Riverbed Technology (RVBD)

Software Development Costs

All of the Company’s research and development expenses have been charged to operations as incurred. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, the Company will capitalize material software development costs incurred after the technological feasibility of software development projects has been established. For the nine months ended September 30, 2008 and 2007, no software development costs met the criteria for capitalization.

Software Development Costs

All of the Company’s research and development expenses have been charged to operations as incurred. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, the Company will capitalize material software development costs incurred after the technological feasibility of software development projects has been established. For the years ended December 31, 2007 and 2006, no software development costs met the criteria for capitalization.

Software Development Costs

We account for costs incurred for computer software purchased or developed for internal use in accordance with Statement of position 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development stage, and amortize them over the software’s estimated useful life.

We capitalized $3.5 million, $2.1 million and $1.3 million in internal use software during the years ended December 31, 2008, 2007 and 2006, respectively. Amortization expense related to these assets totaled $1.1 million, $343,000 and $43,000 during the years ended December 31, 2008, 2007 and 2006, respectively.

Software
Development Costs

We account for costs incurred for computer software purchased or developed for internal use in accordance with Statement of
position 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development
stage, and amortize them over the software’s estimated useful life.

We capitalized $3.5 million, $2.1 million and $1.3 million in internal use
software during the years ended December 31, 2008, 2007 and 2006, respectively. Amortization expense related to these assets totaled $1.1 million, $343,000 and $43,000 during the years ended December 31, 2008, 2007 and 2006, respectively.

Software Development Costs

We account for costs incurred for computer software purchased or developed for internal use in accordance with Statement of position 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development stage, and amortize them over the software’s estimated useful life.

We capitalized $2.1 million, $1.3 million and $69,000 in internal use software during the years ended December 31, 2007, 2006 and 2005, respectively. Amortization expense related to these assets totaled $343,000, $43,000 and $31,000 during the years ended December 31, 2007, 2006 and 2005, respectively.

Software Development Costs

Software Development Costs

We account for costs incurred for computer software purchased or developed for internal use in accordance with SOP 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development stage and amortize them over the software’s estimated useful life.

We capitalized $212,000 and $1.3 million in internal use software during the three months ended March 31, 2007 and the year ended December 31, 2006, respectively. These additions to software development costs were placed into service during the quarter ended March 31, 2007. Amortization expense related to software development costs totaled approximately $78,000 and $10,000 in the three months ended March 31, 2007 and March 31, 2006, respectively.

Software Development Costs

We account for costs incurred for computer software purchased or developed for internal use in accordance with Statement of position 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development stage and amortize them over the software’s estimated useful life.

We capitalized $1.3 million, $69,000 and $0 in internal use software during the years ended December 31, 2006, 2005 and 2004, respectively. Amortization expense related to these assets totaled $43,000, $31,000 and $0 during the years ended December 31, 2006, 2005 and 2004,

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RIVERBED TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

respectively. We did not record amortization on $1.3 million of 2006 additions to software development costs as the software was not placed into service as of December 31, 2006.