Blue Coat Systems (BCSI) 8-K Results of Operations and Financial Condition

Exhibit 99.1

BLUE COAT REPORTS RESULTS FOR

SECOND QUARTER FISCAL 2012

SUNNYVALE, Calif., November 17, 2011 – Blue Coat Systems, Inc. (NASDAQ: BCSI), a leading provider of Web security and WAN optimization solutions, today reported financial results for its second fiscal quarter ended October 31, 2011. Total net revenue for the second quarter of fiscal 2012 was $114.1 million compared with net revenue of $109.5 million in the first quarter of fiscal 2012 and $121.0 million in the second quarter of fiscal 2011.

“In the second quarter, we delivered better revenue results than we anticipated, which drove improved bottom line performance,” said Gregory S. Clark, president and chief executive officer of Blue Coat Systems. “During the quarter we also made progress on refining our strategy and improving execution in specific areas of the company. Importantly, we implemented initiatives to extend our leadership in Web security and to better leverage our differentiated WAN optimization capabilities.”

On a GAAP basis, the Company reported net income of $4.6 million, or $0.10 per diluted share, for the second quarter of fiscal 2012, compared with net income of $2.7 million, or $0.06 per diluted share, in the first quarter of fiscal 2012 and $12.0 million, or $0.25 per diluted share, in the second quarter of fiscal 2011.

The Company reported non-GAAP net income of $9.3 million, or $0.20 per diluted share, for the second quarter of fiscal 2012, compared with non-GAAP net income of $8.4 million, or $0.18 per diluted share, in the first quarter of fiscal 2012 and $18.1 million, or $0.38 per diluted share, in the second quarter of fiscal 2011.

Cash flow provided by operations in the second quarter of fiscal 2012 was $18.1 million compared with $9.5 million in the first quarter of fiscal 2012 and $22.9 million in the second quarter of fiscal 2011. The Company ended the quarter with cash, cash equivalents, and restricted cash of $362.5 million.

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Financial Outlook

For the third fiscal quarter ending January 31, 2012, the Company currently expects net revenue in the range of $113 to $120 million. On a GAAP basis, the Company currently expects net income of $0.05 to $0.13 per diluted share. On a non-GAAP basis, the Company currently expects net income of $0.19 to $0.26 per diluted share. For the third quarter of fiscal 2012, the Company is assuming a diluted share count of approximately 47.3 million shares, an expected annual effective GAAP tax rate of 38% and an expected annual effective non-GAAP tax rate of 30%.

About Non-GAAP Financial Measures

The Company uses non-GAAP financial measures for internal evaluation and to report the results of its business. These non-GAAP financial measures include non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted net income per share. These measures are not in accordance with, nor an alternative to, U.S. generally accepted accounting principles or GAAP. These measures are intended to supplement GAAP financial information, and may be different from non-GAAP financial measures used by other companies. The Company believes that these measures provide useful information to its management, board of directors and investors regarding its ongoing operating activities and business trends related to its financial condition and results of operations. The Company believes that it is useful to provide investors with information to understand how specific line items in the statement of operations are affected by certain items, such as stock-based compensation expense, amortization of intangible assets, expenses for matters related to the stock option investigation, and restructuring expenses, and related income tax adjustments. In addition, the Company’s management and board of directors use these non-GAAP financial measures in developing operating budgets and in reviewing the Company’s results of operations, since such items have limited impact on their current and future operating decisions. Additionally, the Company believes that inclusion of these non-GAAP financial measures provides consistency and comparability with its past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. Refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP gross profit, operating income, net income and diluted net income per share.

2

Conference Call & Webcast

Blue Coat will hold its quarterly conference call to discuss final results for the second quarter of fiscal 2012 and the outlook for the third quarter of fiscal 2012 on Thursday, November 17, 2011 at 2:00 p.m. PST (5:00 p.m. EST). Participants in the United States should call (800) 230-1074. International participants should call (612) 234-9960. The passcode for the call is: 222996. The conference call can also be accessed through an audio webcast from the Company’s website,www.bluecoat.com/company/corporate-investor. A replay of the call will be available starting on Thursday, November 17, 2011 at 5:00 p.m. PST (8:00 p.m. EST), and can be accessed by calling (800) 475-6701 for U.S. participants and (320) 365-3844 for international participants. The passcode for the replay is 222996.

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About Blue Coat Systems

Blue Coat Systems, Inc. is a leading provider of Web security and WAN optimization solutions. Blue Coat offers solutions that provide the visibility, acceleration and security required to optimize and secure the flow of information to any user, on any network, anywhere. This application intelligence enables enterprises to tightly align network investments with business requirements, speed decision making and secure business applications for long-term competitive advantage. Blue Coat also offers service provider solutions for managed security and WAN optimization, as well as carrier-grade caching solutions to save on bandwidth and improve the end-user Web experience. For additional information, please visitwww.bluecoat.com.

# # #

FORWARD-LOOKING STATEMENTS: This document contains certain forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements including: any statements regarding our business outlook and future financial and operating results; any statements of expectation or belief; any statements regarding plans, strategies and objectives of management for future operations; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the risks that are described from time to time in the Securities and Exchange Commission reports filed by the Company, including but not limited to the risks described in the Company’s most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company. The Company assumes no obligation and does not intend to update any of these forward-looking statements, except as required by applicable law, after the date on which it was made.

Blue Coat and the Blue Coat logo are registered trademarks or trademarks of Blue Coat Systems, Inc. and/or its affiliates in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners.

Media Contact:	Jennifer Ruzicka	Investor Contact:	Jane Underwood
	Blue Coat Systems		Blue Coat Systems
	jennifer.ruzicka@bluecoat.com		jane.underwood@bluecoat.com
	408-541-3330		408-541-3015

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BLUE COAT SYSTEMS, INC.

Table 1

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

										Six Months Ended
	Three Months Ended									October 31,
	October 31, 2011			July 31, 2011			October 31, 2010			2011			2010
Net revenue:
Product	$	62,289		$	58,556		$	73,127		$	120,845		$	148,695
Service		51,792			50,953			47,920			102,745			94,832
Total net revenue		114,081			109,509			121,047			223,590			243,527
Cost of net revenue:
Product		14,883			13,764			15,284			28,647			31,248
Service		12,089			12,268			10,723			24,357			21,111
Total cost of net revenue		26,972			26,032			26,007			53,004			52,359
Gross profit		87,109			83,477			95,040			170,586			191,168
Operating expenses:
Sales and marketing		46,781			47,557			44,821			94,338			89,476
Research and development		19,618			19,209			20,948			38,827			40,803
General and administrative		11,447			10,173			10,715			21,620			21,058
Amortization of intangible assets		1,826			1,843			1,843			3,669			3,686
Restructuring		—			—			38			—			178
Total operating expenses		79,672			78,782			78,365			158,454			155,201
Operating income		7,437			4,695			16,675			12,132			35,967
Interest income		137			113			126			250			290
Interest expense		(227	)		(235	)		(223	)		(462	)		(447	)
Other income (expense), net		(473	)		(346	)		158			(819	)		(165	)
Income before income taxes		6,874			4,227			16,736			11,101			35,645
Provision for income taxes		2,288			1,532			4,703			3,820			9,687
Net income	$	4,586		$	2,695		$	12,033		$	7,281		$	25,958
Basic net income per share	$	0.10		$	0.06		$	0.26		$	0.16		$	0.56
Diluted net income per share	$	0.10		$	0.06		$	0.25		$	0.15		$	0.55
Weighted average shares used in computing basic net income per share		46,362			46,718			46,712			46,517			46,520
Weighted average shares used in computing diluted net income per share		46,699			47,692			47,638			47,124			47,594

BLUE COAT SYSTEMS, INC.

Table 2

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

											Six Months Ended
		Three Months Ended									October 31,
		October 31, 2011			July 31, 2011			October 31, 2010			2011			2010
Gross Profit Reconciliation:
GAAP gross profit		$	87,109		$	83,477		$	95,040		$	170,586		$	191,168
Stock-based compensation expense included in cost of revenue	A		451			440			422			891			776
Amortization of intangible assets included in cost of revenue	B		1,168			1,168			1,168			2,336			2,356
Non-GAAP gross profit		$	88,728		$	85,085		$	96,630		$	173,813		$	194,300
Operating Income Reconciliation:
GAAP operating income		$	7,437		$	4,695		$	16,675		$	12,132		$	35,967
Stock-based compensation expense	A		3,723			4,478			4,913			8,201			8,985
Amortization of intangible assets	B		2,994			3,011			3,011			6,005			6,042
Expense for matters related to the stock option investigation	C		—			—			41			—			99
Restructuring	D		—			—			38			—			178
Non-GAAP operating income		$	14,154		$	12,184		$	24,678		$	26,338		$	51,271
Net Income Reconciliation:
GAAP net income		$	4,586		$	2,695		$	12,033		$	7,281		$	25,958
Stock-based compensation expense	A		3,723			4,478			4,913			8,201			8,985
Amortization of intangible assets	B		2,994			3,011			3,011			6,005			6,042
Expense for matters related to the stock option investigation	C		—			—			41			—			99
Restructuring	D		—			—			38			—			178
Income tax adjustments	E		(2,023	)		(1,749	)		(1,977	)		(3,772	)		(4,069	)
Non-GAAP net income		$	9,280		$	8,435		$	18,059		$	17,715		$	37,193
Net Income per Share Reconciliation:
GAAP diluted net income per share		$	0.10		$	0.06		$	0.25		$	0.15		$	0.55
Stock-based compensation expense	A		0.08			0.09			0.10			0.17			0.19
Amortization of intangible assets	B		0.06			0.06			0.06			0.13			0.13
Expense for matters related to the stock option investigation	C		—			—			—			—			—
Restructuring	D		—			—			—			—			—
Income tax adjustments	E		(0.04	)		(0.03	)		(0.03	)		(0.07	)		(0.09	)
Non-GAAP diluted net income per share		$	0.20		$	0.18		$	0.38		$	0.38		$	0.78
Shares used in computing non-GAAP diluted net income per share			46,699			47,692			47,638			47,124			47,594

Notes:

(A) Stock-based compensation expense consists of non-cash charges for employee stock options, restricted stock awards, restricted stock units and employee stock purchase plan awards.

Results include stock-based compensation expense as follows (unaudited):

							Six Months Ended
	Three Months Ended						October 31,
	October 31, 2011		July 31, 2011		October 31, 2010		2011		2010
Cost of revenue	$	451	$	440	$	422	$	891	$	776
Sales and marketing		1,257		1,470		1,462		2,727		2,794
Research and development		1,478		1,395		1,579		2,873		2,810
General and administrative		537		1,173		1,450		1,710		2,605
Total	$	3,723	$	4,478	$	4,913	$	8,201	$	8,985

(B) Amortization of intangible assets associated with acquisitions.

(C) Includes expense for matters related to the Company's stock option investigation.

(D) Restructuring includes severance and facilities related exit costs associated with the Fiscal 2010 Restructuring Plan.

(E) Income tax adjustment is used to reconcile the GAAP tax provision to a non-GAAP tax provision utilizing an expected annual effective tax rate of 30% in fiscal 2012.

BLUE COAT SYSTEMS, INC.

Table 3

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	October 31,			April 30,
	2011			2011
ASSETS
Current assets:
Cash and cash equivalents	$	361,393		$	375,939
Accounts receivable, net		70,737			67,626
Inventory		9,934			10,134
Prepaid expenses and other current assets		11,706			14,091
Current portion of deferred income tax assets		10,582			10,399
Total current assets		464,352			478,189
Property and equipment, net		29,565			31,745
Restricted cash		1,066			1,031
Goodwill		242,611			242,611
Identifiable intangible assets, net		18,965			24,970
Non-current portion of deferred income tax assets		35,517			34,650
Other assets		5,760			6,212
Total assets	$	797,836		$	819,408
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	18,420		$	20,806
Accrued payroll and related benefits		17,745			15,947
Deferred revenue		116,995			121,526
Other current liabilities		11,184			10,758
Total current liabilities		164,344			169,037
Deferred revenue, less current portion		57,928			56,546
Deferred rent, less current portion		4,940			5,501
Long-term income taxes payable		38,953			35,152
Other non-current liabilities		791			688
Convertible senior notes		78,583			78,136
Commitments and contingencies
Blue Coat stockholders’ equity:
Common stock		4			4
Additional paid-in capital		1,239,979			1,269,311
Accumulated deficit		(787,686	)		(794,967	)
Total stockholders’ equity		452,297			474,348
Total liabilities and stockholders’ equity	$	797,836		$	819,408

BLUE COAT SYSTEMS, INC.

Table 4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Six Months Ended October 31,
	2011			2010
Operating Activities
Net income	$	7,281		$	25,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		7,126			6,953
Amortization		6,798			6,836
Stock-based compensation		8,201			8,985
Deferred income taxes		(1,050	)		3,686
Tax benefit of stock option deduction		41			523
Excess tax benefit from stock-based compensation		(334	)		(521	)
Gain on disposition of equipment		—			18
Changes in operating assets and liabilities:
Accounts receivable, net		(3,111	)		(17,976	)
Inventory		200			(4,788	)
Prepaid expenses and other assets		2,491			4,029
Accounts payable		(2,386	)		4,079
Accrued expenses and other liabilities		5,567			4,989
Deferred revenue		(3,149	)		8,666
Net cash provided by operating activities		27,675			51,437
Investing Activities
Purchases of property and equipment, and technology licenses		(4,946	)		(5,953	)
Restricted cash		(35	)		(45	)
Net cash used in investing activities		(4,981	)		(5,998	)
Financing Activities
Net proceeds from issuance of common stock		5,446			6,894
Payments for repurchases of common stock		(43,020	)		—
Excess tax benefit from stock-based compensation		334			521
Acquisition of noncontrolling interest		—			(427	)
Net cash (used in) provided by financing activities		(37,240	)		6,988
Net (decrease) increase in cash and cash equivalents		(14,546	)		52,427
Cash and cash equivalents at beginning of period		375,939			236,347
Cash and cash equivalents at end of period	$	361,393		$	288,774

BLUE COAT SYSTEMS, INC.

Table 5

RECONCILIATION OF PROJECTED GAAP TO

PROJECTED NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

		Three Months Ended
		January 31, 2012
		Low			High
Projected GAAP Net Income		$	2,200		$	6,300
Add back:
Stock-based compensation expense	A		4,700			4,700
Amortization of intangible assets	B		3,000			3,000
Income tax adjustments	C		(1,000	)		(1,500	)
Projected Non-GAAP net income		$	8,900		$	12,500
Projected GAAP Diluted Net Income per Share		$	0.05		$	0.13
Add back:
Stock-based compensation expense	A	$	0.10		$	0.10
Amortization of intangible assets	B	$	0.06		$	0.06
Income tax adjustments	C	$	(0.02	)	$	(0.03	)
Projected Non-GAAP diluted net income per share		$	0.19		$	0.26

(A) Stock-based compensation expense consists of non-cash charges for employee stock options, restricted stock awards, restricted stock units and employee stock purchase plan awards.

(B) Amortization of intangible assets associated with acquisitions.

(C) Income tax adjustment is used to reconcile the GAAP tax provision to a non-GAAP tax provision utilizing an expected annual effective tax rate of 30%.