. Our next questioner in queue is Scott Zeller with Needham & Company. Your line is open. Please go ahead. Scott Zeller – Needham & Company: Thank you. Regarding the main region, how you call correctly there was enough during the past or may be develop some of the newer regions are developing regions of the Europe. And that effort was difficult previously. Was there a refocusing of resources towards perhaps where you’ve been successful previously? Can you tell us that?

I’d say refocusing we are having folks for example in Russia, which is not that area that we have invested in so, we are as we think about Q4 in our planning for 12, we are going to try to expand some of the lesser developed while merging areas of greater Europe area if you will. And so that’s what we’re really doing and so we have as one of these why we want to continue to add sales coverage. Scott Zeller – Needham & Company: Good. Did the choices of where do you invest during the quarter help us to rebound in EMEA or was it just as you said earlier better execution?

No, I think its better execution and I think I wouldn’t call that product contribution in Q3 now. Scott Zeller – Needham & Company: Okay, thank you.

Thank you, sir. Next question in queue is Dan Cummins with ThinkEquity. Please go ahead. Your line is now open. Dan Cummins – ThinkEquity: Thanks. I’ll do one here and hope to for after in a mission. Can you give us some sense of whether the success that you had with…

It wouldn’t be any platform for (intermission). Dan Cummins – ThinkEquity: Okay. Can you give us a sense whether this you think the success that you had with your large deals in the quarter to what extent could that have impacted product gross margin and what you’re think about product gross margin for the 4Q and for 2012, thanks.

Well, I’ll say just why as some of the products that we will sell into retail may have a little bit lower gross margin then our high end product. So as you will get sometimes the mix shift between some of the categories of customers and in terms of kind of products that they will that they order that will have some impact on our product gross margin. Dan Cummins – ThinkEquity: And then have just the forward outlook are maybe the long term guidance on product gross margin?

I don’t have anything more I did make a comment earlier as you recall that historically we have been somewhere between 60% and 65%. I think for us to increase our gross margin beyond the 74ish range we have been operating, we would like to see that gross margin longer term we get up above that number. But, we have not set a clear guidance if you will. Yes, the balance that with right now we are much more focused on market share and so to the extent that and so we work hard, if your question we work hard to get products down as quickly as we can innovate quickly as we can and we are not as focused yet on working every last dollar of product costs that we could and would help gross margin as we try. Again, our focus is really bringing out the newest and best products as opposed to bringing out the last few sense in them that may become more important as times goes on, but we don’t see that right now focus for either this year or next year. Dan Cummins – ThinkEquity: Okay, thank you.

Thank you. Our next questionnaire in queue is Rohit Chopra with Wedbush. Please go ahead your line is now open. Rohit Chopra – Wedbush: Thanks. Just want to ask a couple of questions. Yeah, just needed some clarity on the inventory issue, are you saying that the deals that you weren’t able to ship are those loss deals Ken?

Right now, those are back to their backlog. What you worry about is this to extent you don’t have inventory and a customer comes into the channel looking for X, Y, Z product and they can’t get it from you, do they go somewhere else. And so that sort of hidden backlog if you will. Rohit Chopra – Wedbush: Okay good. I just want to get sense of that. And then can I come back to the gross margin issue on product, there was also some discounts which you guys didn’t talk about this quarter, there is some trade up discounts, there is some competitive trade-in programs. When you do that kind of thing like on the trade-in program and you had some 40% or 45% discount. Do they have to renew their services or does they already have the existing service contract and then they buy new piece of hardware and is that a contributor to the fact that you don’t have the subscription revenue?

I don’t know, I’m not sure we think of this. The only time we give that I could think of special discounts is we have excess inventory or too much inventory in particular products. We may do some things to (indiscernible) channel to sell those products, but that would be on all their mature products as opposed to anything that’s common to us. Rohit Chopra – Wedbush: Okay. Well, the ones I am referring to are in the quarter, there were some trade-up programs for 38% off or 40% off on some bundling or something like that?

I am not quite aware in the company why are we doing all of this probably some of the channel partner maybe they do certain trade up. Rohit Chopra – Wedbush: Okay.

But in the company wide, I think we do believe the value of the product. So, we tend to sink in the price as a good value and always good price.

Yeah, I mean, as Ken says I mean the channel to extent that they are we don’t have to find end user customers at the extent that they want to do some special arrangement, that’s certainly their progress. Rohit Chopra – Wedbush: Okay. And then my last question is just you mentioned that on some of the deals where you weren’t able to close, they are more in the mid range and that’s where you ran out of product, but doesn’t that also when you start closing these deals, don’t they also put pressure on the gross margins, product gross margin? Is that right?

I don’t think now, because those, it doesn’t affect you at all, because we didn’t shift those products. And I would say those products generally have product comparable gross margins that not a very, very lowest of end products not a very highest and either. So, I don’t but so we didn’t, so we didn’t ship but I think the margins and our gross margins of those products are probably comparable to our overall average. Rohit Chopra – Wedbush: Okay. And then there is nothing to do with people trading down in a difficult environment?

Nothing new whatsoever. Rohit Chopra – Wedbush: Okay. Thank you.

Thank you, sir. Next questioner in queue is Erik Suppiger with JMP Securities. Your line is now open. Please go ahead. Erik Suppiger – JMP Securities: Good afternoon, congratulations. Just two quick ones on the product shortages, what are the lead times for the products that you are showed at this point? And also what was the linearity it sounds like you had good DSO but you’re saying that you have a very strong demand at the end of the quarter for some of these products. So what was linearity in the quarter rate?

Linearity is actually pretty normal for our Q3 in terms of you have a decent kind of business enjoy I said frankly it really gets back to work in September, so you do ship more in September. But we did have we were able to do a good job of overall collecting and we’re finding our both we look at good job and I think our partners do a good job of paying a trust about lead times, that’s very dull over and I can’t give you a number that would help you I don’t think because I mean at this way as we increased our orders last quarter we expect those to come in early this quarter. And lead times can be, it can be anywhere from four day weeks to frankly month-and-month because of certain components. So it’s varies all over the map in terms of lead times. The other times when we may put orders for Q4 which we try to move into, we try to pull into Q3 or Q1 trying for the Q4. All of things you do with some success if you order products new then the lead times they do very depending upon where you are in having where your vendors have the components, and therefore the lead time will be few weeks. Do you ship by see by air changes and lot of dynamic that goes into lead time? Erik Suppiger – JMP Securities: Okay, very good. Thank you.

(indiscernible) answer in the after the intimation.

Thank you. We do have time for one final questioner. Our final question for today’s event comes from Alan Weinfeld with David Securities. Your line is now open, please go ahead. Alan Weinfeld – David Securities: Congrats on that comeback guys.

Yeah, that will give me a stock growth. Alan Weinfeld – David Securities: Well, of course I think it came out at 21, but I was curious just all this talk about these growth applications, firewalls, next generation firewalls application, awareness. What do you think these types of things from see Palo Alto or some other companies like that are going to offer, are going to mean to the market compared to the things that you’re doing?

I think if you look on the overall network security over during this for the last 20 years with three company basically there is a different technology with the developing in this area actually fund early days more try to stop sudden make that topic to feel turned the head there and then toward the network transmission the net which go to the layer three, layer four and then the so called application controls is more go to the packet layer just book on the both header and count on another packet that’s more prior to the inclusion space. And then to the – go to the highest day seven to the application layer and also need assembly the all content that’s what others in across the multiple package compared to a just other called that the packet inspection and then all the stream way which only looking inside the packet not across the pack and not are some of the wholesale. So that’s different layer technology, I think the application layer whatever is lost in new so it’s being the last were 10 years ago when we start the company we called the up secures let me trying to address the application layer and then we found out ready to secure it since you need to go to the four content layer to assembly the packet go to the four content who take out a loss and take it other since. And the margin may call it different and also when some time the market trying to what’s hired up all time to make come up new time. But on the technology side down, the function is that the when the customer take the buyer to the testing is the same since really the trend we see is really…

I don’t know if you could answer this, because I am sure you have so many different technologies on top of your appliance, but the customers that you sold to, did you have the most interest in your e-mail security or anti-virus or web security intrusion prevention or what was besides the core ASIC fired the fastest firewall in the universe and the block every threat out there the software content on top, but you possibly name what was hot in driving all the billings during the quarter.

I think the firewall got to layer-4, layer-5 with the basic building block to add additional security function on top of it which including the intrusion, the anti-virus, the web security, and also the span out since. That’s where the performance of fire was quite important and that’s when I build my previous company and that’s when try to more focus on the firewall performance, but after you save the firewall which only can control the connection, but they cannot only see the content, we see the real sins really in the content side. That’s where the intrusion anti-virus and also the web security study come in more important. And I have to say, if you look on how this intrusion probably more go to packet layer (indiscernible) most of it, but anti-virus usually need to go the four content layer cross multiple-packet without assembly. That’s the most difficult partner. I think we are still the only major vendor can address these in the high-speed environment and also with acceleration of the ASIC (indiscernible). The anti-spam we tend to do a little bit platform that’s where the FortiMail come in and also we have the basic function covering the Forti also says that depend on the customer, the vertical market, difficult to say like which the function the try most ourselves, but I have to say probably 80% of customer buy the box, they are able multiple function. So that’s pretty much that the drive, because integrated function we feel is not needed and because today’s environments no longer depend on the single technology, a single function can defend it really has to be joint force has to be the joint force to when the function can defend this whether called the (indiscernible) kind of make it more easy to manage and also lower the cost, because security since I have to say probably generality issue of the bridge is really how people manage it and even we provide a best tool, but if we make complicated manage across multiple vendors, sometimes there is still a issue there. So, that’s the best I can give is really more than 80% is really they have multiple function. Alan Weinfeld – David Securities: Thank you very much. Appreciate it.

Thanks.

Thank you, sir. And at this time, I am showing no additional questionnaires in the queue. I’d like to turn the program go over to management for any closing remarks. Ken Goldman – Chief Financial Officer: I think we didn’t get much of the information here, so I think, well we bet on about 15 to 20 minutes, so standby for those who have any last questions you haven’t got chance to ask and we’ll be back on about 15, 20 minutes. By now, thank you all for coming and listening to our call. Appreciate it.

Thank you, sir. Ladies and gentlemen, this does conclude today’s program. Thank you for your participation and have a wonderful day.