Check Point Software Technologies Ltd. Reports Third Quarter Results

REDWOOD CITY, CALIF., – October 20, 1998 – Check Point Software Technologies Ltd. (Nasdaq: CHKPF) today announced financial results for the third quarter ended September 30, 1998. Net revenues for the quarter were $35,221,000, compared with $23,344,000 for the same period in 1997, an increase of 51%. Net income for the quarter was $16,937,000, or $0.45 per share (diluted), compared with net income of $11,993,000, or $0.31 per share for the same period in 1997, an increase of 41% in net income and 45% in net income per share.

"We are pleased with the overall results for the third quarter of 1998," said Gil Shwed, president and CEO of Check Point Software Technologies Ltd. "The company continued to experience strong growth from enterprise-level sales, including virtual private networks such as extranets and intranets. VPN products now account for 36% of all gateway licenses, and more than 10,000 networks are now implementing VPNs based on Check Point products.

"The company also experienced increased revenues from all geographies this quarter, with revenues from Europe and the Far East equalling the revenue contribution from North America," continued Shwed. "In addition, revenues from professional and technical services experienced a strong increase this quarter, reaching 15% of overall revenues.

"The company's OPSEC™ (Open Platform for Secure Enterprise Connectivity) policy management framework continued to be a strong differentiator for the company, with an increasing number of customers purchasing Check Point products because of the flexibility and extensibility the OPSEC standards afford them. According to a sampling of our reseller channel, an estimated 4 out of every 5 sales include an OPSEC component," said Shwed. A recent Goldman, Sachs survey of Fortune 1000 CIOs and network managers confirms Check Point's open platform approach to enterprise security, with 61% of those surveyed choosing best-of-breed over single-vendor suites or bundles.

Total OEM revenues in the third quarter were 12%, including revenues from Bay Networks, Hewlett-Packard, Nokia/Ipsilon and Sun Microsystems, with revenues from Sun accounting for 7% of total revenues. Check Point expects to transition its relationship with Sun Microsystems from an OEM relationship to a strategic ISV (Independent Software Vendor) relationship. "Check Point anticipates that the two companies will continue to cooperate on a partnering and marketing level to drive sales of FireWall-1 on the Solaris platform, but Check Point will be able to work more closely with those end customers who were previously serviced by Sun," said Shwed.

In the third quarter, the company inked several new and expanded relationships with major security and systems vendors, including Internet Security Systems (ISS), Nokia, Inc., Compaq, and Dell Computer. Check Point and ISS signed an OEM agreement whereby Check Point can offer ISS's market-leading intrusion detection software, RealSecure, as part of a best-of-breed enterprise security solution. The company also announced its VPN-1™ product family in the third quarter, including an OEM agreement with Nokia, Inc. for a VPN appliance solution to be sold by both companies, VPN-1 RemoteLink.

During the third quarter, Compaq Computer added Check Point to its activeAnswers program, designed to ease customers' implementation of enterprise solutions based on Compaq and partners' technologies. In addition, the Compaq Service professional services organization signed an agreement to resell Check Point products. Dell Computer added several Check Point products to its Web e-commerce site, targeted at Internet and Managed Service Providers.

Highlights for the quarter also included the company's continued market share growth, both worldwide and in Europe. International Data Corporation (IDC) reaffirmed Check Point's leadership in the worldwide firewall market, with the company capturing 34% of the worldwide firewall software market in terms of revenues in 1997, up from 33% in the prior year. In Europe, Check Point's market share leadership is even more striking, with the company holding a strong 61% share of the market in terms of installed base units in 1997, according to an IDC study conducted of the Western European firewall market. This report also broke out, for the first time, the firewall-based VPN market according to installed base. Once again, Check Point emerged as the dominant leader with a 64% share of the VPN units installed in Western Europe.

"The enterprise security market is clearly moving from early adopters to mainstream business," said Deborah Triant Rieman, president and CEO of Check Point Software Technologies, Inc. "Check Point is well-positioned to benefit from this trend, as we expand our market and technology leadership in secure enterprise connectivity."

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. is a leading provider of policy-based management solutions for IP networks. The company is dedicated to enabling secure, reliable, and manageable business communications. The company's products include the world's leading enterprise security suite, FireWall-1, the industry's leading VPN family of solutions, VPN-1™, and the industry's premier bandwidth management solution, FloodGate-1™. The MetaIP business unit delivers the industry's leading network and IP address management software, simplifying the set-up, integration and administration of complex networks. The company has U.S. headquarters in Redwood City, California and international headquarters in Ramat-Gan, Israel. For product information, please call (800) 429-4391 or (650) 628-2000 or visit our web site at http://www.checkpoint.com

Statements contained in this press release that are not historical may constitute forward looking statements. Because such statements, including the statements concerning Check Point's relationship with Sun Microsystems and its end customers, deal with future events, they are subject to various risks and uncertainties and actual results could differ materially from the company's current expectations. Factors that could cause or contribute to such differences include, but are not limited to, the impact on revenues of economic weakness in Japan and other Asian countries, difficulties in integrating the operations of MetaInfo, Inc., the inclusion of network security functionality in hardware or system software, changes in the competitive landscape including new competitors and/or the impact of competitive pricing and products, dependence upon a limited number of key resellers, potential competition from Sun, the risk that Sun's customers will not transition, dependence upon a limited number of product lines, timely availability and customer acceptance of new and existing products, the failure to manage growth, the benefit to the company of recent and potential acquisitions, and other factors and risks discussed in the company's Report on Form 20-F for the year ended December 31, 1997, which has been filed with the Securities and Exchange Commission.

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1998 Check Point Software Technologies Ltd. All Rights Reserved.

Check Point, the Check Point logo, FireWall-1, FireWall-1 SecuRemote, FireWall-First!, OPSEC, INSPECT, UAP, FloodGate-1 and IQ Engine are trademarks or registered trademarks of Check Point Software Technologies Ltd. Meta IP and Meta DNS are trademarks of MetaInfo, Inc. All other product names mentioned herein are trademarks of their respective owners.