FORM 20-F - Check Point

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis is based on our consolidated financial statements including the
related notes, and should be read in conjunction with them. Our consolidated financial statements are provided in
“Item 18 – Financial Statements”.
Overview
We develop, market and support a wide range of software and combined hardware and software products
and services for IT security and offer our customers an extensive portfolio of network and gateway security
solutions, data and endpoint security solutions and management solutions. Our solutions operate under a unified
security architecture that enables end-to-end security with a single line of unified security gateways and allow a
single agent for all endpoint security. We also provide unified management which allows for ease of deployment
and centralized control and is supported by and reinforced with real-time security updates. Our products and
services are sold to enterprises, service providers, small and medium sized businesses and consumers. Our Open
Platform for Security (OPSEC) framework allows customers to extend the capabilities of our products and services
with third-party hardware and security software applications. Our products are sold, integrated and serviced by a
network of channel partners worldwide.
In January 2007, we completed the acquisition of Protect Data AB (“Protect Data”), which at the time was
a public company listed on the Stockholm Stock Exchange. Protect Data operates its business through its wholly
owned subsidiary, Pointsec Mobile Technologies AB, a worldwide provider of mobile data protection. Pointsec
delivers solutions for automatic data encryption that keeps the sensitive information stored on mobile computing
devices, such as laptops, PDAs, smartphones, and removable media (e.g., USB devices), confidential and secure.
With the acquisition of Protect Data, Check Point entered the data security market.
On April 13, 2009, we completed the acquisition of the security appliance business of Nokia Corporation
(“Nokia”) pursuant to the terms of an Asset Purchase Agreement entered into on December 22, 2008. Prior to the
completion of the acquisition, Check Point had collaborated with Nokia’s security appliance business over the past
decade to deliver industry-leading enterprise security solutions. Since completing the acquisition, we have been
building upon this collaboration to provide an extended security appliance portfolio that is developed, and
supported by Check Point.
On November 23, 2009, we completed the acquisition of the FaceTime application and signature database.
We plan to utilize the database to bring a new level of granularity to the gateway.
As a result of these acquisitions, our expenses in several categories increased commensurate with the costs
of operating and integrating the acquired businesses. These increases were primarily attributable to increases in
personnel expenses and related costs correlating to increases in cost of revenues, research and development, selling
and marketing and general and administrative expenses.
Our business is subject to the effects of general global economic conditions and, in particular, market
conditions in the IT, Internet security, and data security industries. If general economic and industry conditions fail
to improve, or if they deteriorate, demand for our products could be adversely affected.
We derive most of our product revenues from sales of integrated appliances Internet security products
primarily under our VPN-1 and related brands, as well as related revenues from software updates, maintenance and
other services. Following the acquisition of the Nokia security appliances business, we expanded our appliances
portfolio with the IP Series that generated a large portion of our products sales. We expect this to continue to be the
case in the foreseeable future.
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