Check Point Software Reports Q3 2004 Results - Achieves 25% License Revenue Growth Over Last Year

Experienced Strong Growth in Core VPN-1/FireWall-1 Products

REDWOOD CITY, Calif. - October 18, 2004 - Check Point Software Technologies Ltd. (NASDAQ: CHKP), the world leader in securing the Internet, today announced its financial results for the third quarter ended September 30, 2004. Revenues for the third quarter were $129.3 million, an increase of 22% compared to $106.3 million in the third quarter of 2003.

Net income for the third quarter of 2004 was $66.8 million, and $69.1 million, excluding net acquisition related charges, an increase of 18% compared to $58.4 million in the third quarter of 2003.

Earnings per diluted share for the third quarter of 2004 were $0.26, and $0.27, excluding net acquisition related charges, an increase of 17% compared to $0.23 in the third quarter of 2003.

Operating income, excluding acquisition related charges, improved to $71.9 million from $62.1 million in the third quarter of 2003.

Operating margin for the third quarter of 2004, excluding acquisition related charges, was 56% in the third quarter of 2004, compared to 54% in the second quarter of 2004.

Deferred revenues in the quarter ended September 30, 2004 were $124.8 million, an increase of $25.6 million and 26% over the third quarter of 2003.

The company generated cash flow from operating activities of $64.4 million, an increase of 10% compared to the third quarter of 2003. Days Sales Outstanding improved to 49 days, compared to 51 days in the third quarter of 2003.

As part of the company's share repurchase program the company purchased 6.8 million shares during the quarter at a total cost of close to $122 million. In 2004 the company repurchased a total of 10.1 million shares at an aggregate cost of $200 million.

"This quarter our team achieved exceptional results driven by strong performance of our core products, with increased sales both sequentially and compared to the third quarter last year," said Gil Shwed, chairman and chief executive officer of Check Point Software.

¹ "Acquisition related charges" refer to the impact of the amortization of intangible assets and deferred stock compensation resulting from the acquisition of Zone Labs.

Third quarter highlights include:

• Delivered Check Point Integrity SecureClient - Embarked on the first step in the Check Point endpoint security strategy of Total Access Protection (TAP) by enabling an easy install and automatic configuration of best-of-breed remote access, endpoint security and policy enforcement.
  
  
• SmartDefense Defeated Latest Attacks - Via the Check Point SmartDefense™ Service our customers were protected against potential vulnerabilities and dynamic threats, such as those announced in the Microsoft July 2004 Security Bulletin Summary.
  
  
• Check Point Continues to Enhance Partners and Users Expertise - Hosted a series of premier business and networking events to educate users and partners on Check Point solutions. Over 1,000 partners and end users participated in Check Point Experience™ events in Asia and benefited from valuable technology and market information via presentations, technical and business-focused tracks and product demonstrations from Check Point and its partners.
  
  
• Enhanced Security Level for PC Users - Announced support of Microsoft Windows XP Service Pack 2 for Integrity™ and Integrity Clientless Security™ endpoint security solutions and the ZoneAlarm family of products to provide all levels of Internet users with trusted and easy-to-use security.

Industry Accolades: Recognition for Check Point Leadership and Innovation

• Check Point was placed in the leader quadrant of Gartner's IPSec VPN Equipment Magic Quadrant report based on the company's ability to execute and the completeness of the corporate vision.
  
  
• A poll of 1,400 CIOs ranked Check Point's security administration skills as the top security skill set desired by IT departments, according to findings published in the Robert Half Technology Information Technology Hiring Index and Skills Report.
  
  
• Windows IT Pro readers designate Check Point security solutions Best in the Industry: Check Point Next Generation™ with Application Intelligence™ was named the best firewall, and VPN-1® SecureClient™ and ZoneAlarm® Pro 4.5 were named the best remote access VPN and the best spyware blocker, respectively.

Mr. Shwed continued: "Our recent introduction of new intelligent security solutions such as Connectra, Web Intelligence, InterSpect and Integrity, together with the success of our core products this quarter, continued to generate growth and enables our customers to use the best available technologies and keep their networks secured."

Conference Call Information
Check Point will host a conference call with the investment community on October 18, 2004 at 8:30 AM ET/5:30 AM PT. To listen to the live Web cast, please visit Check Point's Web site at http://www.checkpoint.com/ir. A replay of the conference call will be available through November 1, 2004, at the Company's website or by telephone at (973) 341-3080, confirmation code 5241054.

Safe Harbor Statement
Certain statements in this press release are forward-looking statements. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results could differ materially from Check Point's current expectations. Factors that could cause or contribute to such differences include, but are not limited to: Check Point's ability to integrate Zone Lab's operations effectively, the impact on revenues of economic and political uncertainties and weaknesses in various regions of the world, including the commencement or escalation of hostilities or acts of terrorism; the inclusion of network security functionality in third-party hardware or system software; any unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; a shift in demand for products such as Check Point's; unknown factors affecting third parties with which Check Point has formed business alliances; timely availability and customer acceptance of Check Point's new and existing products, and other factors and risks discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2003, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations.

About Check Point Software
Check Point Software Technologies Ltd. (www.checkpoint.com) is the worldwide leader in securing the Internet. It is the confirmed market leader of both the worldwide VPN and firewall markets. Through its Next Generation product line, the company delivers a broad range of intelligent Perimeter, Internal and Web security solutions that protect business communications and resources for corporate networks and applications, remote employees, branch offices and partner extranets. The company's Zone Labs (www.zonelabs.com) division is one of the most trusted brands in Internet security, creating award-winning endpoint security solutions that protect millions of PCs from hackers, spyware and data theft. Extending the power of the Check Point solution is its Open Platform for Security (OPSEC), the industry's framework and alliance for integration and interoperability with "best-of-breed" solutions from over 350 leading companies. Check Point solutions are sold, integrated and serviced by a network of more than 2,300 Check Point partners in 92 countries.

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©2004 Check Point Software Technologies Ltd. All rights reserved.
Check Point, Application Intelligence, Check Point Express, the Check Point logo, AlertAdvisor, ClusterXL, Cooperative Enforcement, ConnectControl, Connectra, CoSa, Cooperative Security Alliance, FireWall-1, FireWall-1 GX, FireWall-1 SecureServer, FloodGate-1, Hacker ID, IMsecure, INSPECT, INSPECT XL, Integrity, InterSpect, IQ Engine, Open Security Extension, OPSEC, Policy Lifecycle Management, Provider-1, Safe@Home, Safe@Office, SecureClient, SecureKnowledge, SecurePlatform, SecurRemote, SecurServer, SecureUpdate, SecureXL, SiteManager-1, SmartCenter, SmartCenter Pro, Smarter Security, SmartDashboard, SmartDefense, SmartLSM, SmartMap, SmartUpdate, SmartView, SmartView Monitor, SmartView Reporter, SmartView Status, SmartViewTracker, SofaWare, SSL Network Extender, TrueVector, UAM, User-to-Address Mapping, UserAuthority, VPN-1, VPN-1 Accelerator Card, VPN-1 Edge, VPN-1 Pro, VPN-1 SecureClient, VPN-1 SecuRemote, VPN-1 SecureServer, VPN-1 VSX, Web Intelligence, ZoneAlarm, Zone Alarm Pro, Zone Labs, and the Zone Labs logo, are trademarks or registered trademarks of Check Point Software Technologies Ltd. or its affiliates. All other product names mentioned herein are trademarks or registered trademarks of their respective owners. The products described in this document are protected by U.S. Patent No. 5,606,668, 5,835,726 and 6,496,935 and may be protected by other U.S. Patents, foreign patents, or pending applications.

  Licenses

  Subscriptions

  Services

  Cost of revenues

  Research and development

  Selling and marketing

  General and administrative

  Amortization of intangible assets
  and deferred stock compensation

  Acquisition related in-process R&D

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Decrease (increase) in trade and other receivables, net

Increase (decrease) in trade payables and other accrued liabilities

Other adjustments

Amortization of intangible assets and deferred stock compensation

Acquisition related in-process R&D

Cash paid in conjunction with the acquisition of Zone Labs, net

Investment in property and equipment

Net cash used in investing activities

Proceeds from issuance of shares upon exercise of options

Purchase of treasury shares

Net cash provided by (used in) financing activities