Greetings and welcome to the Check Point Software Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Kip E. Meintzer, Head of Global Investor Relations for Check Point Software Technologies. Thank you, Mr. Meintzer, you may begin.

Thanks Michelle. I guess I have a new name now. I'd like to thank all of you joining us today to discuss Check Point's 2017 fourth quarter and full year financial results. Joining me today on the call are Gil Shwed, Founder and CEO, along with our CFO and COO, Tal Payne. As a reminder, this call is webcast live on our website and is recorded for replay. To access the live webcast and replay information, please visit the company's website at checkpoint.com. For your convenience, the conference call replay will be available through February 7th. If you'd like to reach us after the call, please contact Investor Relations by email at kip@checkpoint.com or by phone at +1-650-628-2040. Before we begin with management's presentation, I'd like to highlight the following. During the course of the presentation, Check Point representatives may make certain forward-looking statements. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, include but are not limited to statements related to Check Point's expectations regarding business, financial performance, and customers; the introduction of new products and programs and the success of those products and programs; the environment for security threats, trends in the market, our strategy and focus areas for 2018; demand for our solutions and our business and financial outlook including our guidance for Q1 2018 and full year 2018. Because these statements pertain to future events, they are subject to various risks and uncertainties. Actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point's earnings press release issued on January 31, 2018, which is available on our website and other factors and risks including those discussed in Check Point's Annual Report on Form 20-F, for the year ended December 31, 2016 which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations or beliefs, except as required by law. In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results, as well as the reasons for our presentation of non-GAAP information. Now it is my pleasure to turn the call over to Tal Payne for a review of the financial results.

Great, thank you Kip. Good morning and good afternoon to everyone joining us on the call today. I am pleased to begin the review of the fourth quarter and the full year 2017. Revenues for the quarter increased by 4% year-over-year to $506 million in line with our projection and our non-GAAP EPS grew 8% to $1.58 exceeding the top-end of our range. Before I proceed further into the numbers let me remind you that our GAAP financial results includes stock-based compensation charges, amortization of acquired intangible assets, and acquisition related expenses and the related tax effects. Keep in mind as applicable non-GAAP information is presented excluding these items. Now let's take a look at the financial highlights for the quarter. Product and securities subscription revenues increased this quarter by 3% over the same quarter last year reaching $296 million. Our securities subscription revenues continued to grow and be strong with 18% growth year-over-year reaching $130 million. As we discussed before the growth rate begins to normalize as we reached the anniversary of the bundling of recent [ph] security subscription with our appliances. Our software update and maintenance revenues reached $210 million representing 6% year-over-year. Deferred revenues as of December 31, 2017 reached $1,187 million, a growth of $121 million or 11% over December 31, 2016. Revenue distribution by geography for the quarter was as follows, 45% of revenues came from the Americas, 39% of revenues came from Europe, the remaining 16% came from Asia Pacific, Japan, Middle East, and Africa regions. As you can see revenue growth during the quarter came from Europe AMA while Americas continued to be weak. The changes we have implemented in the field didn't bear fruits yet and as noted before it will take a few quarters to ramp up the level of productivity…

Thank you Tal and Kip. As you just heard from Tal our results for the fourth quarter were good. We were just over our midpoint of revenues and exceeded our EPS projections. For the full year we posted healthy results and set few records in the process. We reached a record operating profit of over $1 billion on a non-GAAP basis for the first time. Our annuity business represents now 70% of our total business for total revenues fueled by our security subscriptions. This security subscriptions represents the new advanced threat prevention technologies that we provide to our customers. We believe this is an impressive achievement. These records were accomplished while facing some execution challenges in United States otherwise our already impressive results would have been even better. We're still few quarters away from seeing the results of the changes in investment we made in the U.S. sales force over the last year. In the first quarter we continued to demonstrate the superiority of our security technology. For example we won the first NSS breach prevention system benchmark with a 100% prevention rate, this is quite an achievement. There were few factors that are even more impressive than this win. According to NSS our total cost of ownership was approximately four times better than the next competitor and even more important we were the only vendor that could run the benchmark and come out on top using only a network gateway. The other vendor gateways weren't able to achieve much inferior results without using addition installation in other places of the network. This demonstrates for everyone that in the real world our technology sets the pace for innovation and provides the highest level of security. But fighting the daily threat prevention battle isn’t enough, there needs to be a bigger…

[Operator Instructions]. Our first question comes from the line of Brad Zelnick with Credit Suisse. Please proceed with your question.

Thanks very much and thanks for taking my question guys. So Gil you've talked about the execution issues that the company has faced since last quarter, I was hoping you can just help us to better understand what's changed internally because this is the same team that has delivered so well for many years prior and what is it that you can see that gives you the optimism that this only takes two or three quarters to fix and as well just in terms of external versus internal, not all companies in your space are facing challenges, there's a lot of change out there in the environment, what can you tell us competitively versus internally?

Okay, so these are like three different questions, I'll try to address them. I hope I'll remember by the first one what it was but let me start with that. Last year we have started making a lot of changes especially in the U.S. about how to approach the market. I mean we are facing new milestones, we are getting close to the $2 billion mark and we wanted to set the right infrastructure to grow better and to address more customers and grow that business. So we're very -- with the new coverage plan for accounts we've created new position for addressing accounts. We've created new regions that will focus on key sectors and so on and these changes include many changes in management and many changes in the field include many new people and these things take time. And unfortunately they take a little bit longer than what I'd like them to take. And I think they're mostly internally focused and I hope that we will start to see to bear the fruits of these investments in a couple of quarters. So that's for the first part. You asked me about the competitive environment and what we see around, so we remain in a very competitive environment. So, that is not new and I haven’t seen a lot of changes there with that regard. I think overall we're in a healthy environment. Even though it is a bit of a challenging one because there's many, many security vendors, there is many people approaching every customer with a lot of different ideas not just direct competitor and not just people that compete head to head with what we do. And it is pretty hard for the customer to device the right strategy and I think in the way the market is operating right now it's almost impossible to get to the right security strategy and that's we launched the Gen V initiative that we're talking about, the Gen V cyber security. We want to demonstrate to the customers where they should be, we want to demonstrate to the customers where they are right now. Let's be clear most customers today are around Gen III, usually below Gen III of security and we must make this generational gap to move all the way through Gen V. And to my belief we have the only viable strategy to get to them there and I think that's what we are investing in for the future.

Thanks very much Gil and just for Tal. Tal what tax rate is implied in the guidance?

So the tax rate if you notice in the last two years in Q4 we have lower rates as a result of closure of lapse of statute of limitation in different countries so the assumption is 17% between Q1 to Q3 and 10% in Q4.

Excellent, thank you.

Thank you, our next question comes from the line of Anne Meisner with Susquehanna Financial Group. Please proceed with your question

Thank you. First one it's for Tal, so the short-term deferred revenue was a bit below where most of us modeled it. I know you don't guide that metric but it's not as strong as we've seen in prior Q4s, I know you did discuss the anniversary of the increased blade bundles but typically that is up a bit more sequentially if you look back in history and I'm just wondering if you're seeing anything notable that would explain that perhaps blade bundle attach rates are a different mix there or on renewals?

So, there is two reasons why we talked about the expected deceleration in subscription as a result of the fact that its anniversary of the bundling. And second we said that the weaker record we had in the U.S. affected bear in mind that Q4 last year was phenomenal.

Okay, and then just maintenance pricing is similar, no changes there?

No changes there, pretty steady.

And then on the guidance, does the guidance assume any impact on ASC 606 the new accounting standard maybe as it relates to commission, the treatment of commission?

No, nothing significant there.

Okay, great and then just a quick one for Gil, hey Gil can you please share with us your outlook on tuck in M&A, you really haven't done much of that recently something that you've done on and off in the past. I know it's partly a function evaluation but I'm just wondering if you're looking to deal bit more of that at some point, maybe you can share the strategy there?

So, yes we are -- we keep looking quite actively in potential M&A deals. I think we are looking in some of the key areas, I won't name them to not expose to much but you can guess which areas we are looking at. The real challenge is not to find one point technology but to find technologies that would be of rolled interest to the markets and we will fit our overall strategy and our overall architecture. We have some good ideas actually so I'm actually quite positive that in the next six months we will find some interesting technologies that we can acquire.

Perfect, thank you very much.

Thank you, our next question comes from the line of Andrew Nowinski with Piper Jaffray. Please proceed with your question.

Anniversarying the subscription bundles but the combination of product revenue and subscription revenue only increased about 2.8% year-over-year which is well below the market growth rate and well below every other vendor suggesting you're losing share. So, I guess are you concerned with that sharp deceleration in the growth of products and subscriptions and is there's anything else that might explain why the other vendors are all pacing you other than the anniversarying of the bundles?

No, just the fact that America was weaker so it was -- well AMA and Europe were growing nicely, America was weaker so as a result that's the 3% that you see in the P&L.

And also again last year we had some major wins so it is a tough compare but as we said we did say some execution issues in the U.S. I think if you look at Europe and the rest of the world it is good. And if we're talking about general market share we are actually seeing that we have very loyal customers, our renewal rates are some of the top in the industry, we've actually keep winning more new customers, and last year we had this nice increase in the amount of business that we get from new customers. So I think that we are making the right steps and we are seeing some good results and we accept to some local weaknesses in execution, I think we should be right on that.

Okay, got it and then if I look back over the course of 2017 despite revenue coming in largely at the midpoint each quarter, your free cash flow consistently exceeded expectations. This quarter it also exceeded but it looks like that was more attributable to the onetime deferred tax benefit and without that free cash flow it looks like you might have missed. I guess do you see any changes to your free cash flow growth trajectory going forward for 2018?

I actually gave the numbers excluding the income tax because it was the largest factor, you are right. And if I recall it was 11% and 8% quarterly and annually. So it was good, healthy growth in our operating cash flow regardless to the changes in the taxes and we expect it to be in line next year. So, probably slightly above 1 billion next year as well, that's the general high level expectation.

Got it, thanks Tal.

Thank you, our next question comes from the line of Shaul Eyal with Oppenheimer. Please proceed with your question.

Thank you, good afternoon everybody. Gil, Tal so you guys are just coming out of your budget planning session over the course of the past few weeks most likely, when thinking about your hiring plans as 2018 unfolds, can you guys share with us a little bit maybe even quantify what's the sales and marketing, what's the R&D, maybe what's the overall number in terms of employees, you guys are thinking about adding to the roadster down the road in 2018?

We don’t have numbers in front of me and I'm not sure if we want to share them but I think generally speaking we will continue to invest especially in the sales force. We're going to also add people in all the other functions, in R&D and all the other places but the majority of investments will be on the sales force side, that's where I think we have the opportunity, that's where I think we need to get more customers and to get more coverage rolled over to the marketplace.

And maybe just to give you a bit more color, when -- as you said we plan to increase our headcount to even more than the midpoint of the revenues. Bear in mind this year if you remember our plan was to decelerate or to have less operating margin in order to invest in the future. And we actually increased our operating margin from 54% to 55%. The plan was 53%. I will tell you that next year we expect to be pretty much in the midpoint of 52% to 53%. You will see it when you will bill the guidance taking into account the tax rate that I gave you. Obviously you start the year lower and the peak is in Q4 as every year. So I think you have enough from that milestones that I gave you in order to build your plan for next year.

Understood, understood Tal and if I may follow on another question, Gil you talked maybe during your prepared remarks greatly about the cloud, about infrastructure as a surrogate. Do you think that Check Point has all the necessary ingredients right now to go and challenge this market, do you feel that maybe you might be a little bit behind or you think that you're a little bit ahead, what's the current thinking from a product perspective, from a strategic perspective about cloud and infrastructure of the service?

So I think that we are a little bit ahead in this marketplace, definitely ahead of what customers are investing and I think a little bit ahead of the competition in that. We definitely don't have everything that's needed and I think one of the big challenges of the cloud in general and the infrastructure as a service. In particular that is offered hundreds of different services so we might be the best for example in providing threat prevention, intrusion prevention, network security capabilities for the cloud. But to secure the cloud you need much more than that and unlike an enterprise network, that is if you secure the perimeter everything inside is less susceptible to attack because it is protected. In the cloud it doesn't work that way. You may have a hundred different services being utilized by the company and they are all exposed on the public internet in the mainstream of the internet. So we are building -- so we have a strategy for that. We are building better solutions, we are looking at additional technologies, and I think that's a definitely a major area for our strategic expansion.

Thank you.

Thank you, our next question comes from the line of Walter Pritchard with Citi. Please proceed with your question.

Hi, thanks. Question for Gil, can you just in terms of the changes on the sale side, are you now done making changes or are there any further changes going into the year that were significant that to some degree change the timing of that stabilizing as you look into the first half of 2018?

Well, we are never done. I mean again -- let's put it this way, if the results are excellent you want to do more and you want to accelerate. If the results in some places are less than perfect you want to make the changes and keep it better. If the people are in you, you can never say that we are done because in few months we will know which people are successful and which people need more help and support. So I think overall we made the big changes that we wanted. We are in line with where we are and I think now we will start to make adjustments. I think time will tell it will be only minor adjustments or will be -- will also need slightly bigger fixes in some places.

And then Tal just a follow up on the tax rate, I heard you for this year I think a lot of companies have seen sort of volatility in 2018 tax rates and then something that settles out beyond 2018, is there any difference in what you might expect in tax rate beyond 2018?

Not in this point of time, no. Not based on what I know today.

Great, thank you.

Thank you, our next question comes from the line of Shebly Seyrafi with FBN Securities, please proceed with your question.

Yes, thank you very much. So my channel checks indicate Palo Alto really pick up its game over the past two to three quarters. So I know you blamed a lot of the issues on the sales changes you made recently but how much of it is external specifically with Palo Alto networks?

I believe that most of our challenge as an execution are internal and I don't -- again I'm not driving their business so I can't comment about the good or not so good things that they've been executing. I think we have some good channels that like what we do. I think we are putting all the right emphasis in place and then I think that we can do better in many places.

Okay, and how many quarters do you think it'll take you to normalize the Americas?

I hope that it is about really two quarters away but you can never know. I think of my sales team as a little bit more optimistic. And I think they think that we can see results even before that and it can take longer. Again you can never know.

Okay, and I think Tal said that the hiring growth expectation in 2018 is going to be more than the midpoint of your revenue growth guidance which is 5%. So just two questions, what was the ending headcount and specifically what kind of hiring growth do you think it will be, do you think it will be like 10%, high single digits, just a run rate?

So, I think probably -- again we don’t provide this for competitive reasons. So I apologize I cannot tell you but you can see if you calculate the margins based on the guidance that we gave you. You'll see that we plan to be around 52% most of the year and pick up in Q4 to get to the total number. And so you can see it's not over acceleration but it's more than the revenues that's why bear into account that we had quite a large effect of the currencies as the dollar weakened against these ready shekel, the Euros, the British pounds, and the few main other local currencies. So, next year guidance takes into account that we can mingle for the dollar versus the main currencies.

Okay, and last one from me, your large deal activity greater than 1 million was up 11% year-to-year which is pretty strong, how do you drive that strong large deal activity with the relative weakness in the Americas?

A good question, I mean we're not looking for excuses but last year we had a very, very, very large deal which is in the comparable may be very hard for us to achieve the growth between Q4 and Q4. That's why I said that our comparables were very tough but instead of making these excuses I just said we need to continue and improve our execution regardless. But that is explanation. We actually had very nice transactions involving customers that purchase more than 1 million, you're right. There was a nice increase there. But in the dollar amount there were one or two very large deal last year but secured the dollar amount and helped in the total booking.

Okay, thank you very much.

Thank you. Our next question comes from the line of Michael Turits with Raymond James. Please proceed with your question.

Hey guys, just had two questions, first for Gil, can you drill down perhaps on the character of demand and whether or not it is shifting from any particular product categories to any others right now?

I think that first we're trying to address through different or more than two different, we are trying to address multiple market. Some in the specific product markets. People renew their gateways, people refresh for infrastructure and so on and this is one market and of course we are trying, this is the main market. We bounced [ph] security gateway, we're also trying to address additional security markets like mobile, like cloud, like advanced threat prevention. Whatever is the bigger challenge that we are trying to address which is the challenge of Gen V cyber security or the overall security architecture for the customers. So I think in all of them we see healthy demand. It is not that we see that any market is weak but I think the biggest challenge is to address the larger ones, the Gen V, the architectural win across the customer because that's the real solution to bringing the market forward and to bring costumer to the new generation. And frankly financially that also has a very high potential to gain share within accounts and with many new accounts as we take a big role in the total security architecture and not being placed into a just a niche even though it is the largest in the network security it is still just a part of the security infrastructure. I think in all of them we are seeing a pretty healthy demand when it is just about renewing and refreshing. And I think customers don't like to spend much more. When it is about expanding customers have more budgets and they are more ready to invest it. So I think if we can help them consolidate we can grow our business in a significant way and we can actually help our customers lower their total cost of ownership also in a pretty significant manner.

And then Tal can you comment on to two trends; one, discounting, where are we in terms of discounting particularly on maintenance and is that going well in terms of where the strategy is and second, where are you in terms of sales turnover, has it dropped at this point during the transition?

So, first on the discounts, we have seen stabilization already a few quarters so it continues which is good. So specifically to your question on the maintenance, so remember what affects the growth of updated maintenance in the quarters and in the future is basically what happened to the discount. So the good news is that discount stabilized already two or three quarters since we talked about it. And the growth in your product revenue, so in theory with the new pricing that majority of the new products are launched as a subscription and as an incentive fee model then the lines of subscription and the line of support and the line of product is being sucked into the subscription line in a sense. So remember that there can be movement between the lines so the discount didn't reduce but its product -- didn't increase the discount sorry, but if the product doesn’t growth then you see a deceleration in the updated maintenance.

And then my question on sales turnover and attrition, is that trough during this transition?

No, we actually saw an increase. If you remember we talked about it and we said we made many changes. As a result of this change many people are moving position. There were some increase in the churn, we are seeing stabilization of that around Q4.

Okay, great. Thanks very much guys.

Thank you, our next question comes from the line of Philip Winslow with Wells Fargo. Please proceed with your question.

Hi, thanks guys for taking my question, just want to focus on just the pricing environment out there just on the product side, just any sort of changes that you may have noticed over the course of the past year just on the new sales or replacements? Thanks.

In terms of the pricing environment again, it remains competitive but on the same time our focus is on delivering more value and delivering better security and delivering more advanced security services. And I think on that we are doing quite well. We had lot of more customers, we're actually surprised to see how many customers are using our sand block technology on their gateways and that increases the value and so on. So I think overall I can say that last year was -- I don’t know if there was a major change last year, it was relatively stable throughout 2017.

Yeah, I think if I am recalling subscription actually update and maintenance stabilized, products picked up a bit. There is a competition out there but nothing over dramatic in regard of the financial change there.

Got it.

Definitely northward since five or 10 years ago, let's be clear. Stable compared to last year not compared to five or 10 years ago.

So, second derivative has a chance. Got it, okay, thank you.

Thank you, our next question comes from the line of Gregg Moskowitz with Cowen and Company. Please proceed with your question.

Okay, thank you very much. Question for Gill about Infinity total protection so it's a comprehensive subscription base security offering as you outlined that should be valuable to some of your customers at the same time I would imagine that providing security across network, cloud, endpoint and mobile doesn't come cheap, so if you were to look at your average customer today can you give us a sense of how meaningful an increase in spend is required to adopt Infinity total protection?

It actually depends how it is being viewed. I think if it is being used just to replace the current product, very slight increase. If it is being used to replace many other security technologies on the enterprise or to make massive changes in the infrastructure it can be a dramatic decrease in the total cost of ownership. Because it does include all the key security technologies advanced web prevention, advanced any phone protection, and lot more technologies in all the areas of security but you actually look at all of them, the value which you provide is an amazing value for that measure. And I think the main challenge here is to drive it all the way up to the sea level because on the different silos people will see only their domain and which is covering more than one domain. It covers almost the entire security sector within enterprise.

Okay, thank you and then just for Tal. I know that you don't explicitly guide to product revenue but just to help everyone from a modeling standpoint, is there any high level color that you can provide on product revenue for 2018 or more specifically do you believe that product revenue can return to growth at some point over the course of the year.

The answer is yes. In the second half of the year I expect to see a positive growth in the product. Remember the range there between 1.9 billion and 2 billion, right. But in general balance was absolutely yes. And I would say very minded also, the thing that is quite hard to predict the move to Infinity, how many customers would choose the model of Infinity, how will it be split between the lines based on fair value and so on. So, that's how I look at the total number and less on the script between the lines.

Very helpful, thanks Tal.

Thank you, our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.

Thanks on that, thank you guys for taking the question. Just a question for probably Gil and Tal, the new pricing model sort of like giving a broad suite across 20 different product functionality on a per user basis. Sounds really interesting in an industry that's moving more and more towards consolidated solutions, I was hoping you could give us some understanding kind of how pricing is going to work on that, how do you think about that in terms of sort of potential off lift into existing customers or sort of like is it going to move like you're saying, is it completely a subscription model, is it completely appliance model, how do we see that and then sort of working into the model overtime?

Well, I would like to say how much it will move into the model, I think it has a nice potential. The model itself is extremely simple. It is single product per user per year and it includes everything. It includes the software, it includes the appliances, and I think best it includes the subscription and their associated services. So it's quite a revolution, again it is hard to -- it sounds very simple but it is a little bit hard to digest because I don’t think other models are like that in the IT industry in general not just in the security space. If you want to buy we would be happy to walk you through that and see how it can work. I think in general it's going to be a great model both for existing customers and very much for new customers.

Got it, any indication of what type of -- you would see from like a one of your existing customers moving to that type of model?

That obviously depends which customer because it depends on how many technology he is already using, how many solution he is already using. If he's still in the world of NGSW or Firewall and he moves to that this can be more significant uplift but it moves him all the way to Gen V security solutions covering end point cloud and their network. It is already an advanced customer that covers next generation threat extraction or prevention and sandblasting will be a lower list. So it really depends on the starting point.

Got it and then from a more product focus question, you talked about CloudGuard ability to create real protection for SaaS applications, when we heard all the vendors talk about this usually in the context of some type of CASB solution, should we think about CloudGuard in that kind of model or is it a different type of technology we're talking about here?

It's a different kind of technology. Most CASB technologies are about monitoring, are about the detection of things, asset management and so on. This is really revolutionary modeling. It talks about putting the most sophisticated security services, threat prevention services to cloud applications. So just as an example when you upload download, send a file through a cloud application, the file will be checked with the most advanced and fresh prevention technology with the sand blast technology, so this is one element which I think is very important, it doesn't exist today. And of course prevent malicious file from getting through with many, many other capabilities, encryption, DLP, and so on that are also included and the dollar issue of the account takeover. One of the big -- the number one today in any cloud environment is with somebody just getting the column, getting the credentials of a user, and through that getting to the entire enterprise there. And I think we've created a very unique technology simple but I think a breakthrough technology that if you're using your device and you're using your account we won't present [indiscernible] from another device to use that and we will stop it right away. And again that's also very different than CASB solution. If not the authentication technology is just making sure that the user is the -- that the device and the user are combined to give a no account take over that's happened.

Thank you and if I could sneak one last one and a broader kind of industry question for you as an industry expert. We were talking -- you were talking earlier about sort of infrastructure and service and point being a leader in terms of the solutions necessary to protect infrastructure and service but there's a lot of a debate going on amongst investors on sort of whether that opportunities are actually going to materialize. You have companies like eight of U.S. who are already sort of $20 billion run rate businesses and it doesn't seem like any of the security vendors have a big sort of -- a lot of revenue streaming from that opportunity and the fear from investors is that the cloud vendors are just going to do it themselves, that [indiscernible] will have their own firewalling capability and they'll just protect the workload on their own infrastructure so there is not going to be an opportunity, where do you fall on that side of the argument, do you think this opens up to be a large opportunity for security vendors themselves or are the cloud vendors going to become more of a competitive threat over time?

I think first the risk and it is definitely a risk there but in all our experience and I think taking a 25 years of experience in that the industry very vendor in networking and operating system in every application was trying at one time in systems, was trying this onetime to become a security vendor and none of them by the way were successful. And if you look at -- and I think we have competed in the last 25 years with everyone from IBM to HP to Microsoft to name a few and I can name many, many more big names and none of them became a security vendor. And the reason is that security needs to be an overlay with growth. First, it goes beyond what the vendor provides. The vendor's main business is to provide more computing environment and not more security and our job is to take it a step forward and second and I think that the most important is to manage security and to apply security on the cross-platform basis. And I think that's the key element, that's another key element that is needed. So, I still think what was going to be an opportunity for security in the cloud, it may not be identical to what we are seeing in the physical and world. It may not be the same gateways or the same security places and I think we're very well aware of that and that is where we are building new technologies and new models to combat that because we're not just trying to copy the security that we had on the traditional networks to the cloud environment.

Okay, that's very helpful, thank you very much.

Thank you, our next question comes from the line of Sterling Auty with J.P. Morgan. Please proceed with your question.

Yes, thanks, hi guys. I want to circle all the way back to follow up on a question that Anne asked early on and it is regarding 606. Just want to confirm that you are shipping to 606 in terms of the revenue recognition. Are you doing modified or full retrospective in terms of the restatement and what type of impact do you expect on the revenue recognition?

So you have two items that are theoretically relevant. One is the revenue recognition and the second in the commission and we don't expect any of it to be materially affect on our year-to-year numbers. You will have an effect, obviously the accounting you have to put it in the balance sheet from the year before to put the effect on retained earnings but there's not going to be a material effect there going forward.

Okay, and are you going to do the modified or fall retrospectives so how are we going to see the comparisons moving forward?

Again it is not, you won't need it before it's quite the same in quite a small number. So you will have -- probably you will see in the 20-F in adjustments that shows you before and after but we don't expect it to be material.

Okay, thank you.

Thank you, our final question comes from the line of John DiFucci with Jefferies. Please proceed with your question.

Thank you for taking my question, I actually have a follow up to I think it was Keith's 13th question and it's for Gil. Gil you said you're ahead of others in the cloud market but it sounds like it's really early out there. I know you've had virtual appliances for a while but CloudGuard is really a new concept. Our enterprise is still in their infancy when it comes to Cloud adoption or is the business more of the entire security community really trying to play catch up to comedy, the adoption as it is just moving really quickly right now, just trying to understand how that's all evolving?

First it is not one answer that applies to everyone. And the cloud is obviously a large business but if you look at major enterprises which represents the majority of our customers most of them still have their infrastructure on the price of data center or private cloud and not on the public cloud. All of them or almost all of them have some experiment and some things on the cloud but the majority of the infrastructure is not yet there. So they are revealing their infancy and adoption. There are a few customers large and small that deals large businesses and large operations on the cloud and for this people the cloud need are significant business. They are not a big consumer of cloud security as of the moment. But again it also represents an opportunity. So these are the two major audiences. Now in general the way the Cloud was death and the way the security was built, it was delivered by the Dare Box people that have delivered the cloud solution. They're using a lot of things -- they are using open source tools using APIs and tools kits widely available out there. And I think they were the ones reason to wait -- everything in the cloud, now the security was implemented. I think what we have seen in previous markets it's not the first market that has been evolved like that. The internet in general has been evolved like that. Based on technological metrics that pushed things forward, used open source things, used open tool kits and moved this forward and when the market starts to mature, it starts to form categories of fair technologies that become more commercial, more standardized because again not every organization wants to build your own tool and not every organization has the expertise, not every organization can afford this. And mainly our organization would want to scale up things, they need to move into a higher grade tools. And I think that will be a similar phenomenon in the cloud itself. We're seeing it really in every organization. But it wasn’t like a threefold of how to do security on the cloud but it was more the developer did something, if they did good they are reasonably protected. We have also seen again with the large data leakage from last year you can see some large organization hasn’t done a good job in protecting the cloud.

Great, thanks for your thoughts there Gil. Thank you.

Thank you, I would like to turn the call back over now to Mr. Meintzer for any closing remarks.

Thank you everyone for joining us today. If you have any further questions again send an e-mail or pop me a call on the work line. And we look forward to seeing you throughout the quarter at the conferences and in your offices. So have a great day and this is Kip signing off. Thanks guys.

Thank you very much.

Thank you.

This concludes today's teleconference, you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.