Ladies and gentlemen thank you for standing by, and welcome to the Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode, and later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over to your host, President and CEO, Mr. Roy Zisapel. Please go ahead, sir.

Good morning everyone, and welcome to Radware's fourth quarter 2007 Earnings Call. Joining me today are Chris McCleary, our Executive Chairman and Meir Moshe, our Chief Financial Officer. Meir will start the call by reviewing the financial results, and afterwards I'll discuss the business highlights of the fourth quarter. After my comments we will open the discussion for the question and answer session. Meir?

Thank you Roy, and welcome everyone to our fourth quarter conference call. First, I would like to read you the Safe Harbor statement. During the course of this conference call, we 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 products, the timing and amount of orders, and other risks detailed from time-to-time in Radware's filings. We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's last filing of Form 20-F, which was filed June, 2007. Now ladies and gentlemen for the financials: We are very pleased to report record revenues for the quarter and for the year 2007. Moreover, we are very proud to report continued improvement in our American businesses. Revenues for the fourth quarter increased sequentially 6% and 16% year-over-year, to a record of $24.4 million. The revenues for 2007 increased by 9%, year-over-year, to a record of $88.6 million. The deferred revenues for the end of the year increased to $18.4 million, an increase of $2.7 million in 2007. The non-GAAP net loss this quarter was $0.1 million or breakeven diluted earnings per share, an improvement from a loss of $1.2 million or $0.06 in the third quarter The non-GAAP net loss for 2007 was $4.9 million or $0.25, compared to a profit of $3.8 million or $0.19 in 2006. Gross margin for the fourth quarter remained at about 81%, the same as in the previous quarters of 2007 and in 2006. Non-GAAP operating expenses in the fourth quarter totaled to $21.9 million. As a reminder, $1.5 million per quarter of the operating expenses are a result of investment in Business-Smart Networking, which includes the operating expenses in connection with the Covelight acquisition. The DSOs for the quarter were 65 days, an improvement from 69 days last quarter. Inventory at the end of the year was $5.4 million. Our cash position including long-term deposits and marketable securities is approximately $155 million at the end of the year and we have no debt. The head count for this quarter was 593 employees. Shareholders' equity remained at about $177 million. Guidance: The first quarter of the year is usually effected by seasonality, so therefore we prefer not to give guidance. However, we feel confident with the street expectations for the quarter. As you can see, ladies and gentlemen, in the fourth quarter revenues increased to a record of $24.4 million, and deferred revenues increased. We have maintained our high gross margins in both our bottom line; and together with our new product announcements, we look forward to having higher sales and better results next year. And now I would like to turn the call over to Roy.

Thank you, Meir. As Meir mentioned, our Q4 results will set another quarter record revenues for the company. Our overall execution improved this quarter resulting in record bookings and revenue numbers. We were pleased with the continuous improvement in our Americas business and the ongoing strength of our European and Asia-Pacific business. We continue to see strong customer activity. Coupled with the new product introductions we made in the last several months, specifically in the announcement of the new product AppXML and SIP Director, and our next generation platforms the OnDemand Switch as announced today, we believe that we are well-positioned for a record year in 2008. During the quarter, we won significant sales in both carrier and enterprise accounts including the Petrobras, Telecom Italia, eBay, Hong Kong Stock Exchange, [Busal] and Coles Myers, Fujitsu Siemens, CTU University, and many others. As evident from the customer list, we are doing very well in the high-end of the market. We had strong growth in the fourth quarter sales of our high-end Applications Switch 4 and Applications Switch 5 platforms. We believe that our next generation platform further expands our competitive advantages in the large enterprise and carrier markets. In order to better serve our customers, we announced this month our new Solutions Lab. This lab is providing a cost-effective, quick and easy way for partners and customers to experience hands-on the deployment of Radware application delivery and security solutions, combined with the mission critical applications. The lab currently has over 20 customer setups running, and more than 10 alliance partners, including IBM, Microsoft, BEA, Oracle and etcetera. This month we won another award for our products. Internet Telephony magazine named AppDirector, the Product of the Year. The magazine named Radware, AppDirector 6000 for its best voice and video-over IP in collaboration…

(Operator Instructions). And our first question is from the line of Stanley Kovler of Merrill Lynch. Please go ahead.

Thank you. My first question is related to cash flow and interest income. Meir, if you could please provide us with some of the cash flow statistics for the quarter, depreciation in CapEx; that would be great. And I had a question about the increase in the financial income; $2.3 million this quarter. The cash balance was roughly flat, so I am wondering if you can go over where the increase happened. Thank you.

Okay. This quarter we actually burned $600,000, mainly due to the increase of our CapEx. This is part of our plan for introducing the new product, and the new lab that Roy mentioned, also, this is part of our investment. As for the financials - first of all, our cash policy is our investment of our cash. This is based on our policy limiting only to higher rated investment, and doesn’t allow investment in creative investment. The financial income generated in the last quarter speaks for itself. That means, that we invested the money very conservatively, all through the year, and this quarter we enjoyed the result of higher rates based on those investments. I believe going forward, we can expect the same financial revenues that we had before like $1.7 million for third quarter.

And I had a follow-up, just on the outlook. You talked about the outlook that your expectations for the quarter are in line with the street. Can you just also remind us specifically on the operating expenses what typically happens in the first quarter, given that you are in the ramp up phase with certain products and also trends in North America?

Actually, the expense in the first quarter should remain the same as in the fourth quarter. We have to take into consideration maybe slight increase due to salary review that we make for part of our international teams in this quarter, that's all.

Great. And as you always do can you give us the breakdown of revenue by geography? And that's it from me. Thank you.

Yeah. The sales contributed by the US team this quarter is 32%, just to remind you, it's up from 30% a quarter ago, and international of course this is the rest 68%, 31% is EMEA, 37% is APAC.

Thank you.

Our next question comes from the line of Ittai Kidron of Oppenheimer. Please go ahead.

Hi guys, congratulations on good results. Roy, maybe you can talk a little bit about the new products, very aggressive launch here. What does it do to your sales and marketing effort, how do you push all of those things at the same time? What does it require you to do in order to handle that introduction? And what is the timeframe that you expect each and every one of those products to have meaningful contribution to your top line?

Okay, so definitely we have been preparing this launch for several months now, and so, we already started in middle of Q4 with our worldwide partner meetings, both for APAC and EMEA. That was done in Tel Aviv and Vietnam respectively. And over there we've launched the solutions for our AppXML and APM support, so we've already trained our partners and the sales force are backing them. Beginning of this month, we had our global kick-off in Tel Aviv, where we've trained all of our field reps, on all the product introductions. From a marketing point of view, obviously we launched a new website that just went up on 15th, and I invite all the participants on the call to visit it. We believe it’s a big upgrade from what we had before, with specific explanation about our target markets and solutions. Going forward, we are launching a marketing campaign across the world to push the OnDemand Switches, the Full Spectrum Security, as well as our other solutions. Concerning timelines, OnDemand Switches are available today and we believe we will start to recognize sales in Q1 orbiting a very low amount. The AppXML is shipping from the end of Q4 and again we believe we will start seeing some revenues this quarter. But, as mentioned in our previous calls, typical sales cycle in our industry is six months. The Application Performance Monitoring module is available, in both our DefensePro and newly introduced OnDemand Switches and as mentioned according to those platforms general availability we will recognize sales. In SIP Director, the solution for the SIP market, we are now entering a testing phase with some large carriers and software vendors in this collaboration space. And we believe that the general availability will be at the beginning of Q3 for the overall market.

Of all these products, which one are you most bullish on near term that can make an impact versus long-term?

I believe the OnDemand Switches should make a very, very meaningful impact on the industry, as well as the Application Performance Monitoring. The SIP Director and the AppXML are targeting more of the next generation software deployments and as a result I believe that’s a good place to partner, cooperate, OEM with larger vendors that need these type of solutions in order to launch their applications.

Very good and can you give us and update on Covelight? How has been the traction over there? Is the monitoring module all about Covelight? I am just little bit confused here. What kind of traction are you seeing with customers on that front?

Okay, Covelight as mentioned before is part of our business-smart network strategy, so the Covelight piece, the Inflight product is an integral part that monitors the business event activity of the applications and forwards them to a backend application. This backend application that can be our customer experience monitoring application, a fraud detection application, a compliance application, or any business intelligence engine line DBCO, Oracle and etcetera, that the customer might use can then speak directly to our switches, for example the new OnDemand Switches that we've announced today, and enforce a difference business behavior. So the business-smart network concept is built on the Inflight product, together with all of our existing switches. As I've mentioned in my call, we are cooperating with other vendors, backend application vendors to push the business-smart network idea forward. This quarter we announced an alliance with Norkom for anti-fraud, anti-money laundering solution, a quarter ago with ArcSight for compliance and we believe future announcements of partnership will arise around them. We are seeing very good traction in the financial segment for the Inflight product. We have several customers that are already running in production for both anti-fraud compliance and user monitoring applicationa. And we expect if you just see for example, what happened in Societe Generale, with the internal fraud case. And so, we believe that the business-smart network is a critical component in next-generation financial services and government deployments.

But do you feel then more comfortable now that this business can be contributing to the bottom line by the end of the year, as you've guided to originally when acquired a company if I remember correctly.

We believe so.

Okay. Good luck guys.

Thank you.

Our next question comes from the line of Irit Jakoby of Susquehanna. Please go ahead.

Hi, thank you. Can you talk more specifically about what you are seeing in the carrier markets? Are you seeing more activity in North America, or is this an APAC market, and how soon do you expect it to be meaningful.

We are seeing traction across the world for the carrier solution. I believe when we speak about the carriers, we should look at the mobile segment, the fixed and the cable operator. So while its geography is a bit of a different mix between those, I think one thing is common to all the carriers across the world. They understand that selling mix or selling bandwidths has limited profitability for the long-term, and by staying only with this business model they are risking their future. So all around the world we are seeing carriers whether deploying or experimenting with new consumer and enterprise based new services that they can charge premium money for. We are seeing a lot of traction in the mobile carriers as we're seeing them looking forward charging for over-the-top video; for example YouTube. They are trying to limit the usage of peer-to-peer applications over the network in order to save on the infrastructure build-up. We're seeing wireline carries starting to deploy new advanced security services for example; denial of service protection and intrusion prevention and so on. So we are engaged currently, in very large carrier offerings, the timeline is unpredictable in this environment, but, they can materially impact our revenues. And we believe that in '08 we will find at least one Tier-one carrier as our top customer for Radware.

And in terms of geography is there a leading geography, or is it pretty consistent globally?

Currently, it's pretty consistent. APAC traditionally is leading in terms of the type of services and the amount of services deployed. But I would say that in the last six months we are seeing also in the Americas, a very active market in the carrier space. I believe that all the carriers are embarking on new application and services initiatives to be delivered probably in '09.

Okay, great. Thank you and good luck.

Thank you.

Next question is from the line of Rohit Chopra of Wedbush Morgan. Please go ahead.

Yeah. Thank you. I had a few questions if you could help me out please. How much does the finance and banking sector represent as a whole, not just North America?

Around 5% of our total revenue.

5% of total. Okay. Has there been any thought to a buyback, a stock buyback?

Well, this is Chris McCleary. We have fully analyzed the issue about the utilization of our cash assets, and at this time, based on where we see the company moving in the future relative to growth aspirations, we've decided at this point not to execute a buyback in the foreseeable future.

Okay. Can you tell me what the average deal size was? Did that change from last quarter?

Yeah. It's slightly up. It went up from $80,000 last quarter to $82,000 this quarter. Just to remind you, in this first half of the year it was $70,000 to $75,000 on average. So we see a continuing increase in average deal $70,000 to $75,000; $80,000 to $82,000. this is the last four quarter.

And, just a question on the competitive environment in the United States, or even globally. Has there been any change that you've seen over the last six months from pricing perspective or anything else. I know that Juniper is sort of exiting one part of the market where they competed with you. Is there anything changing that you guys see?

In the last six months the changes that we have seen are basically as far as introducing our high-end platform like a week ago. We've seen Cisco announcing an appliance that was out there I think in the market for even more than six months, and as you've mentioned we've seen Juniper announcing that they are exiting our market. They are not exiting the whole market of application delivery, but our segment they will be no longer our competitor. So overall and given the introductions that we are doing, we believe today we are the most focused vendor in application delivery and the one that progresses now as the fastest with major new announcements. We believe that we are definitely improving our competitive positioning in this space and we now have huge benefits in terms of performance, scalability, investment protection, and the capability to support existing and new advanced application in the best form in the industry. So we're definitely seeing that in that region for us.

And Roy, one last question, I just wanted to sort of get your sense on when you think you can get the overall company's growth rate up to industry levels. Let's say industry is somewhere around 20, 20 plus, with the onslaught of new products, when do you think you can do that?

First of all, we believe that the industry is not growing anymore in these rates. We think, that it's more around 15%, 16%, I think, we are already, knowing the industry rates, but I think we are also accelerating, and definitely our intention now with the new announcement is to continue the acceleration. So, if you look on our quarterly results so far, I think in Q2, we were growing 7% year-over-year, in Q3 it was already around 14%, and this quarter, it’s already 16%, and definitely we are growing. On the other hand, I’m seeing some of our competitors slowing down in their growth rate. So I think we’re trending in the right direction, and that’s before all the announcements that we’ve just discussed. So definitely, we’re optimistic about our growth rates and taking market shares across the world.

Thank you

Your next question comes from the line of Ittai Kidron of Oppenheimer Please go ahead.

Hi guys, just a follow-up. Can you give us an update on that big project that you’ve announced? I think it was the largest contract in the company’s history. Where do you stand on that as far as [flowing] that through for your P&L?

It's progressing well. Some of the revenues we have recognized over some quarters, generally in Q2 and Q3, there is still other disagreement, there is still a lot for us to ship in 2008 and we expect the revenue recognition to go together with that. So all is progressing well.

Okay. So is it fair to say that there is more revenue ahead of you, rather than behind, with regards to this project?

I would not go to that extreme but we have a meaningful amount of revenues ahead of us and in Q4 we didn't recognize any revenues from that project.

Very good and then my last question is to Chris. Chris, maybe can you give us an overview of where you stand right now as far as the America's business? What you've managed to do, what is still to be done from your standpoint in getting the business to where you wanted to be? How have transactions been and what have been the key positives from your standpoint, but also key disappointments things that are still not working to your satisfaction?

Well the key disappointment, I'll start with that first, is that, we're still training dramatically below where we should be from the valuation standpoint and I'll put that back to you all. First of all – as you know we've gone through an extensive reconfiguration of our sales and support operation in the Americas. And at this point we believe we have all the elements in place, and now it's time to start dramatically improving our execution metrics. One of the tactical changes that we made is that we created two sales forces. One to approach the Federal government market, and also one to specifically go after some tier 1 and tier 2 as well as tier 1 and tier 2 cable companies and carriers. And those organizations now are in place reporting to our VP of sales. We also have developed some other interesting distribution channels, and brought on some more value added resellers, and so we believe that ;07 was our transitional year and '08 we believe – we expect business as usual, which is continuous training, continuous upgrade of our sales engineers and regional sales managers, and strong relations with our distribution and key customers. So, all-in-all we are pleased with the progress, but we will never really let up with our quest for continuing improvement.

Is the progress in line, for you hoped it could at this point or is it lagging or ahead?

I would say it is at expectation.

At expectation, okay. And lastly Roy, maybe just a general comment, there is a lot of concern around corporate spending, and can you tell us, if anything, what you are hearing from your customers in aggregate, specifically here in the US. Are you seeing any slowness any longer sales cycles, anything that would indicate some hesitation in spending?

Okay. So, obviously we are reading all the papers and opinions and so on, but I just came back Sunday, from the US, visiting with our top customers, and I think we've discussed with roughly 10 to 15 of our top customers in the US, the introductions, the direction and their needs, and I think the feedback is extremely positive. So, we don’t see today any impact. It might be attributed to the fact that our equipment is relatively a small amount of the total budget of IT spent, but it's very critical to maintain the availability and the performance of the mission critical applications. And like everything that’s critical to your business, you don’t stop investing in that. You probably go to the peripherals and cut spending out there. So, the fact that we are tied to mission critical deployments to CapEx and OpEx optimization, to improving the business agility and compliance, I think will help us in going through this difficult times in the Americas, I think it is also evident by our progress in Q4, and also our expectations going forward.

Goog luck, guys.

Thank you.

Our next question is from the line of Mark Sue of RBC Capital Markets. Please go ahead.

Thank you. I was just hoping, maybe you could give us your thoughts on the linearity for the current quarter, how things have started, maybe by region, and if you are kind of seeing normal seasonality with the North America?

About Q4, actually about 57% of the revenues were recognized in the last month of the quarter and at the beginning of the quarter it was the rest 43%, our expectation was to be 50% to 55% in the last month of the quarter, but due to the large policy shift, this is the shift that we discovered in the fourth quarter.

Got it. And then for the current quarter, have things started off within the normal historic linear range?

Yeah. This is for Q1; we expect the normal, about 50%, the first two months of the quarter and the 50% in the last month of the quarter. And so far so good, this is in line.

Got it. And, Roy, maybe a philosophical question, I think the last two years, we have only seen single digit revenue growth out of Radware and maybe if you could give us your thoughts on what the benchmark might be for 2008, once you scale the organization, considering a lot of the improvements that you have put in place for yourself, Chris and the rest of the team?

Mark, I don't think it's a philosophical question. It's a guidance question, if I get it correctly. So basically, we don't want to give guidance for the whole year, but from the trends point of view, definitely we are looking for a record year, we are now growing in the last two quarters 14% to 16%. So, obviously from at least our installations, and don't get me wrong, it's not guidance at all, and by no means, we would like to continue with these growth rates, maybe to accelerate them, given the new products, but it's very early to say. We have some issues in the America's, macro economics maybe impacting Europe. We want to take it quarter-by-quarter. At this point, as Meir mentioned, we feel comfortable with this great expectation for Q1 and may in the end of Q1, also when we have a better feel for the new product introductions, we'll update you on that.

Got it, and it's safe to assume that you are targeting internally for a higher rate of revenue growth this year with particularly all the new products?

I would prefer not to comment on our internal expectations.

Okay, got it. Well that's helpful. Thank you gentlemen and good luck.

Thank you.

Our next question is from the line of Scott Searle of S Squared Technologies. Please go ahead.

Hi, good morning, good afternoon. A couple of questions on the carrier side of the equation, first off, what was carrier revenue in the quarter and specifically what was carrier revenue in North America?

Okay. Carrier revenue this quarter, it was about 30% to 35% of the revenues. This is very similar with what we had before around 35% of total revenues.

Okay.

And specifically by geography we don't breakout the carrier.

Roy, you mentioned tremendous amount of carrier activity that's going on right now. Could you give us some idea, the magnitude in terms of dollars or what that pipeline looks like or at least what the potential deal size is? It sounds like you are targeting at least one deal this year, I mean, is this $10 million plus opportunity or is it a number different than that?

Generally, the carrier opportunities are obviously larger than what we are seeing in the enterprise, but there are also spread, timeline, for a longer period of time. So, I would say today on average carrier opportunity is roughly $1 million to $2 million, it can spread over a year or a two years, well the large projects are as you mentioned, $10 million plus for the period of the contract. So, we’re definitely seeing larger deal sizes there, and some of them are tight to the success of the service being launch. So, they might start with a $300,000 project or $400,000 project, but it scales as the service grows. So, if you have a mobile carrier with 50 million subscribers, and they start with 50,000 subscriber capacity for the new services, the service catches up, you grow nicely with this platform delivery. So, we are investing a lot, we are investing ahead of the cycle, we are optimistic as I've mentioned that we will close at least one tier 1 carrier in '08, and we believe that would make a nice impact on our revenues.

Okay and Roy, could you just clarify. How you guys compete or complement with traditional DPI solutions, when you’re looking at critical applications and otherwise. Are you working with some of those solutions that are being marketed out there, or are you would be the single solution?

Okay, so and DPI that stands for deep packet inspection is a technological term. In the end of the day, the carrier wants to achieve something. He might want to just shape or do [dual band] with management for peer-to-peer traffic, and lend our traditional vendors or other vendors to do that. Cisco is doing it, Sandvine a lot in others. But there are other opportunities in this space of added network intelligence for the carrier. For example, the delivering new services on top of a common infrastructure, and then additional capabilities like traffic redirection, load balancing and so on if needed and that's why we are playing, in those environments we are generally the sole provider of the network solution obviously, the carrier or the system integrator in many cases is coupling that with an application, our service, a new service that has been built.

Got you. And also on the strategic relationship, Roy if you could, you've talked a little bit about that. What are the goals for this year, the milestones that we should be thinking about in terms of additional distribution from OEM relationships, or otherwise partnerships that we should be looking for?

We believe we are making some good progress in that front, and we are seeing very nice opportunities also as the market shapes and vendors are going in and out of the market for additional alliances. We will announce them once the time is right, but we are definitely working on that and we are seeing progress on that front.

Great. Last item, depreciation and CapEx in the quarter?

The CapEx, it was about $1.8 million and depreciation $1.1 million.

Thank you.

We have no further questions at this time. Please continue.

Okay. I would like to thank everyone for joining the call today. We strongly believe that the new product introductions that we've done over the last three months are really reshaping the competitive landscape for our company dramatically improving our advantages and obviously the win rate for our business. We're looking forward for a record year in 2008 and we hope to see you soon in the next call. Thanks a lot guys.

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