Good morning. My name is Shauna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Check Point Software Q1 2007 Earnings Call. (Operator Instructions). Thank you. It is now my pleasure to turn the floor over to your host, Ms. Anne Marie McCauley. Ma'am you may begin your conference.

Thank you, Shauna. Good morning and afternoon. I'm Anne Marie McCauley, Director of Investor Relations for Check Point Software. Thank you for joining us to discuss the first quarter results. As a reminder, this call is being webcast live from our website and is being recorded. To access the live webcast and replay information, please visit the company's website at www.checkpoint.com/ir. The replay will be available through May 10. If you would like to reach us after the call, please contact the Investor Relations department at 650-628-2050. On the call with me today is Gil Shwed, Chairman and CEO; Jerry Ungerman, Vice Chairman; and Eyal Desheh, Executive Vice President and CFO. Before we start our management presentation, I would like to read the following disclaimer. During the course of this call, the company will make certain forward-looking statements. Forward-looking statements include statements regarding Check Point's expectations regarding our financial performance and growth for 2007, our beliefs regarding the integration of Point Tech and NFR into Check Point, and the integration of their products and technologies into Check Point's products, and our belief that our performance, execution and robust portfolio of existing and new products positions us well for future growth in 2007. Other statements which may be made in response to questions which refer to our beliefs, plans, expectations or intentions are also forward-looking statements for purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act. Because these statements pertain to future events, they are subject to various risks and uncertainties and actual results could differ materially from Check Point's current expectations and belief. Factors that could cause or contribute to such differences include, but are not limited to, the risks discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2006 which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations. Now let me turn the call over to Eyal Desheh for financial review.

Well thank you very much, Anne Marie. Good morning and afternoon, everyone. I would like to share with you our good first quarter results, provide details on the financials, and offer a brief update on our recent acquisition integration efforts. Our first quarter results were fueled by healthy business performance and marched a good start to 2007. We have put in place many new initiatives over the past year, including both the internal development of products and services as well as acquisitions. And these investments are providing initial results as evidenced by our first quarter financial performance, and we expect this trend to continue in 2007. Before I dig into the numbers, let me remind you that our first quarter GAAP financial results include an in-process R&D charge related to the acquisition of Protect Data, the impact of SFAS 123R, the inclusion of equity-based compensation expenses in the P&L, and acquisition related expenses for Protect Data and NFR which we include for the first time in Q1, as well as, for Zone Labs which was included in the past. In our press release, which has been posted on our website, we are presenting GAAP and non-GAAP results and reconciliation tables which highlight this data. Now, let me share with you the financial highlights for the first quarter of 2007. Revenues for the first quarter were $164 million compared to $134 million in the first quarter of 2006, an increase of 23%. This, by the way, was our highest reported quarterly revenues ever. Our network security business contributed $146.5 million to revenue, an increase of 10% compared to the first quarter of 2006. Our data security business, which includes business generated by our Pointsec product line, since January 18, contributed $17.5 million to revenues in Q1. Keep in mind that the…

Thank you, Eyal, and hello everyone. I appreciate you being on the call today, and for your interest in Check Point. Eyal has provided some additional inside into our financial performance, and therefore I will spend my time focusing on some of our key business activities this past quarter. On our last earnings call and during the Investor Day earlier this quarter, we mentioned that the first quarter was going to be a very busy one for us with the launch of new products, as well as the introduction of recently acquired products into our channel and our field organization. Well, all of these actions have transpired and our first quarter results provided an initial indication of the success of our efforts. Let me take a minute to highlight some of the first quarter initiatives. I think one of the most important elements is the continuation of our strategic initiative to broaden our solution set inline with our customer's input as to what they need; and from the type of vendor they want to provide them their security solutions. You can see from the financial results today, that we are now providing solutions across two key security segments; network security and data security; yet within our unified security architecture. This is a powerful and currently unique combination of solutions that address our customer needs in a meaningful fashion. Our customers tell us that they want a comprehensive set of security solutions that will be managed by a single security council and from a company surely focused on security. This point is made time and time again on meetings we have with our customers all over the world. While they want a more secure operating system, and their routers and switches to be more secure; they say they also need an…

Thank you, Jerry and hello everyone. In the first quarter, we launched our new team of PURE security from Check Point. This team highlights our commitment and focus to provide our customers and partners with the architecture, technology and solution on which we can build our future IT security infrastructure. The success in the quarter came from both our network security solution and from our expansion into data security, both contributing to the 25% growth in revenues and 25% growth in deferred revenues over the first quarter of 2006. But PURE security is not just a team. This is truly our focus that makes Check Point unique in this marketplace. In the quarter, we proved our commitment to this strategy by launching many new products and initiative by trying to building block for our future quarter. We required Protect Data and added the Pointsec product line. We completed the acquisition of NFR Security and added new leading technologies in the field of intrusion detection and prevention. We launched a new version of our core product suite NGX R65 adding important management security and performance capabilities. Finally, we launched the new family of Unified Threat Management, UTM-1 having the best and most integrated solution in this space. This combined effort demonstrates our progress in achieving the Holy Grail of security. A single integrated management console which can manage all layers of security in a consistent, reliable and a secured manner. This new generation of the Unified Security Architecture will make the security consistent across the entire network layer for remote users, security gateways and end points within the network. And expense to the data security layer, to minimize the risk of data loss and leakage. While we started to see the success of our strategy this quarter, this is only the…

(Operator Instructions). Our first question is coming from Sarah Friar with Goldman Sachs. Please go ahead.

Good morning, guys. Thanks a lot for taking my questions. Eyal, can you give us any further color on how the Pointsec total revenue split out across effectively your three line items, so in particular, how much was product versus how much fell into something more like subscription?

You have noticed, we have provided the information about our data security business, which is the Pointsec product line, we didn't break it out the component of products at Pointsec is of course higher than Check Point, but that breakdown is not available.

But can you give us any sense, is it an 80-20 split kind of product maintenance, reporting?

No, it's not 80-20, it's less than that.

Okay. And then in terms of the margins, it looks from your guidance, you're assuming margins can start to pick up again as you get Pointsec integrated and so on. What do you think is a good sustainable margin for Check Point, if you think through '07 and into '08?

Let's first remind us of it, we have the best margins in the industry. And we are not giving margin focuses as you've been following us for many years. You remember that we never give real focus on margins, obviously Pointsec joins in with a lower margin that Check Point had before the combination and that is a result for the margin of this quarter, which is exactly within the expectation where we thought. There is some room for improvement here, but we focus on driving revenues, net income and earnings per share and not driving the margins.

Okay and then just one final one for you. The support and training revenues really jumped up; may be it's a question more for Jerry and the success you are having there. I mean how do you balance that with also working with partners and making sure that you are not taking away support and training revenue from them?

Well, as I said in the introduction of the program, we built this over an extended period of time and we built it with our partners. And we are sharing the revenue, but we are also sharing the expenses, and we are giving our total customers a much better experience with the support that they received by doing it jointly. And it's been very well received. Like I said we've done this on a rollout basis, started in Europe, we're going to Asia, we fine tuned the program as we go forward. But it's been very, very well received by both customers and partners because it's very positive for them and for us.

Okay. And so is the goal, because of the U.S. you said you already were doing effectively or they had about some placement the CES less relevant in the U.S.? As you now have the rollout in Asia and Europe get more mature. Do you see ways to bring it to the U.S. in a different form?

Well, maybe in a different form, maybe a similar form, maybe modified somewhat. We continue to work with our partners here. But we do it geographically, based upon the needs of the customer and the partners in those geographies, as we evolved into. I mean there is no one program we do I think consistently around the world. We try to tailor it to the marketplace and requirements, the language, the culture, the capabilities that the people have. So, we will continue to also enhance the services and support that we provide. The U.S. based customers like we have those in the rest of the world and exactly what form that takes I don't think we know right now. But at some combination of the programs we have in place, which we think is going to have a positive impact on our revenues as well as our partners' revenues and our customer satisfaction.

Okay, great. Thanks a lot.

Thank you, Sarah.

Thank you. Our next question is coming from Robert Breza with RBC Capital Markets. Please go ahead?

Hi good morning and good afternoon. Nice quarter. One question Gil for you; you talked about integrating the sales force into from Pointsec or Protect Data into the Check Point channel. Are we to assume yet that the Check Point traditional sales reps will also be taking on the new product line? And then a question for Eyal, if you could just comment a little bit about taxes and where you think that's likely to go? Thanks.

Oh yes, the Check Point channel and the Check Point sales force are all going to carry, promote and sell the Pointsec's product. It's right now on our price list. And all channels around the world can sell it. We've started the process of training the sales people. We've started the process of training the channel and the way is only to work with the Pointsec dedicated data security experts are going to both support and grow the accounts which they've been serving and the pipeline that they’ve been building. And also be a regional resource that can help the entire team around them, learn how to do that and direct even more opportunities that they can do on their own.

Rob, regarding your question on taxes, as you've seen, our GAAP, our tax rate was 19% this quarter, a little higher than the usual. Our non-GAAP tax rate was 15% this quarter, a little lower than the usual. This has to do with some of the acquisition related expenses that we had in the P&L. In general, we focus on the non-GAAP taxes. It could be within that range, maybe a point or two higher later on this year but that is the area.

Thank you very much.

Thank you. Our next question is coming from John Walsh with Citigroup. Please go ahead.

Good morning. Could you give us an update on competitive environment? Any change with pricing or anything you've seen on the competitive front, particularly within the U.S.?

Let me take that. Not really John, it's still a competitive marketplace. But we are doing well out there. I'm very pleased with our position and our success we had, as I talked about a number of major, major wins. There isn’t anything that isn’t competitive. We had good overall numbers, big accounts, geographically, like I said, it was across governments we did some real nice business with the U.S. government, again this quarter across our product line, financial sector, technology companies, and it really goes across the spectrum, both geographically. We said Europe was very strong. So, I'm very pleased with our position in the marketplace and how well we are doing. As I said’ and I don’t want to repeat all my comments; I just think we are very well positioned with our vision, with our strategy, with our product set, and the needs that the customers have of working with a security vendor as an independent layer on top of everything else they are doing. And I like that position. I think the marketplace does, our partners do, and I think its going to continue to be our focus, which I said is now on execution of what we are doing.

Okay. And then now that you are in the market for a couple of months with the UTM-1 appliance product. Any sense of this, any concerns about channel conflict that now you are selling appliance relative to what some of your partners offer and putting in on their hardware? And then any sense of the revenue contribution from that product for the full year. Do you expect it to be less than 10%, 5% to 10% of the 2007 revenue? Thanks.

I'll let Eyal give the second part of the question or Gill, but on the first part, no John, there is not a conflict, and one of things that they know and we know and we talked about and maybe it takes us a while to get there is that, we are filling a void in the marketplace. We went to a price point that our partners really did not address and could not address. They are at the higher end of the market and not really addressing the mid market, which is why we took the step that we did. We were the ones that were capable putting together the right set of solutions, the pricing, the packaging, etcetera to fill the void that was in the marketplace. An opportunity in the marketplace that we wanted to address that our partners were focused in a different segment a higher-end segment. So this is very complementary and it is not competitive with them, and we don't have a problem with either one of the major ones or any of the open server guys.

Now, regarding the second part of your question, we think, we understand that the product has been less than two months in the market from launch. Sales cycle is not very long on this product, but it’s not zero and pipeline continues to be built very nicely. For a question, yes, it’s less than 10% of our business at this point.

Okay, great. Thank you.

Thank you. Our next question is coming from Sterling Auty. Let me do ask that you limit your questions to one question.

Yes thank you. You mentioned it in your prepared remarks that you are going to give some additional color on the strength in Europe; I didn't quite understand the detail behind it. Is it because of the geographic contribution of Protect Data or what else did you see in the marketplace during the quarter from that region?

Yeah, maybe I didn't give enough color there Sterling, I apologize for that but no it’s across all parts of Network security products it was product sales, it was subscription, it was SmartDefense, it was support, it was across the countries in Europe. We just saw a very, very strong business environment there. I think we did well in most of the places and in an absolute sense we are okay, we are just relative, Europe was very, very strong, just the entire environment. I think our execution, the team we have in place there was exceptional for us. We are very pleased with what happened and it was really across the board geographically and from a product set standpoint. There was no one individual area that caused them to outperform the other regions. It was just a combination of every thing as I said across geographies, across products both network security and data security as well as subscription and support in SmartDefense.

Thank you. Our next question is coming from Walter Pritchard with Cowen. Please go ahead. Walter Pritchard - Cowen & Company: Hi. I was just wondering Eyal on the services line, it sounds like CES was very strong in the quarter operating, if you classify the maintenance for Protect Data and services or/and if that had any impact on services?

Yeah there is, but definitely the major driver of the gross and services revenues of CES program and the majority of the growth is coming from there. Walter Pritchard - Cowen & Company: And just a follow-up, are we now at the point where, I know you sort of had a staggered impact of rolling that out over two quarters or somewhere, Q4 you saw some impact in Q1 you saw some impact. Are we now in kind of a steady state in terms of the impact of CES and that it grows more steadily from here in that services line?

I don't know what the meaning of steady state is in this type of business, but just don’t forget, we have deployed the program right now in EMEA and Asia.

And Q2 was the first quarter as we made this program. So we don't have yet the four quarters. And like Q3 or Q4 when we are going to end the cycle of full year into the new program, and that's going to be somewhere between Q3 and Q4.

Our next question is coming from Todd Raker, with Deutsche Bank. Please go ahead.

Hi guys, on the new businesses, can you quantify the impact of NFR in the quarter and when you gave guidance for Pointsec for full year $95 million to $105 million are you still comfortable with that range?

NFR, the numbers from NFR were not very meaningful in the quarter, but this is a longer sales cycle and we are building it, but we are very happy with the progress. Regarding Pointsec, we see no reason at this point to change the original guidance.

Okay. And one quick follow-up, large deals by over 1 million that's actually up sequentially from your year-end in that core business, is that Pointsec? Can you give us some insight into that?

To tell you and all those five deals came from Check Point Network Security business.

Okay, thanks guys.

Thank you. Our next question is coming from Roni Biron, with ING. Please go ahead.

Hi, guys, the question regarding the market. You indicated that a growing demand for unified solutions. Can you talk more about specific demand for certain products such as -- I am sure you mentioned it, but just to elaborate a bit, such as the intrusion detection and UTM, is it picking up as you expected and the same goes for FireWall and VPN? How do you see this market evolving?

FireWall and VPN are an integral part of our UTM-1 solution, and our entire VPN-1 UTM family, which is a bigger family, and yes, we do see an increased demand for some of these functionalities and some of these solutions. And IPS capabilities are also part of some of these products, so we are also there. The independent, the IPS-1 product lines that we have is a new line that we are just starting. The major announcements around these lines actually are still ahead of us. And so it’s not that -- so the contribution there is still small and most of the work there is still ahead of us. But overall, I think, that where we saw the strength was in the overall network security market and in the new data security market move us along quite well in the quarter.

Okay, thank you.

Our next question is coming from Ed Maguire with Merrill Lynch. Please go ahead.

Yes. Good morning. Looking at the Pointsec business, could you characterize what you see as relative average deal size as compared to the network security business, and also the relative sales cycles to close these opportunities.

Okay Ed. Hi. The average -- the relative deal size for the Pointsec product is larger than Check Point. Although our five biggest deals came from network security, but by an average a typical Pointsec sale is bigger, and I think also and again, we're still learning the very fine details of the business. But I do believe that the sales cycle is also a little longer. Since these products are new to the market and our customer will like to test and experiment, and start on a small scale, understand it works before they go to the biggest deployment, so we do see somewhat longer sales cycles that can't quantify that exactly.

And just a follow-up on the UTM products, are you seeing an early adoption in kind of new deployments, or are you seeing some of the traditional FireWall-1 customers switching or upgrading to UTM-1 platform?

I think its still too early to say, but most of the business we are addressing, and most of what we've seen so far is new deployment and new and products for the UTM-1 line specifically.

And with new customers?

Yeah.

Thank you, our next question is coming from Shaul Eyal with CIBC World Markets.

Thank you. Hi, good afternoon; good quarter. Two quick questions. Jerry, back to the ASP's question before, some company, some security related company started to talk about some up tick with respect to ASPs; some uptick in pricing gone up by about 5%, 6%. What's happening maybe more specifically from Check Point on that front?

I am going to let Eyal answer it for you because he has got the numbers there, I think those might have picked up a little bit, but I don't think there has been any significant change which I want call, 5% or 6%. Eyal, do you have the numbers there exactly or?

ASP? There is a mix, I mean we look at the network security business. I don't think that their ASP has changed. It maybe a little bit up because the UTM-1 products are basically driving more dollars per single sale then our previous UTM software version, but this is still on a small scale. So, when we isolate the network security business, it's more or less the same, maybe a little bit up but not by much, and data security is new, I mean we don't have anything to compare to, and I don't think that compares and makes sense at this point.

The good trend that I can predict for the year is that we've seen an increase in the ASP of network security deal and we'll see a decrease in data security deals because we're going to approach a much broader market and much more of the mid-market with the data security deal.

Got it. Thank you for that, and just kind of one --

Thank you. Our next question is coming from Dino Diana from UBS.

Thanks. Nice quarter, guys. On the deferred revenue strength up 26% year-over-year when you back out Point Tech, is there any more, obviously it’s the highest I think you had seen since the first quarter of 2001? Is there any more license revenue than normal that’s included in that number?

No, it’s actually mostly subscription then subscription support and SmartDefense lets not forget the SmartDefense program, which is not a maintenance or support program. It's a security update and it's just an annuity program. So, I mean, these are the three contributors. I don't think that we have seen much product in deferred revenues this quarter.

Very little. Very, very little.

Okay. And then on the UTM side, obviously the checks have been good so far for the first two months. Do you have any idea when this could be, whatever metric you want to try, maybe like $1 million per quarter run rate business? Is it far off from that?

It’s much more than that already.

It's much more than that already, okay. Any sense for how big that was, or what it can be?

It is too early, but it's much more than that.

Okay.

It's just going to be very good.

We got a question before but it's more than 10% of our business, we said it's roughly 10%.

Okay.

More than $1 million.

Alright, great.

More than $1 million and much less than 10%.

I got it. Okay, thank you.

You're welcome.

Thank you. Our next question is coming from Katherine Egbert with Jefferies. Please go ahead. Katherine Egbert - Jefferies & Company: Thanks, good morning. What do you expect for Pointsec for next quarter, and will you break it out?

Well, we will break it out, I think what we expect is in line with our expectation of a little over $100 million for the year, which means that we are going see growth at Pointsec, but we're not going to provide the specific breakdown. It will grow over what we [expect]. [Technical Difficulty]. Two reasons; one, we believe that the business is growing and the other one, don't forget it. In Q1, we didn't have business for Pointsec for the first three weeks of January because we [Technical Difficulty]. Katherine Egbert - Jefferies & Company: Got it, thanks.

Thank you. Our next question is coming from Phil Winslow with Credit Suisse. Please go ahead.

Hi guys good quarter. Eyal, I just have a quick question on U.S. versus Europe GAAP and if that had any effect on, and how you recognize, call the Pointsec license revenue versus how Protect Data did previously; we've typically seen we move over to U.S. GAAP. Companies have to shift more into services and subscription deferred revenue versus European GAAP. Did you have a similar effect this quarter in this business?

Yeah, I would not describe this as meaningful. Yeah, there are differences between the U.S. GAAP and the international GAAP that Pointsec has been using. But I don’t think that this is meaningful as to say that they had a major impact on results. And this will go away within a few quarters anyway. Difference is that, yeah the international GAAP is a little more liberal and revenue recognition and we applied very circular step to the numbers. So, might find a little bit more in deferred than the usual, but, I can't say these are meaningful numbers, though.

Okay. And then also just on the deferred revenue line, you mentioned $13 million coming from Pointsec. How much of that was just from the purchase accounting versus actual incremental deferred revenue growth during the quarter from Protect Data?

This has all came from purchase accounting.

Okay.

This does not include the regular, the business during the quarter. This is the one step up that we've have done when we added the Pointsec deferred revenue. A balance sheet up to, of course we have adjusted, the number is smaller than what they had because according to purchase accounting you have to reduce it to according to formula so.

Got it.

This is a one time step up, the rest was ongoing business and of course, we continue to generate business and grow it.

Perfect, thanks guys.

You're welcome.

Thank you. Our next question is coming Ehud Eisenstein from Oscar Gruss. Please go ahead.

Hi guys, nice quarter, thanks for taking my call. One of the goals for this year is the focus on the medium size business. Can you give us some sense how that worked for you in the quarter? And secondly, we'll appreciate an update on Japan. Thank you.

We've been very active in trying to promote our mid-size business. Let's remember, we define mid-size, selling mid-size solutions not necessarily, I mean we think of some large accounts will buy mid-size products and some small and mid-size accounts will buy the same mid-size product. So, we have been pretty active in promoting that message, I think that from the UTM-1 and the success that we have for UTM-1, we are starting to bear the fruit of talking about that. In Japan, I think, we are still recovering from few tough years, but this quarter I think this was an order of magnitude change in the business in Japan. It performed better than our plans for the year, and hopefully within a quarter or two, we are going to start seeing reemergence and growth in Japan again.

Excellent, thanks so much.

Thank you. Our next question is coming from Israel Hernandez with Lehman Brothers. Please go ahead.

Good morning everyone. The question on the rollout of Pointsec into the channel, how far along are we on that process and when do you think we will start to see meaningful acceleration in production that in the channel, because we have seen that's a pretty significant opportunity? And a second question here is, how is Pointsec being integrated into the operations of Check Point is it pretty much being left as a standalone business or are we deep into integration within the Check Point fold? Thanks guys.

I think we have addressed a little bit both of these on the previous text. But let me try and reiterate that. The Pointsec product is available to our channel but we are only at the beginning of training, educating, and promoting it. So, every channel partner can own a Pointsec product, every channel partner can sell the Pointsec product. And we are starting to --

We are seeing some orders already.

Yes, we already seeing some orders, but it's still very small volume, I expect that between Q3 and Q4, we are going to see more meaningful contribution for the Check Point channel from the Pointsec product. A Pointsec is already integrated into the Check Point structure. It's not going to be an independent or a separate unit. The Pointsec sales people have become part of the Check Point region, and they will continue to serve their customers and work on the large deals, but they are also going to support the entire area or the entire geographical area in which they are and help the Check Point people and the Check Point channel promote that message and grow that business in the different regions. That's probably true also for many other functions that are there. I mean the Pointsec product organization is a part of the Check Point product organization. These are the two bigger organizations, most of the other organizations are going to be just combined and embedded because we are not dependent or will not stay anywhere standalone.

Thank you.

Thank you. I would now like to turn the call back over to Eyal Desheh.

Well, thank you very much. Thank you everyone for your participation. If you want to speak to management or Investor Relations following this call, please call our Investor Relations department at area code 650-628-2050 and we will be happy to take your calls and return them. So, thank you again and we'll talk to you in three-months. Bye-bye.

Thanks everyone.

Thank you. This does conclude today's Check Point Software conference call. You may now disconnect and have a great day.