FORM F-1

Proposed

Title of Each Class of Securities to be Registered

Maximum Aggregate Offering Price(1)

Amount of Registration Fee

Ordinary shares, par value NIS 0.10

U.S.$82,225,000

U.S.$8,799

As filed with the Securities and Exchange Commission on October 31, 2006

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

ALLOT COMMUNICATIONS LTD.

(Exact Name of Registrant as Specified in its Charter)


State of Israel	3576	Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Allot Communications Ltd.
22 Hanagar Street
Neve Ne’eman Industrial Zone B
Hod-Hasharon 45240
Israel
+972 (9) 761-9200

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Allot Communications, Inc.
7664 Golden Triangle Drive
Eden Prairie, MN 55344
(952) 944-3100

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies of Communications to:


Joshua G. Kiernan, Esq. White & Case LLP 5 Old Broad Street London EC2N 1DW England Tel: +44 (20) 7532-1408 Fax: +44 (20) 7532-1001		Ori Rosen, Adv. Oren Knobel, Adv. Ori Rosen & Co. One Azrieli Center Tel Aviv 67021 Israel Tel: +972 (3) 607-4700 Fax: +972 (3) 607-4701		James R. Tanenbaum, Esq. Morrison & Foerster LLP 1290 Avenue of the Americas New York, New York Tel: (212) 468-8000 Fax: (212) 468-7900		Ehud Sol, Adv. Herzog, Fox & Neeman Asia House 4 Weizman Street Tel Aviv 64239, Israel Tel: +972 (3) 692-2020 Fax: +972 (3) 696-6464

Approximate date of commencement of proposed sale to the public:
As soon as practicable after effectiveness of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, check the following box. o

CALCULATION OF REGISTRATION FEE


(1)		Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457 under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated October 31, 2006

PROSPECTUS

6,500,000 Shares

Ordinary Shares

We are offering 6,500,000 ordinary shares. No public market currently exists for our ordinary shares.

We have applied to have our ordinary shares approved for quotation on The Nasdaq Global Market under the symbol “ALLT.” We anticipate that the initial public offering price will be between $9.00 and $11.00 per ordinary share.

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 8.

We have granted the underwriters a 30-day option to purchase up to an additional 975,000 ordinary shares on the same terms and conditions as set forth above if the underwriters sell more than 6,500,000 ordinary shares in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the ordinary shares on or about , 2006.

Lehman Brothers

Deutsche Bank Securities

CIBC World Markets

RBC Capital Markets

, 2006

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		8
Special Note Regarding Forward-Looking Statements		21
Use of Proceeds		22
Dividend Policy		22
Capitalization		23
Dilution		25
Selected Consolidated Financial Data		27
Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Business		48
Management		63
Certain Relationships and Related Party Transactions		80
Principal Shareholders		85
Description of Share Capital		89
Ordinary Shares Eligible for Future Sale		94
Taxation and Government Programs		97
Underwriting		106
Legal Matters		111
Experts		111
Enforceability of Civil Liabilities		111
Where You Can Find Additional Information		113
Index to Consolidated Financial Statements		F-1

Until , 2006, 25 days after the date of this prospectus, all dealers that buy, sell or trade our ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by or on our behalf. We have not authorized anyone to provide you with information different from that contained in this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy our ordinary shares in any jurisdiction where it is unlawful. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of ordinary shares.

PROSPECTUS SUMMARY

You should read the following summary together with the entire prospectus, including the more detailed information in our consolidated financial statements and related notes appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in “Risk Factors.”

Allot Communications Ltd.

We are a leading designer and developer of broadband service optimization solutions using advanced deep packet inspection, or DPI, technology. Our solutions provide broadband service providers and enterprises with real-time, highly granular visibility into, and control of, network traffic, and enable them to efficiently and effectively manage and optimize their networks. Our carrier-class products are used by service providers to offer subscriber-based and application-based tiered services that enable them to optimize their service offerings, reduce churn rates and increase average revenue per user, or ARPU. The rapid growth of broadband networks, such as cable, DSL and wireless, and the proliferation in the number and complexity of broadband applications have led broadband service providers to demand new ways to manage their networks. Costly infrastructure upgrades to increase network bandwidth capacity neither address service providers’ need for network visibility nor prioritize revenue-generating applications. Furthermore, service providers have generally been unsuccessful in capturing the significant new revenue opportunities available from providing differentiated, premium broadband services that command higher prices. By capitalizing on new revenue opportunities and maximizing the capacity of existing network infrastructure, our DPI technology enables service providers to optimize returns on their investments and enhance the quality of the services they provide.

Our products consist of our NetEnforcer traffic management systems and NetXplorer application management suite. NetEnforcer employs advanced DPI technology, which identifies applications at high speeds by examining data packets and searching for application patterns and behaviors. NetXplorer enables the implementation of user-defined network management policies and the collection of detailed statistics on the network’s users and applications. Our goal is to be the leading provider of independent network inspection and management solutions used by service providers and enterprises to transform generic access broadband networks into intelligent broadband networks.

We generated revenues of $23.0 million in 2005, representing a 27% increase over the prior year, and revenues of $24.6 million for the nine months ended September 30, 2006, representing a 55% increase over the same period in the prior year. We had a net loss of $2.4 million in 2005 and had net income of $0.6 million for the nine months ended September 30, 2006. We have incurred net losses in each fiscal year since our incorporation in 1996 and may be unable to achieve profitability. Since inception, we have financed our operations primarily through private placements of our equity securities and, to a lesser extent, through borrowings from financial institutions. We had 232 employees as of September 30, 2006.

Industry Background

The rapid proliferation of broadband networks in recent years has been largely driven by demand from users for faster and more reliable access to the Internet and by the proliferation in the number and complexity of broadband applications. According to a May 2006 report by International Data Corporation, or IDC, a provider of information about the telecommunications market, the number of broadband subscribers globally is expected to reach 396 million by 2010, representing a compound annual growth rate of 14% over the 206 million in 2005. The applications utilized by broadband subscribers include peer-to-peer file-sharing (P2P), voice-over-IP (VoIP), Internet video and online video gaming applications, as well as applications to enable online content services. In contrast to traditional applications, such as e-mail and web-browsing, these new applications require large amounts of bandwidth and are highly sensitive to network delays, thereby increasing the cost of maintaining network performance. As a result of increased competition and lack of service differentiation, broadband access has become a commodity, contributing to downward price pressure, low ARPU, and high customer churn rates. Yet, because service providers do not have the tools to analyze and manage applications on their networks, most service providers still only offer users undifferentiated connectivity for a flat fee, regardless of the type of application, its importance to the user and level of usage.

To address these issues, service providers have begun to offer premium, differentiated applications, such as VoIP, video and new online content services based on the willingness of subscribers to pay premium rates for upgraded quality of service and certain applications. However, to offer premium services, and to guarantee service levels, service providers need to be able to identify, control and protect network applications used by different subscribers. By offering such tiered services and charging subscribers according to the value of these services, service providers can capitalize on the revenue enhancement opportunities enabled by different broadband applications.

The proliferation of network applications also presents significant challenges for enterprises operating wide-area networks. Enterprises have also become increasingly dependent on broadband Internet and Intranet access, as content distribution between partners and customers, employee remote access, and VoIP, have become more common. Applications such as e-mail, customer relationship management, or CRM, enterprise resource planning, or ERP, and other online transactional and business applications are critical to enterprises’ businesses. In order to guarantee the performance of these mission-critical applications, as well as to reduce infrastructure expenses, enterprises seek the tools required to prioritize and control their network applications.

Service providers and enterprises are seeking to transform generic access broadband networks into intelligent broadband networks. The ability to identify, distinguish and prioritize different network applications plays a major role in intelligent network management, allowing service providers to optimize bandwidth usage and reduce operational costs, while maintaining high quality of service. Application designers are employing increasingly sophisticated methods to avoid detection by network operators who desire to manage network use. For example, applications can disguise themselves as permitted applications and also use sophisticated encryption techniques to avoid detection. Unlike traditional network infrastructure devices, such as switches and routers, which can perform only a very limited examination of packets, DPI solutions offer active control over each application and subscriber in the network.

The Allot Solution

Our NetEnforcer traffic management systems and NetXplorer application management suite enable our end-customers to accomplish the following objectives:


	•	Network visibility. Our intelligent network solutions enable our end-customers to generate detailed real-time and historical reports by identifying bandwidth usage by application, subscriber usage patterns, network performance, long- and short-term usage trends and abnormal events, such as denial-of-service attacks and worms.

	•	Application management and control. Service providers and enterprises apply our intelligent network application management technology to improve service quality by optimizing available bandwidth usage for different applications. For example, P2P applications that consume large amounts of network bandwidth can be de-prioritized to enhance the performance of applications, such as VoIP or Internet video, that are more sensitive to delay. Intelligent application controls can ensure the delivery of mission-critical applications by deprioritizing non-critical, bandwidth-intensive applications, discourage the use of non-business or recreational applications, and warn and protect against security threats.

	•	Subscriber and service management. Our offerings enable service providers to increase total revenue, ARPU and customer loyalty by offering tiered service plans and differentiated content offerings to better meet varying subscriber needs. Using our systems, service providers can tailor and price service plans based on customer needs and demands, such as plans that guarantee performance of certain applications, the ability to purchase bandwidth on demand or bandwidth for prioritized content delivery. Content providers can also contract with service providers to guarantee high quality service to their customers over the service provider’s infrastructure, thereby enabling content providers to differentiate their offerings.

Our Competitive Strengths

Our competitive strengths include the following:


	•	Market-leading DPI technology and analytical capabilities. Our focus on developing the most efficient means to search for hundreds of different applications, combined with our extensive database of algorithms that detect network applications, provide us with a significant competitive advantage. We believe that our NetEnforcer AC-2500, is currently the only commercially deployed solution with its level of functionality capable of supporting 5 gigabits/second performance and 2 million simultaneous connections.

	•	Broad product portfolio. We believe that our broad product portfolio with offerings targeted at small, midsize and large service providers and enterprises enables us to compete in, and our channel partners to serve, a wider range of profitable markets than our competitors.

	•	Independence from underlying network infrastructure. Our independent solutions are designed for easy deployment and to be less disruptive to existing networks than embedded solutions, which require changes or upgrades to the network infrastructure. In addition, independent solutions can be upgraded easily to respond to rapid changes in application behavior and subscriber demands, and offer end-customers flexibility in choosing any infrastructure equipment vendor.

	•	Global sales and marketing channels. Our global network of over 300 distributors, resellers and systems integrators, through which we make substantially all of our sales, have enabled us to achieve a diverse customer base. We also rely on these third parties to install and provide basic technical support for our systems. To date, we have deployed over 9,000 NetEnforcer systems in 118 countries.

	•	Focus on service optimization solutions. We believe that our dedicated focus on DPI solutions differentiates the level of service and support that we provide to our channel partners and end-customers. This includes our responsiveness to the introduction of new applications and effective integration of our products into our customers’ existing billing, customer care and other business systems.

Our Strategy

Our goal is to be the leader in offering service providers and enterprises network inspection and management solutions to transform generic access broadband networks into intelligent broadband networks. Our strategy to achieve this goal includes the following:


	•	Further our technological advantage. We intend to continue investing in the development of market leading broadband service optimization technologies and new broadband applications and services. Our next generation product, which is designed to support multiple channels of 10 gigabit/second full performance throughput rates, will utilize the new Advanced Telecom Computing Architecture standards, or ATCA, since it better enables the integration of additional third-party services into our product offerings.

	•	Continue to expand our sales and marketing channels. We intend to expand our world-wide sales and marketing channels to further address small and medium-sized service providers and enterprises, including the government and education sectors. We intend to seek channel partners in new geographical territories, as well as in vertical markets in countries where we have already established a presence.

	•	Focus on larger service providers. We intend to target larger service providers in response to increased demand from them for the ability to differentiate their service offerings. We believe that sales to these end-customers are more likely to result in sustained demand for our NetEnforcer systems as they deploy our products throughout their networks and as their networks grow. We intend to supplement these efforts by expanding our relationships with system integrators and OEMs who have existing relationships with larger service providers.


	•	Selectively pursue strategic partnerships and acquisitions. We intend to selectively pursue partnerships and acquisitions that will provide us access to complementary technologies and accelerate our penetration into new markets, including mobile networks, security applications and subscriber management.

We face a number of challenges in achieving our goal. In particular, the market for our products in the service provider market is still emerging and is highly competitive, and our growth may be harmed if carriers do not adopt DPI solutions or if they adopt DPI solutions from our competitors. In addition, sales of our products can involve lengthy sales cycles, which may impact the timing of our revenues and result in us expending significant resources without making any sales.

Company Information

We were incorporated under the laws of the State of Israel in November 1996. Our principal executive offices are located at 22 Hanagar Street, Neve Ne’eman Industrial Zone B, Hod-Hasharon 45240, Israel, and our telephone number is +972 (9) 761-9200. Our web site address is www.allot.com. The information on our web site does not constitute part of this prospectus.

Unless the context otherwise requires, the terms “Allot,” “we,” “us” and “our” refer to Allot Communications Ltd. and our wholly-owned subsidiaries.

The terms “NetEnforcer” and “NetReality,” as well as the name “Allot Communications,” are registered trademarks and we have filed a trademark application to register our logo. All other registered trademarks appearing in this prospectus are owned by their holders.

THE OFFERING


Ordinary shares offered by us		6,500,000 shares.

Ordinary shares to be outstanding after this offering		20,914,233 shares.

Use of proceeds		We intend to use the net proceeds of this offering to fund our research and development activities, business development and marketing activities, and for general corporate purposes and working capital. We also may use a portion of the net proceeds to acquire or invest in complementary companies, products or technologies although we currently do not have any acquisition or investment planned.

Proposed Nasdaq Global Market symbol		“ALLT.”

The number of ordinary shares to be outstanding after this offering excludes (1) 3,541,171 ordinary shares reserved for issuance under our share option plans as of the date of this prospectus, of which options to purchase 3,451,439 ordinary shares at a weighted average exercise price of $2.32 per share have been granted, (2) 246,479 ordinary shares that have been issued, but are held in trust for the benefit of our founder and Chairman, Yigal Jacoby, pending his payment of the purchase price of such shares (see “Certain Relationships and Related Party Transactions — Agreements with Directors and Officers — Escrow Agreement with Yigal Jacoby”), and (3) up to 163,705 ordinary shares issuable upon the exercise of warrants granted to two Israeli banks and an Israeli non-profit organization at a weighted average exercise price of $3.37 per share.

Unless otherwise indicated, all information in this prospectus:


	•	reflects the issuance upon the closing of this offering of 270,016 ordinary shares upon the exercise of warrants to purchase Series B preferred shares on a cashless and non-cashless basis, and the receipt of $1,128 by us from such exercise;

	•	reflects the issuance upon the closing of this offering of 14,094 ordinary shares upon the exercise of an option to purchase Series B preferred shares and the receipt of NIS 620, representing approximately $145, from such exercise, held by Mr. Jacoby;

	•	reflects the conversion upon the closing of this offering of (1) all of our issued and outstanding Series A, B, C, D and E preferred shares into 10,969,745 ordinary shares, including 275,127 ordinary shares resulting from an anti-dilution adjustment for price protection granted to holders of our Series C preferred shares in connection with prior financings and this offering, and (2) all of our Series A ordinary shares into 611,349 ordinary shares;

	•	assumes an initial public offering price of $10.00 per ordinary share, the midpoint of the estimated initial public offering price range;

	•	assumes no exercise of the underwriters’ option to purchase from us up to 975,000 additional ordinary shares; and

	•	reflects a 1-for-100 share split effected on February 5, 1998, a share dividend effected on September 12, 2000 of three shares for each outstanding share, and a 4.3962-for-1 reverse share split effected on October 29, 2006. Such reverse share split was effected through a 10-for-1 consolidation of each series of our ordinary and preferred shares, followed by a share dividend of approximately 1.275 ordinary shares for each ordinary share outstanding and an adjustment to the ordinary share conversion ratio of our preferred shares and Series A ordinary shares. We effected the reverse share split in this manner in order to maintain a round par value per share and to give our board of directors maximum flexibility under Israeli law to determine the amount of the share dividend prior to printing preliminary prospectuses for this offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table presents summary consolidated financial and operating data derived from our consolidated financial statements. You should read this data along with the sections of this prospectus entitled “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


										Nine Months Ended
	Year Ended December 31,									September 30,
	2003			2004			2005			2005			2006
										(unaudited)
	(in thousands, except share and per share data)

Consolidated statements of operations data:
Revenues:
Products	$	13,122		$	14,638		$	18,498		$	12,576		$	20,718
Services		1,653			3,447			4,474			3,317			3,859

Total revenues		14,775			18,085			22,972			15,893			24,577

Cost of revenues(1):
Products		3,229			3,942			4,481			3,237			4,562
Services		362			679			938			699			845

Total cost of revenues		3,591			4,621			5,419			3,936			5,407

Gross profit		11,184			13,464			17,553			11,957			19,170

Operating expenses:
Research and development, gross		4,053			4,851			6,652			4,964			6,737
Less royalty-bearing participation		1,094			894			727			582			1,095

Research and development, net(1)		2,959			3,957			5,925			4,382			5,642

Sales and marketing(1)		8,164			10,104			11,887			8,797			10,859
General and administrative(1)		1,832			2,081			2,380			1,709			2,260
Impairment of intangible assets		—			366			—			—			—

Total operating expenses		12,955			16,508			20,192			14,888			18,761

Operating income (loss)		(1,771	)		(3,044	)		(2,639	)		(2,931	)		409
Financing and other income (expenses), net		(507	)		(241	)		45			36			229

Income (loss) before income tax expenses (benefit)		(2,278	)		(3,285	)		(2,594	)		(2,895	)		638
Income tax expenses (benefit)		2			3			(218	)		(178	)		75

Net income (loss)	$	(2,280	)	$	(3,288	)	$	(2,376	)	$	(2,717	)	$	563

Basic net earnings (loss) per share	$	(0.82	)	$	(1.18	)	$	(0.81	)	$	(0.94	)	$	0.04

Diluted net earnings (loss) per share	$	(0.82	)	$	(1.18	)	$	(0.81	)	$	(0.94	)	$	0.04

Weighted average number of shares used in computing basic net earnings (loss) per share		2,774,639			2,787,554			2,943,500			2,903,356			13,310,355

Weighted average number of shares used in computing diluted net earnings (loss) per share		2,774,639			2,787,554			2,943,500			2,903,356			15,501,698

Pro forma basic and diluted net earning (loss) per share of ordinary shares (unaudited)(2)							$	(0.17	)				$	0.04