Allot Communications (ALLT)

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Allot Communications (ALLT)

Initiating with an OUTPERFORM and $16 Target - Solid Growth and Improving Profitability Makes Company an Attractive Play on Mobile Data Traffic
We are initiating coverage on Allot (ALLT) with an OUTPERFORM rating and a $16 price target based on our 2012 PE analysis. We view Allots growth prospects as among the most attractive in networking as adoption of DPI solutions is being driven by rapid consumption of bandwidth-intensive applications, the need to rationalize network costs and to improve average revenue per user. We believe the use of DPI in the service provider market is fast becoming one of the most critical components of the network. The fact remains that while network traffic is increasing exponentially, bandwidth is not unlimited. Unfortunately, spectrum and fiber are costly to acquire and often the most cost-effective solution to manage scarce resources is to deploy traffic management solutions. While we have nearterm concerns regarding the spending environment, especially in Europe, we believe visibility remains high due to a heavy backlog of ongoing deployments. Longer-term, we believe the rollout of 4G/LTE networks, combined with the shift away from unlimited data plans towards usage-based billing and more customized service options, should foster strong adoption of DPI solutions. We advise smallcap, growth investors looking to capitalize on the growth of mobile data traffic with a company that is delivering solid growth and margin expansion to own the name. Strong growth expected in the stand-alone DPI market. Infonetics expects the stand-alone DPI market to reach $2.1bn by 2015 representing a CAGR of 43%. We believe demand trends for Allots solutions will support strong growth over the next several years due to 1) accelerating end-user demand for bandwidth intensive applications; 2) the need to optimize network infrastructure costs; and 3) the need for service providers to create new service offerings to improve ARPU. Most profitable DPI player with potential for margin expansion. Allot has emerged as the most profitable stand-alone player in the market. We believe the company can deliver material margin expansion over the next 12 months given substantial backlog of large deals. Furthermore, Allot expects to invest half of any revenue upside into the business with the remainder falling to the bottom line. Exposure to Europe the greatest near-term risk despite healthy order backlog. Given the uncertainty due to sovereign debt concerns and the implementation of austerity programs, we believe risk exists to customers delaying deployments should economic conditions deteriorate further.
FYE Dec REV (M) 2010A ACTUAL CURR. 2011E PREV. CONS. CURR. 2012E PREV. CONS.
September 8, 2011 Price
$11.89
Rating
OUTPERFORM
12-Month Price Target
$16
Sanjit Singh (212) 938-9922 sanjit.singh@wedbush.com Rohit Chopra (212) 668-9871 rohit.chopra@wedbush.com
Company Information Shares Outst (M) Market Cap (B) 52-Wk Range Book Value/sh Cash/sh Enterprise Value (B) LT Debt/Cap %
26.40 $321.02 $5.30 - $19.15 $2.55 $2.41 $0.26 0%
Company Description Allot Communications was founded in 1996 with headquarters in HodHasharon, Israel. Allot provides solutions leveraging Deep Packet Inspection (DPI) technology that allows service providers to secure, optimize, and build intelligent networks.
Communications Equipment
Q1 Mar Q2 Jun Q3 Sep Q4 Dec Year* Change

EPS
$12.5A 13.6A 14.7A 16.2A $57.0A -2010A ACTUAL
$17.2A 18.5A 18.6E 20.4E $74.7E 31.0%

2011E CURR. PREV.
--$18.4E 19.4E $73.3E
$20.0E 21.2E 22.0E 24.1E $87.3E 17.0%

2012E CURR. PREV.
$19.4E 20.5E 21.5E 23.1E $84.6E
CONS.
CONS.
Q1 Mar Q2 Jun Q3 Sep Q4 Dec Year* P/E Change
$0.01A 0.03A 0.05A 0.07A $0.17A ---
$0.08A 0.10A 0.10E 0.12E $0.40E -139.3%
--$0.10E 0.10E $0.38E
$0.11E 0.12E 0.13E 0.16E $0.52E -27.3%
$0.11E 0.12E 0.13E 0.14E $0.51E
Source: Thomson Reuters
Consensus estimates are from Thomson First Call. * Numbers may not add up due to rounding.
Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see page 24 of this report for analyst certification and important disclosure information.
TABLE OF CONTENTS
COMPANY DESCRIPTION ............................................................................................................................................................... 3 INVESTMENT SUMMARY ............................................................................................................................................................... 3 INVESTMENT THESIS...................................................................................................................................................................... 7 RISKS TO OUR INVESTMENT THESIS............................................................................................................................................. 16 PARTNERSHIPS ............................................................................................................................................................................ 18 MANAGEMENT TEAM.................................................................................................................................................................. 19 ALLOT COMPARABLE MULTIPLES ANALYSIS.............................................................................................................................. 20 ALLOT DISCOUNTED CASH FLOW MODEL ................................................................................................................................. 21 ALLOT - INCOME STATEMENT...................................................................................................................................................... 22 ALLOT BALANCE SHEET AND CASH FLOW STATEMENT ............................................................................................................. 23
Sanjit Singh (212) 938-9922
Allot Communications | 2
COMPANY DESCRIPTION
Founded in 1996 and headquartered in Hod-Hasharon, Israel, Allot Communications leverages Deep Packet Inspection (DPI) technology in its hardware solutions which allow fixed and wireless service providers as well as enterprise customers to build, secure, and optimize intelligent networks. The companys primary products are its traffic management systems which leverage deep packet inspection (DPI) technology which can identify both applications and subscribers and enable features such as traffic shaping, prioritization, quality of service, optimization, filtering, video caching, usage monitoring, network reporting, policy enforcement and the blocking of security threats. While DPI technology has existed for several years, we think the market is reaching an inflection point as end-user consumption of bandwidthintensive applications over both wireless and fixed-line networks is growing at an accelerating rate and causing significant congestion and reducing overall quality of experience for subscribers. Service provider customers both fixed and mobile are increasingly adopting traffic management systems from Allot and its competitors to tackle the problem of rapidly increasing video and data traffic on their networks and to create new revenue opportunities to better monetize the investments in their network infrastructure. For the twelve months ending on December 31, 2010, revenue reached $57mn which represents 36.5% y/y growth compared to the prior 12 months of 2009. For the three months ending June 30, 2011, revenue reached ~$18mn which represented ~35% y/y growth compared to the three months ending June 30, 2010. Non-GAAP gross and operating margins for the most recently completed quarter, was 72% and 15%, respectively. The company has a total employee headcount of 271 as of June 30, 2011.
INVESTMENT SUMMARY
Initiating Coverage on Allot (ALLT) with an OUTPERFORM Rating and a $16 Price Target
We view Allots growth prospects as among the most attractive in the networking industry as adoption of DPI solutions is being driven by rapid end-user consumption of bandwidth-intensive applications on service provider networks and by the need to rationalize network costs and improve ARPU in the face of deteriorating voice revenue and moderating growth in data revenue. We believe the use of DPI technology in the service provider market is fast becoming one of the most critical components of the network. The fact remains that while network traffic is increasing exponentially, bandwidth is not unlimited. Unfortunately, both spectrum and fiber are costly to acquire and often the most cost-effective solution to manage scarce resources is to deploy traffic-management solutions. While we have some near-term concerns regarding the spending environment, especially in Europe, we believe visibility remains high due to a heavy backlog of ongoing deployments. Longer-term, we believe the rollout of 4G/LTE networks, combined with the shift away from all you can eat data plans towards usage-based billing and more customized service options, should foster strong adoption of DPI solutions over the next several years. We advise small-cap, growth investors looking to capitalize on the growth of mobile data traffic with a company that is delivering solid growth and margin expansion to own the name. Our OUTEPRFORM rating is predicated on following factors:
Strong growth expected in the stand-alone DPI market driven by rapid consumption of bandwidth intensive applications and the need for providers to improve sluggish ARPU trends. According to Infonetics, the stand-alone DPI market is expected to reach $2.1bn by 2015 representing a CAGR of 43%. We believe underlying demand trends for Allots traffic management solutions will support consistent double-digit growth over the next several years due to 1) accelerating end-user demand for bandwidth intensive applications which will drive the need for sophisticated traffic management capabilities; 2) the need to optimize network infrastructure costs to slow the growth in cost per Gb of traffic; and 3) the need for service providers to create new service offerings to improve ARPU. Company maintains enviable status as most profitable stand-alone player delivering robust growth and the potential for further margin expansion. Along with revenue growth in excess of 33% y/y for the past several quarters, Allot has emerged as the most profitable stand-alone player in the market. Since Q208, the company has improved OM every quarter for the last 13 consecutive quarters, a notable achievement in our view, as this includes several quarters of the prior IT spending downturn. We believe the company can continue to show material margin expansion over the next 12-months given its substantial backlog of large deals. Furthermore, management has committed to investing half of any revenue upside into the business with the remainder falling to the bottom line. We note that of the public stand-alone vendors, Allot is the most profitable by a significant margin (Allot: 15% OM, Procera: 7% OM, Sandvine: 4% OM). Near-term visibility remains high despite the uncertain spending environment. Allots substantial order backlog has been built from ten consecutive quarters of book-to-bill above one. We think the companys strong backlog creates substantial near-term visibility over the next few quarters which we view as a significant positive, particularly as concerns over an impending IT spending slowdown mount. We think near-term visibility includes orders from Vodafone which has
been a 10%+ customer this year and is on track to be a 10% customer for all of 2011. Other wins which should create visibility over the next few quarters include a large multinational mobile operator which serves 30 million subscribers in nine countries, a tier-one operator in Russia, a large follow-on order from an APAC service provider, as well as a tier-one fixed/mobile service provider in EMEA that serves over 15 million subscribers. While healthy backlog does suggest the potential for accelerating revenue trends, we note that in any given quarter, customers do have the flexibility to delay deployments and/or acceptance testing which can create lumpiness with respect to recognition of quarterly revenue.
Arrival of usage-based billing and addressing of Net Neutrality concerns sets the stage for a new investment cycle in the U.S. Demand from North America for Allot has generally been low as many U.S. based providers (both fixed and wireless) withheld investments in DPI technology due to concerns about the impact of Net Neutrality legislation. While clarifying language and viability of certain use cases still remain open issues, we believe concerns about stricter forms of Net Neutrality legislation is waning and becoming less of an impediment to investment especially since mobile carriers were spared from the most stringent rules. Furthermore, to implement usage-based billing, relieve network congestion, and improve application awareness to enforce network security, we believe U.S. service providers will seek to deploy DPI technology over the next 12-24 months. Solid positioning in a competitive market reflects history of major wins and ongoing new product cycle. In the stand-alone market, Allot currently has the #2 share position behind market leader Sandvine but ahead of Cisco. In recent quarters, Allot has shown accelerating momentum and has generally grown faster than Sandvine. We identify Sandvine, Cisco, and Procera as the greatest competitive challenges for Allot over the near term. However, the recent release of Allots Service Gateway Sigma appliance is seeing strong interest from customers and a history of marquee wins in the mobile market such as its deployment with Vodafone, positions the company well to win major deployments with large service providers, in our opinion. Attractive takeout candidate given solid technology and attractive growth profile. With growth in the stand-alone DPI market expected to reach 43% CAGR from 2010 to 2015 and with Allot occupying the #2 share position, we think the company makes an attractive takeout candidate. There has been speculation that the company was an acquisition target in the past. Most recently, the online Israel publication Calcalist reported that F5 had made an offer for the company for between $400-500mn before abruptly ending talks. This offer represents a 26% to 60% premium over the current share price. We think a premium takeout multiple for Allot is warranted given its attractive growth profile, solid share position, relatively small size, and its improving profitability and margin expansion opportunities. We think both switching/routing vendors as well as application networking players who are looking to boost growth and improve their value proposition to tier-one service providers would be interested in acquiring a stand-alone DPI vendor such as Allot.
Balancing our positive view on the companys long-term growth prospects, we believe the greatest near-term risks to our thesis and to stock performance include the following:
Exposure to European service providers creates risks to growth given current macro uncertainty. Since 2010, Allots EMEA exposure has ranged from 52% in Q211 to as high as 71% in Q111. With ongoing deployments with major European cable providers and mobile operators, management expects its EMEA exposure to be approximately 50% for the remainder of 2011. Given the macro uncertainty due to sovereign debt concerns in certain countries and the implementation of austerity programs in others, we believe risk exists to major customers delaying deployments should economic conditions deteriorate further. While DPI solutions can help service providers delay expensive network upgrades to improve capacity by optimizing the current network infrastructure, in times of significant economic distress, we believe no technology vendor is completely immune to an IT spending slowdown. Long sales cycles in the DPI market create the potential for lumpiness in quarterly revenue. We believe Allots initial orders from a service provider customer are generally quite large in the range of $1-5mn depending on the number subscribers the provider supports. However, we believe the sales cycle as measured from the initial RFP, to trial and evaluation, followed by the testing and certification process and culminating in actual revenue recognition, is currently 9 to 12 months. During times of a significant slowdown in capex spending, such as in the 2008/2009 timeframe, we think the sales cycle can lengthen substantially and reach as long as 12 to 24 months. Given the long sales cycles into the service provider market, we think quarterly revenue performance could be volatile due to both macro uncertainty and customer acceptance criteria which can delay the recognition of revenue of shipped orders. Customer concentration could pose challenges should customer base not see further penetration. While the degree of customer concentration at Allot is consistent with that of other pure play DPI vendors, such as Procera and Sandvine, the companys current level of customer exposure does pose some risk to future revenue should the company prove unable to replace its backlog of orders through the addition of new customers or by further penetrating its existing customer base. For 2010, one large customer, which we believe to be Vodafone, accounted for ~30% of revenue. This customer did account for greater than 10% of revenue in both Q1 and Q2 of 2011, although below the 30% threshold achieved in 2010. We believe Vodafone is likely to be a greater than 10% customer for all of 2011 as the company is
expanding its deployment to other countries which it serves. However, we currently expect Vodafone to begin winding down its deployment by 2012 and is, therefore, unlikely to be a 10% customer in 2012, in our opinion.
Potential share offering represents an overhang on the stock in the near-to-medium term. On August 5, the company announced plans for a 5.5mn share offering (consisting of 4.5mn of new shares and 965k shares from selling shareholders) to help fund corporate initiatives and potential acquisitions of businesses with technologies that are complementary to Allots business. However, on August 7, the company cancelled the proposed share offering likely due to the recent downturn in global stock markets. As the markets stabilize, management will likely seek to reinstate the secondary offering which would cause an incremental 4.5mn shares to come to market and would potentially dilute our 2011 EPS estimate by ~16%, or 5 cents, versus our current 2011 EPS estimate.
Valuation and Price Target Risks

We are initiating coverage with an OUTPERFORM rating and a $16, 12-month price target based on our 2012 PE analysis. We apply a 27x multiple to our 2012, cash-adjusted EPS estimate of $0.50 plus $2.41 in cash per share to arrive at our target. We note that our 27x multiple is line with our 2012 EPS growth estimate of ~27% and is consistent with Allots historical 12-month forward PEG of ~1.0x. Our price target is supported by our ten-year DCF analysis (see Exhibit 21) which assumes 4.0% terminal FCF growth rate, a 12.3% WACC, and a beta of 1.88 based upon weekly return data over the past two years. Our implied cash-adjusted PE multiple represents a 23% premium on our 3-year forward EPS growth rate of 22%. We believe the implied premium is warranted given the companys strong near-term visibility, solid competitive position, attractive growth profile, and continued margin expansion potential. Our target also implies a 2012E EV/Sales multiple of 4.0x on our 2012 revenue estimate of $87mn which is in line with leading growth names in our coverage universe, such as Riverbed (3.9x), Aruba (3.9x) and Broadsoft (4.0x) but a discount to both Acme Packet (7.7x) and Fortinet (5.5x) (see Exhibit 1). Our Q311 revenue estimate of $18.6mn is slightly above consensus of $18.4mn, while our Q311 EPS estimate of $0.10 is in line with consensus. For the full-year 2011, our revenue estimate of $74.7mn is above the consensus estimate of $73.3mn and our EPS estimate of $0.40 is $0.02 above consensus. Our 2012 revenue estimate of $87.3mn is above the consensus estimate of $84.6mn while our 2012 EPS of $0.52 is $0.01 higher than consensus. For 2011, we are modeling 31% and 139% y/y growth for revenue and EPS, while in 2012 we are modeling 17% and 27% y/y growth for revenue and EPS, respectively. We forecast the company to exceed the 20% OM threshold in early 2013 based upon managements guidance that it will invest half of any revenue upside back into the business with the remainder falling to the bottom-line. Exhibit 1: Valuation Comparables of High Growth Networking Names Ranked by 2012 EV/Sales Multiple as of 09/06/11
Company Acme Packet Fortinet Aruba Networks Broadsoft Riverbed Allot Sandvine Market Session Border Controllers Unified Threat Management WLAN Voice Application Servers WAN Optimization DPI DPI Market Share Position #1 #1 #2 #1 #1 #2 #1 Average 2012 EV/Sales 7.7x 5.5x 3.9x 4.0x 3.9x 3.1x 1.3x 4.2x Current GM 84.3% 74.6% 70.9% 82.1% 78.7% 71.6% 76.9% 77.0% Current OM 40.8% 21.5% 17.9% 24.2% 29.6% 15.2% 5.6% 22.1% 2012/2011 Est Rev Growth 29.9% 15.5% 20.4% 28.1% 23.0% 15.5% 25.8% 22.6% 2012/2011 Est OM Expansion -+14bps +119bps +231bps +974bps +143bps +293bps +950bps +385bps
Source: Thomson, IDC, Infonetics
Exhibit 2: Valuation Comparables of High Growth Networking Names Ranked by 2012 PE as of 09/06/11
Company Fortinet Acme Packet Aruba Networks Broadsoft Allot Sandvine Riverbed Market Unified Threat Management Session Border Controllers WLAN Voice Application Servers DPI DPI WAN Optimization Market Share Position #1 #1 #2 #1 #2 #1 #1 Average 2012 P/E 43.4x 32.8x 29.9x 26.2x 24.1x 22.7x 21.2x 28.6x Current GM 74.6% 84.3% 70.9% 82.1% 71.6% 76.9% 78.7% 77.0% Current OM 21.5% 40.8% 17.9% 24.2% 15.2% 5.6% 29.6% 22.1% 2012/2011 Est EPS Growth 17.6% 30.8% 8.1% 20.3% 34.9% 341.2% 32.3% 69.3% 2012/2011 Est OM Expansion +119bps -+14bps +231bps +974bps +293bps +950bps +143bps +385bps
Source: Thomson, IDC, Infonetics
Risks to attainment of our share price target include: slower-than-expected growth in the network equipment market, a weakerthan-expected capex spending environment in the service provider market; potential adverse impact from stricter FCC Net Neutrality initiatives, increased competitive threats from larger network equipment providers in both domestic and international markets; further deterioration in business confidence in Europe where the company generates ~50% of sales, earnings dilution from a potential share offering, and a negative impact to the companys earnings potential should the U.S. dollar weaken further.
Exhibit 3: Forward 12-Month EV/Sales Ratio

Historical Forward 12 Months EV to Sales
6x 5x 4x 3x 2x 1x 0x Apr-10 Aug-10 Apr-11 Nov-10 Mar-10 May-10 Mar-11 May-11 Aug-11 Dec-10 Oct-10 Feb-10 Sep-10 Feb-11 Jun-10 Jun-11 Jan-11 Jul-10 Jul-11
ALLT
MEDIAN FWD EV/SALES SINCE INCEPTION
Source: Thomson
Exhibit 4: 12-Month Forward 12 P/E ratio

Historical Forward 12 Months P/E
50x 45x 40x 35x 30x 25x 20x 15x 10x 5x 0x Apr-10 Apr-11 Aug-10 Nov-10 Dec-10 Mar-10 Mar-11 May-10 May-11 Aug-11 Oct-10 Sep-10 Feb-10 Feb-11 Jun-10 Jan-11 Jun-11 Jul-10 Jul-11
ALLT
MEDIAN FWD P/E SINCE INCEPTION
Source: Thomson
Exhibit 5: Forward 12-Month P/E/G Ratio Using 12-Month Expected Earnings Growth
Historical Forward 12 Months P/E/G

2.0x 1.8x 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x
11 gAu 1 l-1 Ju 11 nJu 1 -1 ay M 1 r-1 Ap 1 -1 ar M 11 bFe 11 nJa 0 c -1 De 10 vNo 0 t -1 Oc 10 pSe 10 gAu 0 l-1 Ju 10 nJu 0 -1 ay M 0 r-1 Ap 0 -1 ar M 10 bFe
ALLT
MEDIAN FWD P/E/G SINCE INCEPTION
Source: Thomson
INVESTMENT THESIS
We Expect Strong Growth in Stand-alone DPI Market Driven by Rapid Demand for Bandwidth Intensive Applications and the Need for Service Providers to Create New Revenue Generating Service Offerings
In our view, the Deep Packet Inspection (DPI) market, while still in the early stages of adoption, has one of the most attractive growth profiles in networking over the next five years. Several third-party research vendors have estimated that the DPI market will reach anywhere from $1.1 to $2.1bn by 2015. According to a report released by Infonetics in April 2011, the market is expected to reach $2.1bn by 2015 representing a CAGR of 43% (see Exhibit 6). We believe underlying demand trends for Allots traffic management and service delivery solutions will support consistent double-digit growth over the next several years, for the following reasons: 1. 2. 3. Accelerating Demand for Bandwidth Intensive Applications Drives Need for Sophisticated Traffic Management Capabilities Economic Need to Rationalize Service Provider Network Infrastructure Costs to Slow the Growth in Cost per Gb of Traffic Opportunity for Service Providers to Improve Average Revenue Per User (ARPU) by Designing New Service Offerings
Exhibit 6: Stand-alone DPI Market to Reach $2.1bn by 2015 (amounts in millions of $s)
Standalone DPI Market Expected to Reach $2bn by 2015

Growing at CAGR of ~43%
$2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $781 $600 $400 $344 $200 2010 2011 2012 2013 2014 2015 $518 $1,138 $1,566 $2,055
Source: Company Reports and Infonetics Research, April 2011
Accelerating Demand for Bandwidth Intensive Applications Drives Needs for Traffic Management Capabilities We expect accelerating demand for bandwidth intensive applications to a be a key driver for Allots traffic management solutions as providers struggle to reliably deliver ever increasing volumes of data traffic over the network and to subscribers. Exponential growth in data volumes are being driven by two factors: 1) end-users can now access content from multiple devices including laptops/desktops; smart phones, tablets, and e-readers while, 2) the nature of the content that users are accessing has shifted from HTTP traffic to more bandwidth-intensive video applications such as NetFlix, YouTube, HTML5 and Flash video. As seen in Exhibits 7 and 8, Ciscos Visual Networking Index group forecasts a 92% CAGR in mobile data traffic from 2010-2015, driven primarily consumption of video which is expected to grow at a 104% CAGR over the same time frame. Already, OTT video applications, such as Netflix (#1 in North America) and YouTube, account for a dominant share of internet traffic (see Exhibits 9 and 10). Data growth rates are unlikely to abate as many providers are expected to roll out LTE/4G networks over the next two years which will only increase demand for bandwidth-rich content, in our view. Given the high cost of acquiring customers and challenges in growing ARPU, service provider customers will increasingly invest in traffic management and service optimization solutions to provide QOS and to foster customer loyalty and retention.
Exhibit 7: Global Mobile Data Traffic Forecast

Global Mobile Data Traffic Forecast
92% CAGR in Mobile Data Traffic Driven by Video
7,000 Global Mobile Data Traffic Video 6,000 5,000 PB pe r Mont h 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015
Exhibit 8: Global Mobile Data Traffic Forecast by Device

Mobile Data Traffic by Device Type
Nonsmartphones Smartphones Laptops and netbooks Tablets Home gateways M2M
4,000 3,500 P B p er M o n th 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015
Source: Cisco VNI. February 2011
Source: Cisco VNI. February 2011
Exhibit 9: Top Applications by Bytes in North America
Exhibit 10: Top Applications by Bytes in Europe

Top Applications by Bytes, Europe
30% 25% 20% 15% 10% 5% 0%
Top Applications by Bytes, North America

30% 25% 20% 15% 10% 5% 0%
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Source: Sandvine Global Internet Phenomenon Report, Spring 2011
F la
Source: Sandvine Global Internet Phenomenon Report, Spring
Need to Rationalize Network Infrastructure Costs to Slow the Growth in Total Cost per GB of Traffic While growth in the number and type of devices that can connect to the network is a positive for carriers in that each of these devices require a data plan which helps promote revenue growth, the downside of accelerating adoption of smart phones and tablets is that they are used primarily to consume bandwidth-heavy content and applications such as video and live gaming. As the growth in bandwidth requirements continues to outpace growth in ARPU, long-term profitability for many service providers is at risk. Highlighting these profitability concerns, Tellabs undertook a study in early 2011 to determine when rising network networks cost would surpass revenue in a theoretical end of profit analysis. Assuming 7x increase in traffic growth by 2015, a flat rate price model, a 30% spare capacity infrastructure allowance, and a 175% average-to-peak traffic ratio (as well as several other assumptions including necessary capex and opex investments), Tellabs concluded that a North American mobile carrier currently running a 3G network and migrating to a LTE network over time will see profits reach a breakeven level by mid 2013. Under similar assumptions, a Western European mobile carrier currently running a 3G network and migrating to an LTE network over time will see profits reach a breakeven level by late 2014 (see Exhibit 12). A key requirement for many providers is to bring network infrastructure costs more in line with revenues and not with bandwidth demand. By deploying traffic management solutions such as those from Allot, service providers can simplify and optimize network costs in the following ways: 1. 2. By foregoing costly network capacity upgrades: achieved by leveraging protocols such as video caching, traffic prioritization, optimization, QOS, and application filtering techniques to optimize existing infrastructure. By deploying multiple services through a single appliance: most management solutions from DPI vendors are multipurpose in nature and allow service providers customers to deploy network security, policy enforcement, network visibility and reporting, and traffic prioritization services from a single appliance saving both capex and opex dollars.
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SS
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Exhibit 11: Expected Growth in Mobile Data Traffic vs. Expected ARPU for U.S. Carriers
Mobile Data Traffic Versus ARPU for U.S. Carriers
$50.00 $49.50 $49.00 $48.50 $48.00 ARPU $47.50
Global Mobile Data Traffic

$49.28 $48.99
ARPU (Data+Voice)
7,000 6,000
$48.42 $47.75
4,000
$47.11
$47.00 $46.50 $46.00
$46.68
3,000 2,000 1,000
$45.50 $45.00 2010 2011 2012 2013 2014 2015 0
Source: Cisco VNI Forecast February 2011, IDC
Exhibit 12: Break-Even Analysis for a Hypothetical North American and Western European Mobile Carrier
Source: Tellabs End of Profit Study January 2011
Opportunity for Service Providers to Improve Average Revenue Per User (ARPU) by Designing New Service Offerings As discussed above, a primary business challenge for many service providers is maintaining or improving profitability in the face of accelerating traffic loads which are burdening their networks. In Q211, ARPU for the top four U.S. based carriers grew 2.4% y/y as average data ARPU growth of 15.9% y/y offset a decline in voice ARPU. Going forward however, IDC projects voice ARPU to decline at a -7% CAGR from 2010 to 2015 while data ARPU is expected to grow at a +7% CAGR over the same time period. Clearly, service providers must develop strategies to improve ARPU given the shift away from voice offerings. While data ARPU is currently experiencing double-digit growth, intensifying competition from over-the-top-providers (OTTP) who offer many of the same services as traditional fixed and wireless providers is complicating the task of improving total ARPU. Examples of competing services from OTTPs include: Skype (voice and video), Google Voice (text, voice), Fring (video)and WhatsApp (text messaging). Leveraging the application and subscriber intelligence inherent in traffic management systems, service providers are seeking to respond to these business challenges by creating innovative new service offerings and pricing bundles. The nature and type of service offerings vary by region with U.S. service providers facing more limitations due to Net Neutrality rules while international service providers enjoy greater flexibility to offer subscribers more customized packages. Examples of the types of new service offerings that are increasingly being rolled out by Asian, Latin American, and European service providers include: fair use enforcement , OTT Video caching, OTT video optimization, service tiering, bill shock prevention, off peak
Sanjit Singh (212) 938-9922 Allot Communications | 9
Traffic in PB per Month
5,000
happy hour, quota-based charging, application-based charging, and illegal content blocking. For example, Allots recent win with a multinational mobile operator will see Allots solution deployed in nine countries, serving ~30 million subscribers. One of the new service offerings being developed by the operator is a Social Networking monthly plan which will give subscribers unlimited access to Facebook and Twitter while access to all other sites and applications would be counted against the subscribers monthly quota restriction. Other operators are offering subscribers other options such as Home work time (allows parents to block access to Facebook and YouTube during specified periods), Off peak Time (allows subscriber unlimited access that is exempted from quota restrictions during specified periods i.e. 12 midnight to 9 a.m.), and Bandwidth Boost (allows subscribers to choose a temporary boost in throughput by paying a fee). In our view, service providers ultimately would like to make revenue-sharing agreements with leading content providers such as YouTube and Facebook to help fund investments in the network infrastructure. Such an arrangement could be structured in a way that allows subscribers unlimited or prioritized access to the content providers site while the content provider would pay the service provider based upon the bytes of traffic directed to their respective sites. We note that such an arrangement would be untenable in the U.S. due to violation of Net Neutrality rules. Exhibit 13: Q211 Y/Y ARPU Growth for Major U.S. Carriers
Q2 2011 ARPU GROWTH Vendor Data ARPU Total ARPU AT&T 16.6% 2.0% Verizon 15.2% 1.9% Sprint 19.0% 3.3% T-Mobile 12.9% 2.2%
Source: Company Reports
While the possible types of new service plans are much more limited in the U.S. due to Net Neutrality rules which prohibit blocking and traffic discrimination, we believe the shift from unlimited data plans to usage-based plans and the need to enforce fair use of network resources during periods of network congestion (which is allowed under Net Neutrality guidelines under reasonable network management principles) will foster increased adoption of DPI solutions. Under a fair use policy, no one subscriber is allowed to abuse shared network resources at the expense of others; therefore, during periods of high network congestion, the policy will rate limit the traffic of all subscribers (as no single subscriber is not allowed to be discriminated against); and once the congestion has subsided, the rate limit policy is removed. We note that the network intelligence required to implement and deploy all of the possible permutations of service options is substantial as it requires real-time intelligence on a number of dimensions including the identity of the subscriber, the type of application being accessed, the time which the subscriber is accessing a particular application, and the volume of traffic being consumed. Furthermore, this intelligence must be integrated with service providers policy and charging rules functions as well as its operating and billing support systems (OSS, BSS) to properly enforce policies and bill subscribers accordingly. It is these key features which make DPI solutions a key element in the service providers strategy to improve ARPU, in our view. Exhibit 14: Expected Voice and Data ARPU for U.S. Carriers
Total Susbcriber ARPU for U.S. Carriers

Voice ARPU CAGR of ~-7%, Data ARPU
$55 $50 $45 $40
ARPU
$17.29 $18.83 $20.20 $21.45
Voice
Data
$35 $30 $25 $20 $15 $10 2010 2011 2012

$31.98 $30.16 $28.22
$22.67
$24.01
$26.29
$24.44
$22.67
2013
2014
2015
Source: IDC
Healthy Backlog Suggests Near-term Visibility In Spite of an Uncertain Spending Environment

A key asset of the company given the current environment is its substantial order backlog which has been built from ten consecutive quarters of book-to-bill above one. We think the companys strong backlog creates substantial near-term visibility over the next few quarters which we view as a significant positive particularly as concerns over an impending IT spending slowdown mount. We think near-term visibility includes orders from Vodafone which has been a 10%+ customer so far this year (30%+ in 2010) and is on track to be a 10% customer for all of 2011. Other wins which should create visibility over the next few quarters includes a large multinational mobile operator which serves 30 million subscribers in nine countries, a tier-one operator in Russia, a large follow-on order from an APAC service provider, as well as a tier-one fixed/mobile service provider in EMEA that serves 15 million subscribers. Management indicated the possibility of having two or more 10% customers (both likely from EMEA) for the year, excluding Vodafone but that the deployment and acceptance testing process for ultimate revenue recognition is still in the early stages. While healthy backlog does suggest the potential for accelerating revenue trends, we note that in any given quarter, customers do have the flexibility to delay deployments and/or acceptance testing which can create lumpiness with respect to quarterly revenue recognition.
High Leverage Model Suggests Significant Margin Expansion Potential Over Next 12 Months
Beginning in Q208, the company has improved OM every quarter for the last 13 consecutive quarters which we view as a notable achievement as this includes several quarters of the prior IT spending downturn. The company has been operating profitably since Q110 and has added over 1600 bps of OM in the last six quarters. The driver for the significant margin expansion has been strong revenue growth (36.8% CAGR since Q409) compared to a 12.8% CAGR in opex during the same time frame. GM has been trending down, reflecting a higher mix of lower margin value-added services (service protector, MediaSwift, WebSafe) and a significant increase in deal sizes which often carry slightly lower margins due to some discounting. We believe the company can continue to show material margin expansion over the next twelve months given its substantial backlog of large deals from Europe, Asia and Latin America. Furthermore, management has committed to investing half of any revenue upside into the business with the remainder falling to the bottom line. According to our estimates, an incremental $1mn in revenue would increase OM by ~100bps. At this trajectory, we think 20% OM is achievable over the next 6 to 8 quarters. We note that of the public stand-alone vendors, Allot is the most profitable by a significant margin (Allot: 15% OM, Sandvine: 4% OM, Procera : 7% OM as of the most recently reported quarter).
Solid Positioning in Wireless Mobile Market Key to Sustaining Growth

Despite forecasts that global mobile data traffic is expected to grow at a 92% CAGR from 2010 to 2015 (according to Ciscos Visual Network Index), mobile operators are confronted with the prospect of voice ARPU declining at a -6.7% CAGR and data ARPU increasing at just a +6.8% CAGR from 2010-2015 according to IDC. We expect mobile carriers to be one of the most significant adopters of DPI solutions to help ease the burden of exploding traffic growth on their networks. Furthermore, it is imperative that providers enable new service offerings to improve ARPU as over-the-top (OTT) applications allow consumers to bypass both data and voice offerings from their carriers. We generally view Allot as well-positioned to capture a significant share of the wireless market given the robustness of its traffic management and service delivery solutions and given a portfolio of marquee wins in the mobile space. Currently, the mobile market accounts for ~40% of Allots revenue (~50% of current bookings) whereas fixed-line providers account for ~30% of revenue and enterprise accounts for ~20% revenue. While we expect the mobile market to drive significant growth in the years ahead, we also note that it represents the most competitive markets for DPI adoption. In particular, we view Cisco and Sandvine as the most significant competitive threats as both have won high profile design wins with tier-one service providers. Sandvine has been particularly aggressive in this space, with a landmark win with Telefonica who supports over 250 million subscribers. While Sandvine is often thought to focus on the Cable/DSL market in North America (typically 60-80% of revenue is from Cable/DSL customers), in its most recent quarter, 46% of revenue came from the wireless market. In 2010, despite wireless accounting for just 28% of total revenue, Sandvines wireless revenue of ~$27mn was greater than Allots 2010 wireless revenue of ~$23mn (wireless was ~40% of total revenue at Allot). Through the first half of 2011, Sandvine has accelerated momentum with mobile providers announcing 25 mobile wins (versus 26 for all of 2010) while Allot has announced 8 (versus 22 in total for 2010). Going forward, we expect significant competition in the mobile market but we remain confident that Allot will win its fair share of deals given the robustness of its solutions and a history of landmark design wins in the wireless space.
Exhibit 15: Allot vs Sandvine, Number of Wireless Providers Wins

Allot vs. Sandvine: Number of Wireless Provider Wins
Sandvine
14 12 12 10 8 6 4 2 0 Q110 Q210 Q310 Q410 Q111 Q211
Allot
7 5 4 3 2 1 2 1 4 3 5
Arrival of Usage-Based Billing and Stabilization of Net Neutrality Concerns Sets the Stage for a New Investment Cycle in the U.S.
We believe the U.S. market will become an incremental driver for growth over the next 12 to 24 month due to: 1. 2. 3. Diminished Threat from Net Neutrality Rules Which Now Allow for Reasonable Network Management The Move to Usage-Based Billing Among U.S. Service Providers Increasing Need for Application Awareness to Block Illegal or Prohibited Traffic on Service Provider Networks
Revenue contribution from North America for Allot has generally been between 17-25% of total sales since 2009 as many U.S. based service providers (both fixed and wireless) withheld investments in DPI technology due to concerns about the potential scope and impact of Net Neutrality legislation. While there remains much work to be done in terms of clarifying language and the legality of potential use cases, we believe concerns about stricter forms of Net Neutrality legislation is waning and becoming less of an impediment to investment. Just a few months after the proposed framework offered jointly by Google and Verizon, the FCC did adopt Net Neutrality rules by a 3-2 vote in December 2010. While Verizon is currently challenging the authority of FCC to impose the mandated rules and the House of Representatives has recently voted to repeal the mandates via legislation (the bill is unlikely to pass in the Senate), we believe current rules do allow for investment in DPI to commence. The Net Neutrality rules adopted by the FCC treat fixed and mobile providers differently. Fixed mobile carriers face stricter set of Net Neutrality covenants and are generally required to adopt transparency requirements related to their network management techniques, are prohibited from blocking lawful content on their networks, and are disallowed from unreasonably discriminating lawful network traffic. According to the FCC reasonable network management are allowed and such acceptable practices include: ensuring network security and integrity, including by addressing traffic that is harmful to the network; addressing traffic that is unwanted by users, such as by providing services or capabilities consistent with a users choices regarding parental controls or security capabilities; and by reducing or mitigating the effects of congestion on the network Mobile carriers were spared from the most stringent Network Neutrality rules given the nascent nature of the industry and constraints to available spectrum and are also allowed to engage in reasonable network management practices. Generally, mobile carriers must comply with transparency requirements and basic no blocking rules subject to reasonable network management. Crucially, for mobile providers, they are unable to engage in application surcharging practices including blocking applications or charging a fee for applications that compete with providers voice or data services. Furthermore, we do think pay for priority practices that have been adopted by many international service providers (both fixed and mobile) as a revenue sharing strategy with content providers would be explicitly prohibited for fixed-line providers. Given the above guidelines, which allow for reasonable network management, we believe DPI solutions should begin to be deployed in higher frequencies to address network security concerns and to address periods of high congestion on the network. In our view, the main driver for DPI adoption in the U.S. is the move to usage-based billing (UBB) or tiered pricing. In recent months, major providers including Verizon, and AT&T have moved to usage-based pricing plans which charge consumers a set fee for a month of a fixed amount of bandwidth access (ex. $30 per month for 2Gb of data). In March, AT&T, with its U-Verse and its DSL broadband offerings, has implemented usage based pricing to its fixed-line products, charging its customers a $10 fee for exceeding their monthly cap.
Another trend among U.S. service providers involves tethering detection and the use of throttling. As part of reasonable network management guidance related to network congestion, AT&T and Sprint (Virgin Mobile unit) have implemented throttling policies which involve reducing the access speeds of customers who consume an unusual amount of traffic (top 5% in the case of AT&T customers, customers exceeding 2.5GB in Sprints case). In addition, carriers are increasingly seeking to detect illegal tethering (which involves using a mobile device as a broadband connection for other devices) and to upgrade users to formal tethering plans. Even as many of the innovative service offerings and revenue sharing strategies adopted by international service providers are generally unavailable to U.S. providers, to implement usage-based billing, to relieve network congestion through use of network management techniques, and to improve network security by creating application awareness, we think U.S. service providers will seek to deploy DPI technology from vendors such as Allot over the next 12-24 months. Results from the recent quarter from public standalone vendors suggest that the U.S. market may be finally seeing some momentum as Allot reported 75% y/y growth (+39% q/q), Procera reported 50% y/y (+4% q/q) growth, and Sandvine reported 5% y/y (but +107% q/q) growth. Exhibit 16: Y/Y Revenue Growth by Region
Y/Y Revenue Growth by Region
Americas
120% 100% 80% 60% 40% 20% 0% -20% -40% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
EMEA
Asia Pac
Exhibit 17: Geographic Revenue Concentration

Geographic Revenue Concentration
Americas
100% 90%
29% 22% 37% 18% 20% 21% 18% 12% 24% 26%
EMEA
APAC
80% 70% 60% 50%
46% 38%
58%
64%
58%
62%
65%
71% 57% 52%
40% 30% 20% 10% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
25% 25% 20% 18% 22% 17% 17% 19% 17% 22%
DPI Market is Competitive but Allots Well-Positioned Due to Strong Growth and New Products
The DPI market is typically categorized into the stand-alone market consisting of pure play vendors such as Allot and Sandvine, and the embedded market consisting of larger network players such as Cisco, Hauwei, Alcatel-Lucent, and Ericsson. Currently, we believe most RFPs from tier-one service providers are for robust stand-alone solutions and we view the stand-alone solutions including Sandvine, Cisco, and Procera as representing the greatest competitive threat to Allot in the near-term. In the stand-alone market, Allot currently has the #2 share position behind market leader Sandvine and ahead of Cisco (which acquired its stand-alone solution via its P-Cube acquisition in 2004 for $200mn). However, in recent quarters Allot has shown accelerating momentum and has generally grown faster than market share leader Sandvine. For example, in Q211 Allot grew product revenue 34% y/y, faster than Sandvine who grew product revenue 10% y/y but slower than smaller rival Procera who grew product revenue 123% y/y (who benefits from a much smaller revenue base). For the 1H11, Allot has grown product revenue 39% versus 1H10 compared to Sandvine who has seen product revenue decline 8% and Procera who has grown product revenue 128% versus 1H10. Part of the reason explaining Allots outperformance, in our view, is its greater penetration of the faster growing EMEA market and somewhat less exposure to the fixed line market in North America which caused Sandvine to report uncharacteristically weak results in Q111. In our view, the stand-alone DPI market is similar to the core routing market (Cisco, Juniper, Alcatel-Lucent) in the sense that each vendor attempts to leap frog the other with its new appliance. The obvious distinction from the core routing market is the much faster growth rate expected over the next 5 years in the DPI market. In our assessment, the three public stand-alone vendors (Allot, Sandvice, Procera) have all released compelling high-end solutions that offer significant throughput and can support millions of subscribers that would be attractive to most tier-one service providers. In December of 2010, Allot released its Service Gateway Sigma E appliance which offers 160Gbps supporting up to 8 million subscribers. The modular platform supports value-added software services such as MediaSwift, WebSafe, and ServiceProtector and has been gaining traction among tier-one service provider in Europe in recent months. We identify Sandvine, Cisco, and Procera as the greatest competitive challenge for Allot over the near term. Sandvine has become much more competitive in recent quarters particularly in Europe where it has increased its presence significantly. Furthermore, the company is making significant strides to diversify away from its slower growing Cable/DSL installed base and has developed a strong pipeline of wins with mobile operators who have been aggressive adopters of DPI solutions outside the U.S. In addition, the company has a built a more robust partnership ecosystem with leading network equipment providers such as Hauwei, Alcatel-Lucent, and Mitsubishi. Cisco has generally pursued an unfocused strategy promoting both a stand-alone and an embedded solution and has lost its #2 share position to Allot in recent quarters reflecting some of the organizational disarray over the past 12 months. Given its substantial sales and distribution, and close relationships with tier-one service providers, however, we think Cisco can be formidable player should it sharpen its focus in the quarters ahead. Procera is a smaller rival with approximately half of the revenue of Allot but is one of the fastest growing players in the market with growth of 102% y/y in its most recent quarter and who now expects $35mn in sales in 2011 which would represent growth of over 75% y/y. We think Proceras main advantage is0 its R&D prowess, leading edge solutions, deep penetration in the higher education vertical and its significant traction within the North American service provider market.
Takeout Possible Given Strong Technology and Attractive Growth Profile

With 43% CAGR expected in the stand-alone DPI market from 2010 to 2015 according to Infonetics, and with Allot occupying the #2 share position behind Sandvine, we think the company makes an attractive takeout candidate. There has been speculation in the past that the company was an acquisition target. Recently, the online Israel publication Calcalist reported that F5 had made an offer for the company for between $400-500mn before abruptly ending talks. That offer would represent a 25% to 60% premium over the current share price. Relative to current 2012 consensus revenue estimates, a deal in this range would represent an EV/Sales multiple between 4.0x 5.2x. Given recent deals in networking, where the average sales multiple was between 3 and 8x, we think a premium takeout multiple for Allot is warranted given its attractive growth profile, #2 share position, relatively small size, and its improving profitability and margin expansion opportunities. We think both switching/routing vendors as well as application networking players who are looking to boost growth and improve their value proposition to tier-one service providers would be interested in acquiring a stand-alone DPI vendor such as Allot. In our view, we believe potential acquirers include Cisco, Juniper, F5, Riverbed, Nokia-Siemens, Alcatel-Lucent, HP, Adtran, and Ericsson.
Exhibit 18: Comparison of High-end DPI Platforms by Vendor
Source: Broadband Traffic Management Blog http://broabandtrafficmanagement.blogspot.com/
RISKS TO OUR INVESTMENT THESIS

Significant Exposure to European Service Providers Creates Risks to Growth Given Macro Headwinds
Since 2010, Allots EMEA exposure has ranged from 52% in Q211 to as high as 71% in Q111. Given ongoing deployments with major European cable providers and mobile operators (including Vodafone), management expects its EMEA exposure to be approximately 50% for the remainder of 2011. Given the macro uncertainty due to sovereign debt concerns in certain countries and the implementation of austerity programs in others, we believe significant risk exists to major customers delaying deployments or cancelling projects should economic conditions deteriorate further. While DPI solutions can help service providers delay expensive network upgrades to improve capacity by optimizing the current network infrastructure, in times of significant economic distress we believe no technology vendor is completely immune to an IT spending slowdown. We believe fixed line, cable and DSL providers would be most negatively impacted (fixed line providers currently account for ~30% of bookings) as growth in that segment is slower than the mobile market where providers are struggling to keep up with exponential growth in mobile video and data traffic. During the last downturn most of the weakness was due to a slowdown as well as a lack of execution in North America. In EMEA, the company saw growth slow in Q308, Q408 and Q109 but improved materially thereafter as European providers restarted their initiatives to create new service offerings and leveraged DPI solutions to alleviate network congestion challenges due to the growth in data traffic.
Long Sales Cycles Creates Potential for Significant Lumpiness in Quarterly Sales
We believe Allots initial orders into a particular service provider customer are generally quite large - in the range of $1-5mn depending on the number subscribers the provider supports. However, we believe the sales cycle as measured from the initial RFP, to trial and evaluation, followed by the testing and certification process and culminating in actual revenue recognition is currently 3 to 4 quarters. During times of a significant slowdown in capex spending, such as in the 2008/2009 timeframe, we think the sales cycle can lengthen substantially and reach as long as 12 to 24 months. Given the long sales cycle into the service provider market, we think quarterly revenue performance is likely to be volatile due to both macroeconomic uncertainty and customer acceptance criteria which can delay the recognition of revenue of shipped orders. We think these factors underscore why management currently does not currently provide formal quarterly or full-year guidance.
Competition from Larger Integrated Players Could Intensify by Architecting Functionality into Router
Currently, the market for DPI solutions or DPI functionality can be categorized into two types of providers: 1) stand-alone vendors and 2) integrated vendors. Most orders in recent years and the majority of current RFPs from service providers have favored stand-alone solutions from vendors such as Sandvine, Allot, Procera, Arobor Networks and Cisco (via its $200mn P-Cube acquisition in 2004). However, larger network equipment providers such as Alcatel-Lucent, Ericsson, Nokia Siemens, and Cisco have brought solutions to market that incorporate DPI functionality into their service or edge routers. To date, this strategy has shown little signs of success as stand-alone players continue to post strong growth, add new customers and widen market their share lead over integrated rivals. We also note that many of the larger integrated players (Nokia-Siemens, Alcatel) are major resellers of stand-alone solutions (primarily Sandvine and Allot) which we think suggests that integrated router solutions currently lack the technological robustness to manage what are essentially application specific networking challenges. In our view, stand-alone solutions will continue to be the preferred solution in the core of service provider networks as service providers rollout increasingly complex services that require intelligence at the subscriber, application, and usage levels. However, we do see an opportunity for integrated players to incorporate basic DPI functionality at the edge of the network and we expect integrated players to see steadily improving traction at the edge over the next few years. Furthermore, as LTE/4G networks rollout across the developed world over the next few years, we expect the increased capacity and faster access speeds to only exacerbate demand for bandwidth intensive applications and services. Should the increase in subscriber traffic volumes reach such a level so as to over burden and limit the capacity of stand-alone solutions to effectively manage and optimize IP traffic, we believe there is risk that the market could move to more router integrated solutions. Our current view is that competitive landscape remains largely favorable for stand-alone players and should remain so for the next few years but a shift to integrated players could materially impact Allots unit volumes and profitability.
Customer Concentration Could Pose Challenges If Customer Base is Not Further Penetrated
While the degree of customer concentration at Allot is consistent with that of other pure play DPI vendors such as Procera and Sandvine, the companys current level of customer exposure does pose some risk to future revenue should the company prove unable to replace its backlog of orders through the addition of new customers or by further penetrating its existing customer base. For the year 2010, one large customer, which we believe to be Vodafone according to our contacts, accounted for 30% of revenue. The customer did account for greater than 10% of revenue in both Q1 and Q2 of 2011, although below the 30% threshold achieved in 2010. We believe Vodafone is likely to be a greater than 10% customer for all of 2011 as the company is expanding its deployment to other countries which it serves. However, we currently expect Vodafone to begin winding down its deployment by 2012 and is, therefore,
unlikely to be a 10% customer in 2012, in our opinion. Given an extensive pipeline of opportunities with mobile operators in Europe, APAC, and South America, we think Allot will be adding additional 10% customers (on quarterly basis) over the next few quarters.
Investment in the U.S. Could Weaken Should Stricter Interpretation of Net Neutrality Laws Be Enacted
On December 21, 2010 the FCC, by a 3-2 margin, voted to enact new rules to prevent fixed-line and broadband service providers from blocking, degrading, or prioritizing certain internet content and applications over others subject to reasonable network management techniques. Mobile or wireless providers were generally left unscathed given the nascent nature of the industry and are only subject to transparency requirements and are prohibited from blocking lawful content or applications that compete with the providers voice or video services subject to reasonable network management. Should rules that currently apply only to fixed line broadband providers be applied to mobile providers (which would require a new FCC rule making process or congressional legislation) we believe investment in network management solutions such as those provided by Allot would be adversely impacted.
Prolonged Dollar Weakness Could Limit Magnitude of Earnings Upside in the Medium to Long Term
The company prices its products and services in U.S. dollars for the overwhelming majority of its regional operations; however, a material portion of Allots opex is paid in Israeli Shekels (~180 employees out of a total of 271 are based in Israel) reflecting a substantial proportion of Allots R&D and G&A operations. While management recently indicated that it has fully hedged its USD/Shekel exposure for the next few quarters, we believe that any prolonged weakness in the USD will have a negative impact on both OM expansion and EPS upside and potentially cause share price performance to suffer.
Company May Not Be as Well-Positioned in the U.S. Relative to Rivals

With relative stability and incremental clarity provided by the FCC in recent months, we believe a DPI investment cycle is in its early stages among North American service providers who had been holding off investments relative to their European, Latin American, and Asian counterparts over the last few years. While we are optimistic that North America could become a modest incremental growth driver over the next 24 months, we are concerned that Allot may not be as well positioned relative to some of its North American based rivals such as Cisco, Sandvine, and Procera. Over the last four quarters, Allot has derived 22%, 17%, 19%, and 17% respectively from the North American market while Sandvine has generated 48%, 29%, 28%, and 38% over the last four quarters from North America. Since 2010, Allot has generated just $18mn from North America which is significantly less than Sandvine who has generated $50mn and even less than much smaller rival Procera who has generated $20mn in North America during the same time frame. Along with price and performance, we believe a key factor in securing design wins from large service providers is a thorough understanding of their business and their network architecture. Given its relatively smaller presence in the North American market, we think Allot could be at a disadvantage to capitalize on increased service provider spending over the next 24 months versus domestic rivals such as Cisco, Sandvine, and Procera.
Potential Share Offering Represents an Overhang on the Stock in the Near- to Medium-Term
On August 5, the company announced plans for a 5.5mn share offering (consisting of 4.5mn of new shares and 965k shares from selling shareholders) to help fund corporate initiatives and potential acquisitions of businesses with technologies that are complementary to Allots business. However, on August 7, the company canceled the proposed share offering due to the recent downturn in global stock markets. As of June 30, the company had $63mn in cash and investments and, in our view, we believe tierone service providers generally prefer that key suppliers have an excess of $100mn in cash to mitigate their counterparty supplier risk. Given that the share price was ~$16 at the time of the original announcement, we estimate the company was seeking to raise ~$70mn resulting in a total cash position of ~$130mn. We anticipate that as the markets stabilize, management will seek to reinstate the secondary offering which would cause an incremental 4.5mn shares to come to market and would potentially dilute our 2011 EPS estimate by ~16%, or 5 cents versus our current 2011 EPS estimate.
PARTNERSHIPS
In our view, one of the key elements to building leverage into Allots business model over the long-term is a robust partnership strategy to extract efficiencies in sales and marketing expenses. To date, the company has developed integrated solutions with many vendors in the policy management space, including Optenet, Tekelec, and Qosmos. However, the company has begun to show momentum with larger network equipment vendors, such as Nokia-Siemens Networks, Huawei, HP, and ZTE. For example, Allot and Nokia-Siemens collaborated on a large win in May of this year with a large Russian wired/wireless operator who has over 25 million subscribers. Allots Service Gateway product will act as a real-time, traffic identifier and will route subscribers packets to a policy enforcement engine that will allow the operators to deploy revenue generating valued-added services. We believe the company is working to close similar deals with other network equipment providers. Given that integrated, comprehensive solutions typically carry larger deal sizes and are often implemented on a multi-quarter time frame (improving visibility), we would like to see Allot more aggressively forger deeper relationships with existing partners beyond integration and pursue new partnerships with other network equipment providers such as Ericsson, Alcatel-Lucent and Motorola. As GM trends continue their gradual decline with more players trying to capitalize on the fastgrowing DPI market, we view vendors who align themselves with leading network ecosystems as best-positioned. Exhibit 19: Sample of Announced Partnerships
Vendor PeerApp Qosmos Openet HP Tekelec Huawei Nokia Siemens Networks Aperto Networks Amdocs 724 ZTE Vendor Description Provider of Media Caching Solutions Provider of Network Intelligence Solutions Provider of Subscriber Optimization Software Full Service IT provider of IT Hardware, Software, and Services Offers a Policy Control Solution to Broadband Service Provider Full Service IT provider of IT Hardware, Software, and Services Network Equipment Provider to the Global Service Provider Market Wireless Broadband, Moobile WIMAX, and Enterprise VPN Equipment Provider Provider of Software and Services for Billing, CRM, OSS Systems Provider of Mobile Multimedia and Advertising Solutions Network Equipment Provider to the Global Service Provider Market Nature Joint solution optimizes Internet content delivery by integrating Allot's DPI solutions with PeerApp's intelligent media caching products. Joint solution to enable charging and quality monitoring of VOIP and data networking. Joint policy management solution. Joint offering integrates Allot's Service Gateway for policy enforcement and the HP Internet Usage Manager for real time charging and policy decision functionality. Joint solution combining Allot's application identification and policy and charging enforcement function capabilities with Camiant's policy engine. Integration and interoperability testing between Allot's Service Gateway (PCEF) and Huawei's PCRF product. Integration of Allot's intelligent policy and charging enforcement function with NSNs policy & charging rules function (PCRF),enabling mobile operators to offertiered and premium Joint solution offers awareness and enforcement of subscriber and service specific quality of service and traffic management over the wired and wireless network. Interoperability relationship. Technology Integration. Interoperability relationship.
Source: Company Website
MANAGEMENT TEAM
Allot has assembled a qualified management team that possesses deep experience and knowledge of the telecom industry. Many members of the executive team have also started companies whose solutions were targeted at the service provider market. While there has been some turnover at the CFO level three CFOs since 2007, in recent years, management has generally shown a strong ability to execute and surpass financial milestones, in our view. We believe that the management team possesses deep experience in the technology industry which should prove valuable in a sector known for its rapidly changing dynamics especially in the current, volatile spending environment. Rami Hadar, Director, President and CEO Rami Hadar has been serving as president and Chief Executive Officer since 2006 and possesses deep experience within the telecom sector both as a founder and as a management executive. From 2002 to 2005, he served as CEO of Native Networks; a maker of Ethernet packet switches; which was subsequently acquired by Alcatel-Lucent. Prior to this, he served as Executive Vice President of Sales and Marketing for Ensemble Networks; a broadband wireless equipment provider which he co-founded; from 1999 to 2002. In 1989, he founded and served as CEO for CTP Systems which was acquired by DSP Communications in 1995 AND which subsequently was purchased by Intel in 1997. Nachum Falek, CFO Nachum Falek has served as CFO since April 2010 and brings several years of executive financial leadership experience in the telecom sector. Prior to Allot, Mr. Falek served as CFO of AudioCodes from 2003 to 2010 and was the companys director of Finance from 200 to 2003. Amir Hochbaum, VP of Research and Development Amir Hochbaum has served as VP of Research and Development since 2008. Prior to joining Allot, he was the Chief Operating Officer of Axerra Networks and from 2005 to 2007; he served as SVP of Research, Development and Operations with Vyyo Israel. From 1994 to 2005, he held executive roles at Avaya including Managing Director and VP of R&D. Jay Klein, VP and CTO Jay Klein has served as CTO since 2007 and has been with the company since 2006. His primary responsibilities include technology strategy development, IP development, and driving algorithmic excellence. He brings nearly 20 years of engineering experience with leadership and founding roles at Ensemble Communications, DSPG, and CPT Systems. Andrei Elefant, VP of Product Management Mr. Elefant has served as VP of Product Management since 2007 and has held various management positions since joining Allot in 2000. His primary responsibilities include product management and product marketing for the company. Eli Cohen, VP of International Sales Eli has served as VP of International Sales since 2008 where he oversees the implementation of all of the companys direct and indirect channel strategies. Prior to Allot he held numerous roles including VP of Sales and Sales Operations and VP of Strategic Alliances at ECI Telecom. Prior to this he founded Gigaspaces Technologies. Pini Gvili, VP of Operations Pini Gvili has served has served as VP of Operations since 2006 where he oversees manufacturing, testing and fulfillment activities for all of the companys products. He previously served as VP of Operations for Celerica which specialized in technologies for cellular network optimization. Vin Costello, VP and GM of the Americas Vin Costello has served has served as VP and GM of the Americas since 2006 where he oversees sales, marketing and support functions in the region. He brings several years of experience in the telecom industry holding previous senior operating and management roles at NYNEX Corporation, Bell Atlantic, and Corvis Corporation. Lior Moyal, VP of Business Development Lior Moyal has served has served as VP of Business Development since 2009 with primary responsibility for driving Allots partnership and alliance strategy with system integrators, OEM vendors, and value added network partners. Prior to joining Allot he held senior roles at AudioCodes including VP of Business Development from 2008 to 2009 and VP of Marketing from 2005 to 2007.
ALLOT COMPARABLE MULTIPLES ANALYSIS

Exhibit 20: Comparable Multiples Analysis for Communications Equipment Sector
Networking Vendors Acme Packet Adtran Alcatel Lucent Allot Arris Aruba Networks Blue Coat BroadSoft Brocade Checkpoint Software Cisco Citrix EMC Ericsson Extreme Networks F5 Networks Fortinet HP Juniper Networks Logitech Meru Mitel Motorola Mobility Motorola Solutions NetApp Netgear NetScout Opnet Plantronics Polycom Radvision Radware Riverbed Sandvine ShoreTel SolarWinds Sonus SourceFire Symantec VmWare Websense Average Ticker APKT ADTN ALU ALLT ARRS ARUN BCSI BSFT BRCD CHKP CSCO CTXS EMC ERIC EXTR FFIV FTNT HPQ JNPR LOGI MERU MITL MMI MSI NTAP NTGR NTCT OPNT PLT PLCM RVSN RDWR RVBD SVC-T SHOR SWI SONS FIRE SYMC VMW WBSN Rating NEUTRAL NR NR OUTPERFORM NR OUTPERFORM NEUTRAL NR NR NR OUTPERFORM NR NR NR NEUTRAL OUTPERFORM OUTPERFORM NR NEUTRAL NR NR NR NR NR NR NEUTRAL NEUTRAL NR NEUTRAL OUTPERFORM NEUTRAL OUTPERFORM OUTPERFORM NR OUTPERFORM NR NR NR NR NR NR Price 09/07/11 $49.50 $30.03 $3.40 $12.14 $10.56 $19.89 $15.94 $29.24 $3.98 $52.79 $15.64 $57.92 $22.02 $11.01 $2.77 $79.39 $18.71 $24.01 $21.17 $10.28 $8.64 $3.40 $37.67 $41.35 $36.04 $27.04 $12.99 $33.01 $30.61 $22.83 $5.92 $25.74 $24.23 $1.70 $6.79 $24.58 $2.34 $28.15 $16.56 $90.21 $19.15 EV/SALES CY2011 CY2012 9.9 x 7.7 x 2.1 x 1.9 x 0.3 x 0.3 x 3.4 x 2.9 x 0.8 x 0.7 x 4.6 x 3.9 x 1.0 x 1.0 x 5.6 x 4.4 x 1.1 x 1.1 x 7.0 x 6.3 x 1.7 x 1.6 x 4.4 x 3.8 x 2.2 x 2.0 x NM NM 0.3 x 0.3 x 4.5 x 3.8 x 6.4 x 5.6 x 0.5 x 0.5 x 2.1 x 1.8 x 0.6 x 0.5 x 1.1 x 0.9 x 0.6 x 0.6 x 0.6 x 0.5 x 1.0 x 1.0 x 1.8 x 1.6 x 0.6 x 0.6 x 1.6 x 1.4 x 3.7 x 3.1 x 1.5 x 1.4 x 2.3 x 2.0 x NM NM 2.3 x 2.1 x 4.8 x 4.0 x 1.6 x 1.3 x 1.0 x 0.9 x 8.7 x 7.0 x 0.9 x 0.9 x 4.3 x 3.5 x 1.9 x 1.8 x 9.8 x 8.0 x 2.1 x 2.1 x 2.8 x 2.4 x EV/EBITDA CY2011 CY2012 22.9 x 17.9 x 7.2 x 6.2 x 3.1 x NM 18.3 x 14.2 x 6.3 x 4.6 x 20.8 x 16.9 x 5.6 x 6.8 x 31.0 x 15.6 x 4.9 x 5.1 x 11.8 x 10.6 x 5.4 x 4.8 x 14.3 x 11.5 x 7.6 x 7.4 x NM NM 8.1 x 2.5 x 11.3 x 9.4 x 27.8 x 23.3 x 3.5 x 3.5 x 8.1 x 6.9 x 5.5 x 4.8 x NM NM 5.7 x 4.8 x 14.2 x 9.4 x 5.4 x 4.9 x 8.7 x 7.1 x 4.9 x 3.9 x 5.9 x 1.4 x 18.4 x 12.4 x 5.8 x 5.5 x 11.0 x 8.4 x NM NM 13.7 x 11.3 x 15.3 x 12.5 x 17.8 x 10.1 x 31.5 x 13.8 x 17.6 x 13.7 x NM NM 26.5 x 18.9 x 5.4 x 4.6 x 26.3 x 21.2 x 8.0 x 7.8 x 12.6 x 9.5 x CASH ADJ P/E CY2011 CY2012 38.2 x 31.1 x 11.9 x 10.0 x 8.1 x 7.5 x 24.2 x 19.3 x 9.8 x 10.7 x 28.9 x 27.8 x 12.3 x 17.6 x 34.5 x 21.8 x 8.3 x 8.2 x 15.4 x 13.7 x 8.5 x 7.6 x 22.0 x 17.9 x 12.6 x 11.0 x NM NM 25.7 x 3.5 x 17.6 x 14.9 x 45.8 x 40.2 x 6.1 x 6.1 x 13.1 x 11.2 x 11.3 x 9.4 x NM NM 5.1 x 4.7 x 62.0 x 20.0 x 10.9 x 8.7 x 12.1 x 10.4 x 7.5 x 7.2 x 11.3 x 8.2 x 31.0 x 22.6 x 8.6 x 7.6 x 17.6 x 13.6 x NM NM 15.2 x 12.9 x 24.5 x 18.8 x 30.0 x 12.9 x NM 34.9 x NM 20.2 x 13.7 x 21.0 x 54.0 x 34.6 x 10.3 x 8.9 x 42.8 x 34.4 x 11.8 x 11.7 x 20.1 x 15.9 x P/E CY2011 42.1 x 14.5 x 13.5 x 30.0 x 13.1 x 31.8 x 22.7 x 40.1 x 9.5 x 19.0 x 9.6 x 25.3 x 14.8 x 12.6 x 49.5 x 19.1 x 51.3 x 5.2 x 16.8 x 16.2 x NM 5.1 x NM 18.7 x 15.6 x 10.5 x 14.6 x 37.0 x 12.0 x 20.5 x NM 19.9 x 28.6 x 35.3 x NM 28.8 x 33.9 x 65.9 x 10.8 x 46.4 x 12.4 x 23.6 x CY2012 34.2 x 12.6 x 7.6 x 23.6 x 10.6 x 30.5 x 32.5 x 25.4 x 8.4 x 16.8 x 8.4 x 20.9 x 12.8 x 11.0 x 7.8 x 16.2 x 44.5 x 5.1 x 14.3 x 12.4 x NM 4.7 x 27.6 x 14.9 x 13.2 x 9.9 x 11.0 x 26.9 x 10.6 x 15.9 x NM 17.1 x 22.1 x 20.0 x 49.8 x 23.2 x 52.0 x 42.3 x 9.4 x 36.8 x 11.4 x 19.9 x
Source: Allot reports and Wedbush Securities estimates
ALLOT DISCOUNTED CASH FLOW MODEL

Exhibit 21: 10 year DCF Analysis
Acme Packet - Discounted Cash Flow Analysis ($ in millions except EPS) OPERATING CASH FLOW Less: Capital Expenditures UNLEVERED FREE CASH FLOW E 2011 11.560 (2.617) 8.944 E 2012 14.782 (3.457) 11.325 E 2013 24.301 (4.308) 19.993 E 2014 26.366 (5.312) 21.054 E 2015 31.721 (6.484) 25.238 E 2016 37.727 (7.809) 29.918 E 2017 44.247 (9.280) 34.967 E 2018 49.565 (10.884) 38.681 E 2019 55.010 (12.598) 42.412 E 2020 60.497 (14.390) 46.107 E 2021 65.941 (16.222) 49.719
Assumptions Discount Rate (WACC) Terminal FCF Growth Rate - Nominal Sum of Discounted Cash Flows Terminal Value PV of Terminal Value Enterprise Value Less: Debt Preferred Add: Cash Theretical Equity Value Fully Dilluted Shares Outstanding Theoretical EOY Price per Share 12.3% 4.0% 157 624 196 353 0 0 70 422 27 15.94
Sensitivity Analysis Terminal Growth Rate
Discount Rate
10% 12% 14%
3.0% 19.16 15.08 12.49 16.7 15.9 12.5
4.0% 20.85 15.94 12.98
5.0% 23.19 17.03 13.57
Average Median Range
23.2 Weighted Average Cost of Capital % of Total 0% 100% 100% Cost of Capital 5.00% 12.3% Tax Adjustment 8% After-tax Cost 4.6% 12.3% Wgtd Avg 0.0% 12.3% 12.3%
Debt Equity Total
Cost of Equity Risk-free Rate (10 yr. T-Bond) - Average Daily Rate Over Past 3 Months Risk Premium (Average) Beta - Bloomberg Weekly Raw Beta Over the Past 2 years Cost of Equity 2.9 5.0 1.88 12.3
ALLOT - INCOME STATEMENT

Exhibit 22: Income Statement
Allot Communications
Income Statement
TOTAL REVENUE OPERATING EXPENSES Cost of Revenue TOTAL COST OF REVENUE GROSS PROFIT GROSS MARGIN Sales and Marketing General and Administrative Research and Development TOTAL OPERATING EXPENSES OPERATING INCOME OPERATING MARGIN OTHER INCOME (EXPENSE) Interest (Net)+Other Other Income TOTAL OTHER INCOME (EXPENSE) INCOME BEFORE TAXES INCOME TAXES - (Provision) Benefit Tax Rate NON-GAAP NET INCOME BEFORE ADJUSTMENTS Pre Tax Stock Based Comp+Other GAAP NET INCOME Basic Shares Outstanding Diluted Shares Outstanding EPS - DILUTED (NON-GAAP) Y/Y Growth % EPS - Diluted (GAAP) Y/Y Growth % CASH-ADJSUTED EPS Margin Analysis Total Gross Margin Sales and Marketing General and administrative R&D Operating Tax Rate Net Margin Y/Y Change Total Revenue Gross Profit Sales and Marketing General and administrative R&D Operating Profit Net profit Sequential Change Total Revenue Gross Profit Sales and Marketing General and administrative R&D Operating Profit Net profit Mar 1Q10A 12.471 Jun 2Q10A 13.626 Sept 3Q10A 14.668 Dec 4Q10A 16.207 FY 2010 56.972 Mar 1Q11A 17.183 Jun 2Q11A 18.454 Sept 3Q11E 18.641 Dec 4Q11E 20.373 FY 2011E 74.651 Mar 1Q12E 20.040 Jun 2Q12E 21.173 Sept 3Q12E 21.999 Dec 4Q12E 24.133 FY 2012E 87.345
3.296 3.296 9.175 73.6% 5.021 1.099 2.495 8.615 0.560 4.5%
3.863 3.863 9.763 71.6% 5.201 1.162 2.635 8.998 0.765 5.6%
4.074 4.074 10.594 72.2% 5.398 1.230 2.858 9.486 1.108 7.6%
4.537 4.537 11.670 72.0% 5.551 1.291 2.924 9.766 1.904 11.7%
15.770 15.770 41.202 72.3% 21.171 4.782 10.912 36.865 4.337 7.6%
4.799 4.799 12.384 72.1% 6.093 1.246 2.879 10.218 2.166 12.6%
5.248 5.248 13.206 71.6% 6.150 1.255 2.996 10.401 2.805 15.2%
5.308 5.308 13.333 71.5% 6.208 1.265 3.073 10.545 2.788 15.0%
5.744 5.744 14.629 71.8% 6.631 1.378 3.329 11.339 3.290 16.1%
21.099 21.099 53.552 71.7% 25.082 5.144 12.277 42.503 11.048 14.8%
5.717 5.717 14.323 71.5% 6.666 1.353 3.278 11.296 3.027 15.1%
6.021 6.021 15.152 71.6% 6.950 1.376 3.396 11.723 3.429 16.2%
6.242 6.242 15.757 71.6% 7.106 1.405 3.516 12.027 3.730 17.0%
6.756 6.756 17.377 72.0% 7.687 1.464 3.751 12.901 4.476 18.5%
24.736 24.736 62.609 71.7% 28.408 5.598 13.940 47.947 14.662 16.8%
(0.414) (0.414) 0.146 0.031 -21.2% 0.177 (0.623) (0.446) 22.4 23.0 0.01 -121.9% (0.02) -85.2% 0.03
0.148 0.148 0.913 (0.127) 13.9% 0.786 (8.203) (7.417) 22.7 24.3 0.03 -299.7% (0.31) 579.5% 0.03
0.247 0.247 1.355 (0.100) 7.4% 1.255 (0.503) 0.752 22.8 23.6 0.05 -737.4% 0.03 -131.1% 0.04
(0.176) (0.176) 1.728 0.112 -6.5% 1.840 (0.491) 1.349 23.2 25.1 0.07 8553.7% 0.05 -179.3% 0.08
(0.195) (0.195) 4.142 (0.084) 2.0% 4.058 (9.820) (5.762) 22.8 24.0 0.17 -388.8% (0.24) -30.5% 0.18
0.059 0.033 0.092 2.258 (0.085) 3.8% 2.173 (0.547) 1.626 24.0 26.0 0.08 -50.7% 0.06 -50.7% 0.08
0.061 (0.124) (0.063) 2.742 (0.016) 0.6% 2.726 (1.115) 1.611 24.2 26.4 0.10 218.8% 0.06 -120.0% 0.11
0.032 0.032 2.819 (0.141) 5.0% 2.678 (0.600) 2.078 24.4 26.7 0.10 89.2% 0.08 145.1% 0.10
0.032 0.032 3.322 (0.166) 5.0% 3.156 (0.600) 2.556 24.7 26.9 0.12 59.5% 0.09 76.2% 0.12
0.184 (0.091) 0.093 11.141 (0.408) 3.7% 10.733 (2.862) 7.871 24.3 26.5 0.40 139.3% 0.30 -223.6% 0.40
0.070 0.070 3.097 (0.155) 5.0% 2.942 (0.800) 2.142 24.9 27.2 0.11 -73.3% 0.08 -73.3% 0.11
0.074 0.074 3.504 (0.175) 5.0% 3.328 (0.800) 2.528 24.6 27.5 0.12 17.3% 0.09 50.8% 0.12
0.075 0.075 3.805 (0.190) 5.0% 3.615 (0.800) 2.815 25.2 27.7 0.13 29.7% 0.10 30.1% 0.13
0.096 0.096 4.572 (0.229) 5.0% 4.344 (0.800) 3.544 24.8 28.0 0.16 32.3% 0.13 33.2% 0.15
0.316 0.316 14.978 (0.749) 5.0% 14.229 (3.200) 11.029 24.9 27.6 0.52 27.3% 0.40 34.5% 0.50
73.6% 40.3% 8.8% 20.0% 4.5% 21.2% 1.4%
71.6% 38.2% 8.5% 19.3% 5.6% -13.9% 5.8%
72.2% 36.8% 8.4% 19.5% 7.6% -7.4% 8.6%
72.0% 34.3% 8.0% 18.0% 11.7% 6.5% 11.4%
72.3% 37.2% 8.4% 19.2% 7.6% -2.0% 7.1%
72.1% 35.5% 7.3% 16.8% 12.6% -3.8% 12.6%
71.6% 33.3% 6.8% 16.2% 15.2% -0.6% 14.8%
71.5% 33.3% 6.8% 16.5% 15.0% -5.0% 14.4%
71.8% 32.6% 6.8% 16.3% 16.1% -5.0% 15.5%
71.7% 33.6% 6.9% 16.4% 14.8% -3.7% 14.4%
71.5% 33.3% 6.8% 16.4% 15.1% -5.0% 14.7%
71.6% 32.8% 6.5% 16.0% 16.2% -5.0% 15.7%
71.6% 32.3% 6.4% 16.0% 17.0% -5.0% 16.4%
72.0% 31.9% 6.1% 15.5% 18.5% -5.0% 18.0%
71.7% 32.5% 6.4% 16.0% 16.8% -5.0% 16.3%
33.1% 33.0% 16.9% -0.6% 7.6% -168.0% -122.8%
36.1% 34.1% 11.7% -1.0% 31.0% -237.1% -319.6%
35.3% 33.6% 6.9% 13.9% 26.3% -340.3% -778.4%
40.6% 36.3% 5.8% 15.4% 26.3% -1686.7% 9584.2%
36.5% 34.3% 10.0% 6.8% 22.5% NM NM
37.8% 35.0% 21.4% 13.4% 15.4% 286.8% 1127.9%
35.4% 35.3% 18.2% 8.0% 13.7% 266.7% 246.8%
27.1% 25.9% 15.0% 2.8% 7.5% 151.6% 113.4%
25.7% 25.4% 19.5% 6.8% 13.9% 72.8% 71.5%
31.0% 30.0% 18.5% 7.6% 12.5% 154.7% 164.5%
16.6% 15.7% 9.4% 8.6% 13.8% 39.7% 35.4%
14.7% 14.7% 13.0% 9.7% 13.3% 22.3% 22.1%
18.0% 18.2% 14.5% 11.1% 14.4% 33.8% 35.0%
18.5% 18.8% 15.9% 6.2% 12.7% 36.1% 37.6%
17.0% 16.9% 13.3% 8.8% 13.5% 32.7% 32.6%
8.2% 7.1% -4.3% -1.8% 7.7% -566.7% 831.6%
9.3% 6.4% 3.6% 5.7% 5.6% 36.6% 344.1%
7.6% 8.5% 3.8% 5.9% 8.5% 44.8% 59.7%
10.5% 10.2% 2.8% 5.0% 2.3% 71.8% 46.6%
36.5% 34.3% 10.0% 6.8% 22.5% NM NM
6.0% 6.1% 9.8% -3.5% -1.5% 13.8% 18.1%
7.4% 6.6% 0.9% 0.7% 4.1% 29.5% 25.4%
1.0% 1.0% 0.9% 0.8% 2.6% -0.6% -1.7%
9.3% 9.7% 6.8% 9.0% 8.3% 18.0% 17.8%
31.0% 30.0% 18.5% 7.6% 12.5% 154.7% 164.5%
-1.6% -2.1% 0.5% -1.8% -1.6% -8.0% -6.8%
5.7% 5.8% 4.3% 1.7% 3.6% 13.3% 13.1%
3.9% 4.0% 2.2% 2.1% 3.6% 8.8% 8.6%
9.7% 10.3% 8.2% 4.2% 6.7% 20.0% 20.2%
ALLOT BALANCE SHEET AND CASH FLOW STATEMENT

Exhibit 23: Balance Sheet, Cash Flow Statement, and Key Ratios
Balance Sheet ($ in millions) ASSETS Cash & Equivalents Accounts Receivable Inventory Other TOTAL CURRENT ASSETS Gross Plant Accumulated Depeciation Net PP&E LT Investments Goodwill+Intangibles Other TOTAL ASSETS LIABILITIES & SHAREHOLDERS' EQUITY Accounts Payable Deferred Revenue Other Current Liabilities TOTAL CURRENT LIABILITIES Other Non-current Deferred Revenue Long Term Debt TOTAL LONG TERM LIABILITIES SHAREHOLDERS' EQUITY Preferred Retained Earnings Common Additional Paid In Capital Less Treasury Stock Other Equity TOTAL EQUITY TOTAL LIABILITIES & SHAREHOLDERS' EQUITY Cash Flow ($ in millions) OPERATIONS Net Income Depreciation+Amortization Receivables Inventory Accounts Payable Deferred Revenue Other Non Cash Charges OPERATING CASH FLOW INVESTING Capital Expenditures Acquisition of Businesses Net Investments Other CASH FROM INVESTMENTS FINANCING Net Debt Net Common Shares Issued Dividends Other CASH FLOW FROM FINANCING OTHER ADJUSTMENTS NET INCREASE/(DECREASE) IN CASH A 1Q 41.735 5.372 6.111 4.282 57.500 15.664 9.830 5.834 14.116 3.607 0.746 81.803 A 2Q 55.359 7.096 2.428 7.531 72.414 16.304 10.511 5.793 0.000 3.577 0.688 82.472 A 3Q 56.231 7.538 9.679 2.920 76.368 16.639 11.191 5.448 0.000 3.546 0.587 85.949 A 4Q 59.449 10.739 10.830 4.913 85.931 16.751 11.558 5.193 0.000 3.516 0.502 95.142 A 2010 59.449 10.739 10.830 4.913 85.931 16.751 11.558 5.193 0.000 3.516 0.502 95.142 A 1Q 60.953 13.506 11.644 5.691 91.794 17.467 12.249 5.218 0.000 3.486 0.521 101.019 A 2Q 63.498 11.142 9.724 6.763 91.127 18.074 12.959 5.115 0.000 3.455 0.529 100.226 E 3Q 64.030 12.427 11.206 6.763 94.426 18.718 13.681 5.037 0.000 3.455 0.529 103.447 E 4Q 69.850 13.582 12.126 6.763 102.321 19.423 14.429 4.994 0.000 3.455 0.529 111.298 E 2011 69.850 13.582 12.126 6.763 102.321 19.423 14.429 4.994 0.000 3.455 0.529 111.298 E 1Q 74.166 13.360 11.117 6.763 105.406 20.216 15.206 5.010 0.000 3.455 0.529 114.400 E 2Q 75.360 14.116 11.708 6.763 107.947 21.054 16.015 5.039 0.000 3.455 0.529 116.970 E 3Q 73.957 14.666 12.137 6.763 107.523 21.924 16.857 5.068 0.000 3.455 0.529 116.574 E 4Q 81.175 16.089 13.136 6.763 117.163 22.879 17.734 5.146 0.000 3.455 0.529 126.293 E 2012 81.175 16.089 13.136 6.763 117.163 22.879 17.734 5.146 0.000 3.455 0.529 126.293
2.000 8.875 6.756 17.631 0.162 3.667 0.000 3.829
4.654 7.136 8.024 19.814 0.153 3.465 0.000 3.618
5.206 7.008 9.148 21.362 0.176 3.575 0.000 3.751
5.140 10.828 10.122 26.090 0.191 3.873 0.000 4.064
5.140 10.828 10.122 26.090 0.191 3.873 0.000 4.064
5.169 11.765 10.872 27.806 0.210 4.396 0.000 4.606
2.094 11.384 11.240 24.718 0.223 4.381 0.000 4.604
5.898 8.723 11.240 25.861 0.223 4.381 0.000 4.604
6.382 13.534 11.240 31.156 0.223 4.381 0.000 4.604
6.382 13.534 11.240 31.156 0.223 4.381 0.000 4.604
6.352 14.524 11.240 32.116 0.223 4.381 0.000 4.604
6.690 14.227 11.240 32.158 0.223 4.381 0.000 4.604
6.936 10.772 11.240 28.947 0.223 4.381 0.000 4.604
7.507 16.375 11.240 35.122 0.223 4.381 0.000 4.604
7.507 16.375 11.240 35.122 0.223 4.381 0.000 4.604
0.000 (64.140) 0.492 128.476 0.000 (4.485) 60.343 81.803 A 1Q (0.446) 0.682 2.470 (1.065) (1.142) 5.029 (2.064) 3.464
0.000 (71.557) 0.492 128.476 0.000 1.629 59.040 82.472 A 2Q (7.417) 0.681 (1.724) (1.420) 2.654 (1.941) 10.672 1.505
0.000 (70.805) 0.492 128.476 0.000 2.673 60.836 85.949 A 3Q 0.752 0.680 (0.442) (7.251) 0.552 (0.018) 6.250 0.523
0.000 (69.456) 0.492 128.476 0.000 5.476 64.988 95.142 A 4Q 1.349 0.657 (3.201) 3.952 (0.066) 4.118 (4.950) 1.859
0.000 (69.456) 0.492 128.476 0.000 5.476 64.988 95.142 A 2010 (5.762) 2.700 (2.897) (5.784) 1.998 7.188 9.908 7.351
0.000 (67.830) 0.492 128.476 0.000 7.469 68.607 101.019 A 1Q 1.626 0.691 (2.768) (0.814) 0.027 1.459 0.744 0.965
0.000 (66.219) 0.492 128.476 0.000 8.155 70.904 100.226 A 2Q 1.611 0.710 2.364 1.920 (3.075) (0.396) (0.239) 2.895
0.000 (64.141) 0.492 128.476 0.000 8.155 72.982 103.447 E 3Q 2.078 0.722 (1.285) (1.482) 3.804 (2.661) 0.000 1.177
0.000 (61.585) 0.492 128.476 0.000 8.155 75.538 111.298 E 4Q 2.556 0.748 (1.155) (0.920) 0.484 4.811 0.000 6.524
0.000 (61.585) 0.492 128.476 0.000 8.155 75.538 111.298 E 2011 7.871 2.871 (2.844) (1.296) 1.240 3.213 0.505 11.560
0.000 (59.443) 0.492 128.476 0.000 8.155 77.680 114.400 E 1Q 2.142 0.777 0.222 1.009 (0.030) 0.990 0.000 5.110
0.000 (56.915) 0.492 128.476 0.000 8.155 80.208 116.970 E 2Q 2.528 0.809 (0.756) (0.591) 0.338 (0.297) 0.000 2.031
0.000 (54.100) 0.492 128.476 0.000 8.155 83.023 116.574 E 3Q 2.815 0.842 (0.550) (0.429) 0.245 (3.456) 0.000 (0.533)
0.000 (50.556) 0.492 128.476 0.000 8.155 86.567 126.293 E 4Q 3.544 0.877 (1.423) (0.999) 0.571 5.604 0.000 8.173
0.000 (50.556) 0.492 128.476 0.000 8.155 86.567 126.293 E 2012 11.029 3.305 (2.507) (1.010) 1.124 2.841 0.000 14.782
(0.837) 0.000 (3.062) 0.000 (3.899)
(0.586) 0.000 11.670 0.000 11.084
(0.542) 0.000 (0.462) 0.000 (1.004)
(0.202) 0.000 (9.995) 0.000 (10.196)
(2.166) 0.000 (1.849) 0.000 (4.015)
(0.680) 0.000 (0.539) 0.000 (1.219)
(0.588) 0.000 (0.262) (0.850)
(0.644)
(0.704)
(0.644)
(0.704)
(2.617) 0.000 (0.801) 0.000 (3.418)
(0.793)
(0.838)
(0.871)
(0.955)
(0.793)
(0.838)
(0.871)
(0.955)
(3.457) 0.000 0.000 0.000 (3.457)
0.000 0.000 0.000 0.314 0.314 (0.121)
0.000 0.000 0.000 0.453 0.453 13.042
0.000 0.000 0.000 0.763 0.763 0.282
0.000 0.000 0.000 1.522 1.522 (6.815)
0.000 0.000 0.000 3.052 3.052 6.388
0.000 0.000 0.000 1.253 1.253 0.999
0.000 0.000 0.000 0.214 0.214 2.259
0.000 0.532
0.000 5.819
0.000 0.000 0.000 1.467 1.467 9.610
0.000 4.317
0.000 1.193
0.000 (1.403)
0.000 7.218
0.000 0.000 0.000 0.000 0.000 11.325
Source: Allot and Wedbush Securities estimates
Covered Public Companies Mentioned in this Report (As of close 9/7/2011) Company Ticker Price Rating Price Target Cisco CSCO $15.88 OUTPERFORM $18 Aruba Networks ARUN $20.03 OUTPERFORM $25 Acme Packet APKT $49.61 NEUTRAL $70 Fortinet FTNT $18.85 OUTPERFORM $24 F5 Networks FFIV $79.92 OUTPERFORM $90 Riverbed RVBD $24.22 OUTPERFORM $28 Juniper Networks JNPR $21.54 NEUTRAL $24
Analyst Certification I, Sanjit Singh, Rohit Chopra, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not, directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained in this report.
Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ211.pdf
Investment Rating System: Outperform: Expect the total return of the stock to outperform relative to the median total return of the analysts (or the analysts team) coverage universe over the next 6-12 months. Neutral: Expect the total return of the stock to perform in-line with the median total return of the analysts (or the analysts team) coverage universe over the next 6-12 months. Underperform: Expect the total return of the stock to underperform relative to the median total return of the analysts (or the analysts team) coverage universe over the next 6-12 months. The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the other stocks in the analysts coverage universe (or the analysts team coverage).* Rating Distribution (as of June 30, 2011) Outperform:59% Neutral: 35% Underperform: 6% Investment Banking Relationships (as of June 30, 2011) Outperform:14% Neutral: 2% Underperform: 0%
The Distribution of Ratings is required by FINRA rules; however, WS stock ratings of Outperform, Neutral, and Underperform most closely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS stock ratings are on a relative basis. The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The analysts receive compensation that is based upon various factors including WS total revenues, a portion of which are generated by WS investment banking activities. Wedbush Equity Research Disclosures as of September 8, 2011 Company Allot Communications F5 Networks Cisco Systems Aruba Networks Fortinet Riverbed Technology Acme Packet, Inc. Juniper Networks Disclosure 1 1 1 1 1 1 1 1
Research Disclosure Legend 1. WS makes a market in the securities of the subject company. 2. WS managed a public offering of securities within the last 12 months. 3. WS co-managed a public offering of securities within the last 12 months. 4. WS has received compensation for investment banking services within the last 12 months. 5. WS provided investment banking services within the last 12 months. 6. WS is acting as financial advisor. 7. WS expects to receive compensation for investment banking services within the next 3 months. 8. WS provided non-investment banking securities-related services within the past 12 months.
9. 10. 11.
WS has received compensation for products and services other than investment banking services within the past 12 months. The research analyst, a member of the research analysts household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks. WS or one of its affiliates beneficially own 1% or more of the common equity securities.
Price Charts Wedbush disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed until the following quarter. Additional information on recommended securities is available on request.
* WS changed its rating system from (Strong Buy/Buy/Hold/Sell) to (Outperform/ Neutral/Underperform) on July 14, 2009. Please access the attached hyperlink for WS Coverage Universe: http://www.wedbush.com/services/cmg/equities-division/research/equityresearch Applicable disclosure information is also available upon request by contacting Ellen Kang in the Research Department at (213) 6884529, by email to ellen.kang@wedbush.com, or the Business Conduct Department at (213) 688-8090. You may also submit a written request to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017.
OTHER DISCLOSURES
RESEARCH DEPT. * (213) 688-4505 * www.wedbush.com EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076 CORPORATE HEADQUARTERS (213) 688-8000 The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a representation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to be nor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned herein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary and advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales thereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. The herein mentioned securities may be sold to or bought from customers on a principal basis by this firm. Additional information with respect to the information contained herein may be obtained upon request.
EQUITY RESEARCH DEPARTMENT (213) 688-4529 DIRECTOR OF RESEARCH Mark D. Benson (213) 688-4435
RETAIL AND CONSUMER Consumer Products Rommel T. Dionisio Kurt M. Frederick, CFA CPA Entertainment: Toys Edward Woo, CFA Healthy Lifestyles Kurt M. Frederick, CFA CPA Specialty Retail: Hardlines Joan L. Storms, CFA John Garrett, CFA Specialty Retail: Softlines Betty Chen
TECHNOLOGY, MEDIA AND TELECOM Communications Equipment Rohit Chopra Sanjit Singh Entertainment: Retail Michael Pachter Nick McKay Alicia Jenks Entertainment: Software Michael Pachter Edward Woo, CFA Nick McKay
LIFE SCIENCES Biotechnology/Biopharmaceuticals/BioDefense Gregory R. Wade, Ph.D. (415) 274-6863 David M. Nierengarten, Ph.D. (415) 274-6862 Christopher N. Marai, Ph.D. (415) 274-6861 Cardiac, Hepatic and Regenerative Duane Nash, MD JD MBA (415) 263-6650 Akiva Felt (415) 263-6648 Emerging Pharmaceuticals Liana Moussatos, Ph.D. Richard Lau Christopher N. Marai, Ph.D.
(212) 938-9934 (213) 688-4459
(212) 668-9871 (212) 938-9922
(213) 688-4382
(213) 688-4474 (213) 688-4343 (212) 938-9927
(213) 688-4459 (213) 688-4474 (213) 688-4382 (213) 688-4343 (415) 263-6626 (415) 274-6851 (415) 274-6861
(213) 688-4537 (213) 688-4523
(415) 273-7328
Computer Services: Financial Technology Gil B. Luria (213) 688-4501 Internet and E-Commerce Edward Woo, CFA Media James Dix, CFA Movies and Entertainment Michael Pachter Nick McKay Alicia Jenks Semiconductors Betsy Van Hees Ryan Jue
Healthcare Services - Managed Care Sarah James (213) 688-4503 Daniel Patt (212) 938-9937 Medical Diagnostics and Life Sciences Tools Zarak Khurshid (415) 274-6823
RETAIL/CONSUMER MARKET RESEARCH Gabriella Santaniello (213) 688-4557
(213) 688-4382
CLEAN TECHNOLOGY AND INDUSTRIAL GROWTH Aerospace and Defense Kenneth Herbert Andrew Doup Clean Technology Craig Irwin David Giesecke Environmental Services Al Kaschalk Kevin Lee Industrial Biotechnology Liana Moussatos, Ph.D. Christopher N. Marai, Ph.D.
(213) 688-4315
(415) 274-6875 (415) 274-6876
(213) 688-4474 (213) 688-4343 (212) 938-9927
(212) 938-9926 (212) 938-9925
(415) 274-6869 (415) 263-6669
(213) 688-4539 (213) 688-4303
Telecommunications Infrastructure Suhail Chandy, CFA (213) 688-4380 Scott P. Sutherland, CFA (213) 688-4522 Telecommunications Software Scott P. Sutherland, CFA (213) 688-4522 Suhail Chandy, CFA (213) 688-4380 Wireless Equipment Scott P. Sutherland, CFA Suhail Chandy, CFA
(415) 263-6626 (415) 274-6861
Water and Renewable Energy Solutions David Rose, CFA (213) 688-4319
(213) 688-4522 (213) 688-4380
EQUITY SALES Los Angeles San Francisco New York Boston
(213) 688-4470 / (800) 444-8076 (415) 274-6800 (212) 938-9931 (617) 832-3700
EQUITY TRADING Los Angeles San Francisco New York Boston
(213) 688-4470 / (800) 421-0178 (415) 274-6811 (212) 344-2382 (617) 832-3700
CORPORATE HEADQUARTERS 1000 Wilshire Blvd., Los Angeles, CA 90017-2465 Tel: (213) 688-8000 www.wedbush.com

Allot Communications (ALLT)

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Allot Communications (ALLT)

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Equity Research

Allot Communications (ALLT)

September 8, 2011 Price

26.40 $321.02 $5.30 - $19.15 $2.55 $2.41 $0.26 0%

Q1 Mar Q2 Jun Q3 Sep Q4 Dec Year* Change

$12.5A 13.6A 14.7A 16.2A $57.0A -2010A ACTUAL

$17.2A 18.5A 18.6E 20.4E $74.7E 31.0%

--$18.4E 19.4E $73.3E

$20.0E 21.2E 22.0E 24.1E $87.3E 17.0%

$19.4E 20.5E 21.5E 23.1E $84.6E

Q1 Mar Q2 Jun Q3 Sep Q4 Dec Year* P/E Change

$0.01A 0.03A 0.05A 0.07A $0.17A ---

$0.08A 0.10A 0.10E 0.12E $0.40E -139.3%

--$0.10E 0.10E $0.38E

$0.11E 0.12E 0.13E 0.16E $0.52E -27.3%

$0.11E 0.12E 0.13E 0.14E $0.51E

Source: Thomson Reuters

Sanjit Singh (212) 938-9922

Sanjit Singh (212) 938-9922

Sanjit Singh (212) 938-9922

Valuation and Price Target Risks

Source: Thomson, IDC, Infonetics

Source: Thomson, IDC, Infonetics

Sanjit Singh (212) 938-9922

Exhibit 3: Forward 12-Month EV/Sales Ratio

MEDIAN FWD EV/SALES SINCE INCEPTION

Exhibit 4: 12-Month Forward 12 P/E ratio

MEDIAN FWD P/E SINCE INCEPTION

Historical Forward 12 Months P/E/G

MEDIAN FWD P/E/G SINCE INCEPTION

Sanjit Singh (212) 938-9922

Standalone DPI Market Expected to Reach $2bn by 2015

Source: Company Reports and Infonetics Research, April 2011

Sanjit Singh (212) 938-9922

Exhibit 7: Global Mobile Data Traffic Forecast

Exhibit 8: Global Mobile Data Traffic Forecast by Device

Source: Cisco VNI. February 2011

Source: Cisco VNI. February 2011

Exhibit 9: Top Applications by Bytes in North America

Exhibit 10: Top Applications by Bytes in Europe

Top Applications by Bytes, North America

Source: Sandvine Global Internet Phenomenon Report, Spring 2011

Source: Sandvine Global Internet Phenomenon Report, Spring

Sanjit Singh (212) 938-9922

Mobile Data Traffic Versus ARPU for U.S. Carriers

$50.00 $49.50 $49.00 $48.50 $48.00 ARPU $47.50

Global Mobile Data Traffic

$47.00 $46.50 $46.00

3,000 2,000 1,000

$45.50 $45.00 2010 2011 2012 2013 2014 2015 0

Source: Cisco VNI Forecast February 2011, IDC

Source: Tellabs End of Profit Study January 2011

Traffic in PB per Month

Total Susbcriber ARPU for U.S. Carriers

$35 $30 $25 $20 $15 $10 2010 2011 2012

Sanjit Singh (212) 938-9922

Healthy Backlog Suggests Near-term Visibility In Spite of an Uncertain Spending Environment

Solid Positioning in Wireless Mobile Market Key to Sustaining Growth

Sanjit Singh (212) 938-9922

Exhibit 15: Allot vs Sandvine, Number of Wireless Providers Wins

Source: Company Reports

Sanjit Singh (212) 938-9922