1. W O R L D W I D E L E A D E R I N S E C U R I N G T H E I N T E R N E T A Return to Value: Building Real Businesses Gil Shwed, Chairman & CEO Presented by Marius Nacht, SVP

2. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -2- Agenda Evolution of the IT Start-Up Evolution of the IT Start-Up  Goals  Fundamentals  Creating value The Check Point Case The Check Point Case  Market and technology growth  Financial results  Creating customer value

3. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -3- The Tech Start-up: The Opportunity Innovation and low cost of entry Innovation and low cost of entry  Significant entrepreneurial opportunity The Entrepreneur The Entrepreneur  Innovate & Make a difference  Be A Leader  Achieve Financial Success

4. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -4- How Is This Achieved? Customer Need Customer Need  Products/Services that fills a real need  Customers are willing to pay for this The Start-up Advantage The Start-up Advantage  Focused & Creative  Expertise – Market & Technology  Fast & Flexible

5. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -5- The Start-Up’s Plan: Pre-1995 1. Created an Innovative Product, Technology or Service  Lean (2-4 people) “garage operation”  Spent cautiously and operated on limited resources 2. Found the Early Adopters  Made “real world” products  Started selling! 3. Built a company  Grew sales first, then grew company  Evolved the technology just ahead of market

6. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -6- The Start-Up’s Plan: 1998 - 2000 Identified a HUGE Opportunity (or jumped on a “hot” bandwagon)  Hoped for big money rewards  Challenge was to gain mindshare Created Mindshare  Spent $$$ (before a real product)  Built a company that fit a HUGE opportunity Focused on internal growth  Built a big company prior to proven market/product RESULT: You’ve just lost your start-up advantages  Not as fast, focused or cost effective

7. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -7- What does the Plan for a Post-2001 Start-Up Look Like? A Pre-1995 Start Up Plan…

8. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -8- A Return to Value The Start-Up’s Plan: Post-2001 A Return to Value 1. Create an Innovative Product, Technology or Service  Lean (2-4 people) “garage operation”  Spend cautiously; operate on limited resources 2. Find the Early Adopters  Make “real world” products  Start selling! 3. Build a company  Grow sales first, then grow company  Evolve the technology just ahead of market The Start-Up’s Plan: Pre-1995 1. Created an Innovative Product, Technology or Service  Lean (2-4 people) “garage operation”  Spent cautiously; operate on limited resources 2. Found the Early Adopters  Made “real world” products  Started selling! 3. Built a company  Grew sales first, then grew company  Evolved the technology just ahead of market

9. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -9- A Return to Value: Focus & Efficiency 1. Sales 2. Customers/Partners 3. Technology Pre-Sales (PS) Early Sales (ES) More Sales (MS) No. of People <101:100K 1 Person for $100,000 in sales 1:200K Ratios 60% in R&D Sales > R&D Sales + R&D > 60% Efficient – Invest in the right places

10. W O R L D W I D E L E A D E R I N S E C U R I N G T H E I N T E R N E T The Check Point Case: Creating Value

11. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -11- Check Point Case: From Start-Up to World Class Company 1993 – 1994: Launching Company 1993 – 1994: Launching Company  The Israeli version of a “garage operation”:  Headquarters = Grandmother’s apartment  Staff = 3 Founders (3 Developers added towards end of 1994)  Undercover development  Guerilla Marketing 1995 – 2001: Building a World-Class Company 1995 – 2001: Building a World-Class Company  Worldwide Operations – Sales & Services  From $10M to $0.5B Sales  Global Organization  300 R&D, 300 Sales, 200 Services

12. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -12- Firewalls1994 VPN19972001 Stateful InspectionStateful Inspection First shrink-wrapped firewallFirst shrink-wrapped firewall IntegratedIntegratedVPN/Firewall OPSECOPSECAlliance Gigabit PerformanceGigabit Performance VPN Enterprise ScalabilityVPN Enterprise Scalability Security DashboardSecurity Dashboard Setting Technology Standards Check Point Case: Setting Technology Standards End-to-end Internet security platformEnd-to-end Internet security platform Desktop/Client securityDesktop/Client security eBusiness application securityeBusiness application security1999

13. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -13- Check Point Revenues & Profits Creating Value: Check Point Revenues & Profits $1.20 $0.00 $0.80 $0.40 Millions $ $100 $200 $300 $400 $500 $600 19951996199719981999200012Month EPS Net Income Revenues

14. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -14- When starting – try to find “Exploding” Markets “Exploding” Markets  Hard to predict  Enough for many Partner Partner  Can’t do it all (and well) Innovation Innovation  Technology  Utilization  Marketing

15. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -15- Summary “Economic Value” is back “Economic Value” is back  Companies are measured on revenues and earnings  Grow only as much as you can afford / as much as is financially justified “Start-up and Innovation” culture is back (“Get rich fast” might not work that well) “Start-up and Innovation” culture is back (“Get rich fast” might not work that well)

16. ©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential -16- How Is This Achieved? Customer Need Customer Need  Products/Services that fills a real need  Customers are willing to pay for this The Start-up Advantage The Start-up Advantage  Focused & Creative  Expertise – Market & Technology  Fast & Flexible

17. W O R L D W I D E L E A D E R I N S E C U R I N G T H E I N T E R N E T