Riverbed Technology (RVBD)

Research and Development

Continued investment in research and development is critical to our business. To this end, we have assembled a team of engineers with expertise in various fields, including networking, applications, storage and systems management. We have invested significant time and financial resources into the development of our products. We plan to expand our product offerings and solutions capabilities in the future and plan to dedicate significant resources to these continued research and development efforts. Further, as we expand internationally and into different sectors, we may incur additional costs to conform our products to comply with local laws or local product specifications.

Research and development expenses were $58.7 million, $39.7 million, and $19.2 million in 2008, 2007, and 2006, respectively.

Research and Development

Continued investment in research and development is critical to our business. To this end, we have assembled a team of engineers with expertise
in various fields, including networking, applications, storage and systems management. We have invested significant time and financial resources into the development of our products. We plan to expand our product offerings and solutions capabilities
in the future and plan to dedicate significant resources to these continued research and development efforts. Further, as we expand internationally and into different sectors, we may incur additional costs to conform our products to comply with
local laws or local product specifications.

Research and development expenses were $58.7 million, $39.7 million, and $19.2 million in 2008, 2007,
and 2006, respectively.

Research and Development

All costs to develop our products are expensed as incurred.

SIZE="2">2.    NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of vested common shares outstanding during the period. Diluted net income (loss) per common share is computed by giving effect to all potential dilutive common shares, including options, common stock
subject to repurchase, warrants and convertible preferred stock.

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RIVERBED TECHNOLOGY, INC.

FACE="ARIAL" SIZE="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

FACE="ARIAL" SIZE="2">The following table sets forth the computation of income (loss) per share:

The following weighted average outstanding options and RSUs were excluded from the computation of diluted
net income (loss) per common share for the periods presented because including them would have had an anti-dilutive effect:

Stock options outstanding with an exercise price lower than our average stock price for the periods
presented, RSUs, and Plan Shares (“In-the-money awards”) that would otherwise have a dilutive effect under the treasury stock method, are excluded from the calculations of the diluted loss per share in periods with a loss since the effect
in such periods would have been anti-dilutive.

Stock options outstanding with an exercise price higher than our average stock price for the periods
presented, (“Out-of-the-money awards”) are excluded from the calculations of the diluted net income (loss) per share since the effect would have been anti-dilutive under the treasury stock method.

Research and Development

All costs to develop our products are expensed as incurred. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, our products are released soon after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.

Research and Development

Research and Development

All costs to develop our products are expensed as incurred. Software development costs can be capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, our products are released soon after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.

Basic net income (loss) per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by giving effect to all potential dilutive common shares, including options, common stock subject to repurchase, warrants and convertible preferred stock.

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The following table sets forth the computation of income (loss) per share:

The following weighted average outstanding options, common stock subject to repurchase and convertible preferred stock were excluded from the computation of diluted net loss per common share for the periods presented because including them would have had an antidilutive effect:

Research and Development

All costs to develop our products are expensed as incurred. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, our products are released soon after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.

Research and Development

All costs to develop our products are expensed as incurred. Software development costs can be capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, our products are released soon after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.