Blue Coat Reports Financial Results for Second Quarter Ended October 31, 2008

Achieves Record Net Revenue

SUNNYVALE, Calif., November 25, 2008 - Blue Coat Systems, Inc. (NASDAQ: BCSI), the leader in WAN Application Delivery and Secure Web Gateway, today reported its financial results for its second quarter of fiscal 2009 ended October 31, 2008. Total net revenue for the second quarter of fiscal 2009 was $119.0 million, an increase of 62% compared to net revenue of $73.4 million in the same quarter last year, and an increase of 16% compared to net revenue of $102.5 million in the immediately preceding quarter. Excluding net revenue associated with the acquisition of Packeteer, Inc. on June 6, 2008, net revenue for the second quarter of fiscal 2009 was $93.9 million, an increase of 28% compared to net revenue of $73.4 million in the same quarter last year, and an increase of 9% compared to net revenue of $86.4 million in the immediately preceding quarter.

"Despite a difficult economic environment, Blue Coat continued to execute its strategy during the second quarter, enabling us to once again report record net revenue," said Brian NeSmith, president and chief executive officer, Blue Coat Systems. "We have largely completed the integration of Packeteer, Inc., which we acquired in June, and recognized approximately $25 million in net revenue from the acquired business in the second quarter. In addition, we achieved integration between our ProxySG appliances and the PacketShaper appliances we acquired from Packeteer. Customers around the world have an ongoing need to gain visibility and control of corporate networks, accelerate business-critical applications, and prevent malicious attacks to achieve the cost and risk reduction that is essential to their success. Blue Coat is uniquely positioned to provide the visibility, acceleration and security required in a single solution."

On a GAAP basis, the Company reported a net loss of $0.3 million, or ($0.01) per share, in the second quarter of fiscal 2009, compared to net income of $7.0 million, or $0.17 per diluted share, in the second quarter of fiscal 2008, and a net loss of $5.8 million, or ($0.15) per share, in the first quarter of fiscal 2009.

The Company reported non-GAAP net income of $11.6 million, or $0.27 per diluted share, in the second quarter of fiscal 2009, compared to non-GAAP net income of $12.4 million, or $0.30 per diluted share, in the second quarter of fiscal 2008, and net income of $6.8 million, or $0.16 per diluted share, in the first quarter of fiscal 2009.

Current quarter GAAP and non-GAAP net income includes $4.6 million of expense for Packeteer integration activities compared to $4.8 million in the first quarter of fiscal 2009. These expenses relate principally to compensation incentives that are not anticipated in future quarters.

Excluded from current quarter non-GAAP net income is $7.2 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $5.1 million in stock-based compensation expense, $3.2 million in amortization of intangible assets, and $0.7 million in expenses associated with matters related to the stock option investigation. Non-GAAP net income for the current quarter also includes $4.3 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.

In the second quarter of fiscal 2008, non-GAAP net income excluded $4.0 million in stock-based compensation expense, $0.4 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $0.3 million in legal settlement costs. Non-GAAP net income in the second quarter of fiscal 2008 did not include additional tax expense for non-GAAP items as the Company's tax liability at that time was limited to foreign and state tax obligations.

Non-GAAP net income in the first quarter of fiscal 2009 included $4.8 million of expense for integration activities related to the acquisition of Packeteer, but excluded $6.1 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $4.2 million in stock-based compensation expense, $2.1 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $1.5 million in restructuring expense related to severance costs. Non-GAAP net income in the first quarter of fiscal 2009 also included $2.1 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.

Blue Coat ended the quarter on October 31, 2008, with cash, cash equivalents, and restricted cash of $97.8 million, an increase of $21.5 million from the prior quarter. Cash flow provided by operations in the second quarter of fiscal 2009 was $27.1 million.

Financial Outlook

For the third fiscal quarter ending January 31, 2009, in consideration of the current economic environment the Company is currently planning net revenue in the range of $106.0 to $112.0 million. On a GAAP basis, the Company expects a net loss of ($0.12) to ($0.03) per share. On a non-GAAP basis, the Company expects net income of $0.12 to $0.20 per diluted share. Non-GAAP earnings per diluted share excludes expense related to the fair value write-up of acquired inventory sold during the quarter, stock-based compensation expense, amortization of intangible assets, and expenses associated with the stock option investigation and assumes an effective tax rate of 30% on non-GAAP pre-tax income.

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