##### Table of Contents



_
    _
   SECURITIES AND EXCHANGE
    COMMISSIONWashington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the year ended December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to
    
    .   Commission File Number
    000-27723
      SonicWALL, Inc.
 (Exact name of registrant as
    specified in its charter)
  California

77-0270079(State or other jurisdiction
    of

(IRS Employerincorporation or
    organization)

Identification
    No.)   1143 Borregas Avenue
    Sunnyvale, CA 94089 (Address of Principal
    Executive Offices, including zip code)
  (408) 745-9600
 (Registrants Telephone
    Number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
    Common Stock, no par value
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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TABLE OF CONTENTS  CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTSPART IITEM 1. BusinessITEM 1A. Risk FactorsITEM 1B. Unresolved Staff CommentsITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. Submission of Matters to a Vote of Security HoldersPART IIITEM 5. Market for Registrants Common Equity and Related Stockholder MattersSTOCK PERFORMANCE GRAPHITEM 5c. Issuer Purchases of Equity Securities (in thousands, except per-share amounts)ITEM 6. Selected Consolidated Financial DataITEM 7. Managements Discussion And Analysis Of Financial Condition And Results Of OperationsITEM 7A. Quantitative and Qualitative Disclosures about Market RiskITEM 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND  FINANCIAL STATEMENT SCHEDULEREPORT OF ARMANINO MCKENNA LLP, INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRMREPORT OF ARMANINO MCKENNA LLP, INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRMREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A. Controls and ProceduresITEM 9B.Other InformationPART IIIITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersITEM 13. Certain Relationships and Related Transactions, and Director IndependenceITEM 14. Principal Accounting Fees and ServicesPART IVITEM 15. Exhibits and Financial Statement SchedulesSIGNATURESVALUATION AND QUALIFYING ACCOUNTSEXHIBIT INDEXEXHIBIT 10.38EXHIBIT 10.39EXHIBIT 10.40EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1    Table of Contents  
  CAUTIONARY
    NOTE ON FORWARD-LOOKING STATEMENTS
     
  PART I
 
  ITEM 1.
    Business  Overview
  easy-to-use, easy-to-use
    (408) 745-9600.
 1




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Industry
    Background
  ease-of-use.
  Increasing
    Use of Broadband Access Technologies
  dial-up
  Importance
    of Data Security
    e-mail
      e-mail
  Integrated
    Solutions for Internet Security
   2




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easy-to-deploy
  The
    Advent of Secure Virtual Private Networks (VPNs)
  out-of-office site-to-site
  point-of-sale site-to-site
  Changing
    Mobile Computing Environment and Demand for
    SSL-VPN
     3




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Need
    for Anti-Virus, Intrusion Prevention and Content Filtering
    Solutions
    Rising
    Value of Data and Demand for Business Continuity
  point-in-time,
  Increases
    in Unsolicited
    E-Mail
    Strategy
      
    Global Growth.  We plan to focus our investment
    in those geographical areas that can sustain rates of growth
    consistent with our business objectives. Part of our global
    growth initiative also includes taking advantage of supply chain
    improvements wherever possible. We believe that this type of
    alignment of our resources will strengthen our global position.
    Continue to Bring New Products to the
    Market.  We use our internal product design and
    development and integration expertise to produce solutions that
    deliver value to our end-users.
    Continuous Cost Reduction.  We intend to be
    vigorous in our pursuit to lower costs in all aspects of our
    business. Supply chain improvements and continual business
    process improvement are key components of this initiative. We
    believe that the associated cost reductions will strengthen our
    market position and assist us in penetrating new markets. 4




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
    Strengthen Our Indirect Channel.  Our global
    target markets are generally served by a two-tier distribution
    model. We have achieved varying degrees of regional penetration
    in these markets with large-scale distributors at the hub of our
    model fulfilling the needs of value-added resellers
    (VARs) and systems integrators and creating a
    distribution web that covers over 50 countries. We intend to
    continue to implement programs designed to enhance our
    competitive position through distributors and VARs.
    Increase Services and Software Revenue.  We
    intend to continue to develop new services and licensed software
    offerings to generate additional revenue from our installed base
    and to provide additional sources of revenue ancillary to our
    product sales. We currently offer a selection of integrated
    functionality including gateway anti-virus, client anti-virus,
    anti-spyware, anti-spam, intrusion prevention, offsite backup,
    and content filtering subscription services. We also offer
    fee-based customer support services and training. We have
    dedicated sales and marketing personnel and programs that focus
    on selling these services, as well as add-on products to our
    existing base of customers.
    Inorganic Growth.  We intend to continue to
    explore corporate opportunities to enhance our ability to
    broaden the product range that we bring to the market. Where
    appropriate, we may license, OEM, or acquire technologies in
    order to better address the current and future requirements of
    our customers.  The
    SonicWALL Solutions
    (3) e-commerce
  Security
    Appliances
      SonicWALL TZ 150 and TZ 150 Wireless.
  SonicWALL TZ 170 and TZ 170 Wireless.
 5




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SonicWALL TZ 170 SP and TZ 170 SP
    Wireless.
  SonicWALL TZ 190.
  SonicWALL PRO 1260.
  SonicWALL PRO 2040.
  SonicWALL PRO 3060. site-to-site
  SonicWALL PRO 4060. site-to-site
  SonicWALL PRO 4100.
  SonicWALL PRO 5060. medium-to-large
  SonicWALL Content Security Manager (CSM) 2100 and
    3200.
  SonicWALL SSL-VPN 200, SSL-VPN 2000, and SSL-VPN
    4000. e-mail,
  SonicWALL Email Security 200, 300, 400, 500, 6000,
    8000.
  SonicWALL CDP 1440i, 2440i, 3440i, 4440i. end-to-end
 6




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Security
    Application and Services
    SonicWALL Global VPN Client.
  SonicWALL Content Filtering Service.
  SonicWALL Enforced Anti-Virus and Anti-Spyware
    Client. desktop-by-desktop
  SonicWALL Gateway Anti-Virus, Anti-Spyware, and Intrusion
    Prevention.
  SonicWALL Backup and Recovery Offsite
    Services.
  Global
    Security Management Applications
  sub-networks
  site-by-site
 7




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Value
    proposition
    
    High-Performance, Scalable, and Robust Access
    Security.  We offer our customers a comprehensive
    integrated security solution that includes firewall, VPN,
    gateway anti-virus, anti-spyware, intrusion prevention, content
    security, and content filtering. Specifically, we offer the
    following values:  
    Our access security products protect private networks against
    Internet-based theft, destruction, or modification of data, and
    can automatically notify customers if their network is under
    certain types of attack. SonicWALL has been awarded the
    internationally recognized International Computer Security
    Association (ICSA) Firewall and VPN Certification.
    Our SSL-VPN product family provides organizations of various
    sizes with an affordable, simple and secure clientless remote
    network and application access solution that requires no
    pre-installed client software.
    Our anti-virus services provide comprehensive virus protection
    with automatic updates and minimal administration.
    Our gateway anti-virus, anti-spyware, and intrusion prevention
    services shield networks from infection from malicious code by
    blocking transmissions through the gateway and disrupting
    background communications from existing spyware programs that
    transmit confidential data.
    Our content filtering service enables customers such as
    businesses, schools, government agencies, and libraries to
    restrict access to objectionable or inappropriate web sites.
    Our Secure Content Management solutions provide and
    end-to-end
    comprehensive protection against spam, virus, Spyware, intrusion
    and other vulnerabilities.
    Our products can serve a network of
    sub-10 user
    segments to all the way up to large enterprise with thousands of
    users. Each of our solutions, e.g., Email Security, Content
    Security Manager, Client Anti-Virus & Anti-Spyware,
    etc., work as a standalone solution, but also together to
    provide layered protection against a rapidly changing threat
    environment.  
    Ease of Installation and Use.  The SonicWALL
    product line of Internet security solutions delivers
    plug-and-play
    appliances designed for easy installation and use. Installation
    consists of connecting a SonicWALL device between the private
    network and the broadband Internet access device for our access
    security products and in front of the
    e-commerce
    web server for our transaction security products. SonicWALL
    products are configured and managed through a web browser-based
    interface or through our GMS with no required reconfiguration of
    personal computer applications. Specifically, we offer the
    following values:  
    Our access security products are pre-configured to interface
    with major Internet access technologies, including cable, DSL,
    Integrated Services Design Network (ISDN), Frame
    Relay, and T-1 via Ethernet.
    Our transaction security products are compatible with major web
    server and
    e-commerce
    software products and are designed to operate in the most
    sophisticated and highest traffic network architectures.
    Our CSM product can work behind most existing firewalls and VPN
    appliances.
    Our Email security solution works with most Email servers.  
    Low Total Cost of Ownership.  The SonicWALL
    product design minimizes the purchase, installation, and
    maintenance costs of Internet security. The suggested retail
    prices of our security solutions start below $400 and scale up
    to over $35,000.
    Reliability.  The SonicWALL products are
    designed for reliability and uptime. Our products use an
    embedded single purpose operating system. 8




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
    Reduces Recovery Time Objective (RTO).  The
    SonicWALL CDP series reduces downtime after failure. Traditional
    backup technologies require the manual process of rotating
    backup tapes, restoring tapes in specific orders, and copying
    data to staging areas before placing the data back into
    production environments. The SonicWALL CDP solution reduces this
    downtime through one click recovery and access to backup data by
    any secure, registered user with assigned rights on the network
    Provides for Recovery Point Objective
    (RPO).  After a data loss event, businesses
    traditionally restore data typically from a single point in time
    on either a daily, weekly, or monthly basis. The SonicWALL CDP
    series allows users to recover data to a specific point in time
    since it continuously backs up data thereby allowing users with
    privileges to select any previous version of a file and
    instantly bring it into a product environment.
    Integrated
    End-to-End
    Local and Offsite Solution.  The SonicWALL CDP
    product line represents an integrated
    end-to-end
    backup and recovery solution. Traditional multi-vendor solutions
    typically involve tape drive vendors, backup software vendors,
    offsite backup providers, tape transportation and vaulting
    providers, and the manual process of managing tapes. The
    integrated SonicWALL solution solves this problem by providing a
    hands-free disk-based continuous solution.  Technology
  ease-of-use
  Appliance
    Platforms
  system-on-a-chip
    
    Deep Packet Inspection Firewall.  The core
    technology is the deep packet inspection firewall software that
    examines all layers of the packet (from the physical layer up to
    application layer) and determines whether to accept or reject
    the requested communication based on information derived from
    previous communications and the applications in use. Deep packet
    inspection dynamically adjusts based on the changing state of
    the communication running across the firewall and is invisible
    to users on the protected network.
    IP Address Management.  Our appliances manage
    the complexity of IP addressing through. Network Address
    Translation (NAT) tools which allow networks to
    share a small number of valid public IP addresses with an equal
    or larger number of client computers on the LAN.    
    Web Browser-Based Management Interface.  This
    interface is designed to provide an intuitive and
    easy-to-use
    web-based management interface for rapid installation,
    configuration, and maintenance This interface can be accessed
    from any web browser on the internal, private network. This
    interface can also be accessed remotely in a secure manner.
    SonicWALL Global Management System.  Our global
    management system, SonicWALL GMS, is an enterprise software
    application that is designed to enable service providers and
    distributed enterprises to manage all of their SonicWALL
    appliances from a central location. SonicWALL GMS is available
    to use in Windows NT, Windows 2000 and Sun Solaris
    operating environments. SonicWALL GMS is also compatible with
    leading relational database management systems such as Oracle
    and Microsoft SQL Server.
    Logging and Reporting.  SonicWALL appliances
    maintain an event log of potential security concerns, which can
    be viewed with a web browser or automatically sent on a periodic
    basis to any
    e-mail
    address. SonicWALL appliances notify the administrator of
    high-priority security issues, such as an attack on a server, by
    immediately sending an alert message to a priority
    e-mail
    account such as an
    e-mail
    pager. 9




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SonicWALL appliances also provide pre-defined reports that show
    different views of Internet usage, such as the most commonly
    accessed web sites.    
    SonicWALL Email Security solutions provide inbound and outbound
    e-mail
    management, content compliance capabilities, anti-spam and Time
    Zero anti-virus technology, DHA, DoS and Zombie attack
    protection, end-user spam management, seamless LDAP integration,
    and robust reporting.
    SonicWALL Content Security Manager products are appliance-based
    gateway security and content filtering solutions that integrate
    real-time gateway anti-virus, anti-spyware and intrusion
    prevention to deliver network protection from Internet threats.    
    SonicWALL CDP is a proprietary software/hardware appliance that
    continuously searches servers, mobile laptops, and connected
    desktops for file changes. Our unique Adaptive Replication
    Engine (ARE) coordinates protection of multiple networked client
    PCs and servers, updates client servers with latest versions,
    and coordinates updates with the SonicWALL web infrastructure.  Applications
    and Services
    
    Content Filtering.  Our Internet content filter
    blocks objectionable content using a list of prohibited URLs and
    keywords as well as cookies, Java and ActiveX scripts.
    Gateway Anti-Virus.  Our gateway anti-virus
    service is intended to provide anti-virus protection throughout
    a business and across a distributed network and delivers
    protection for high threat viruses and malaria by conducting
    inspections over the most common protocols used in todays
    networked environments. Automatic anti-virus updates are
    available for all network nodes to protect them from new virus
    outbreaks.
    Anti-Spyware.  Our gateway anti-spyware service
    is intended to provide anti-spyware protection throughout a
    business and across a distributed network and delivers
    protection for intrusive and unwanted applications, from being
    loaded onto users computers without their knowledge.
    Automatic anti-spyware updates are available for all network
    nodes to protect them from new virus outbreaks.
    Intrusion Prevention.  Our intrusion prevention
    service utilizes a configurable, ultra-high performance deep
    packet inspection engine to deliver network protection while
    preventing known buffer overflow vulnerabilities in software.
    This service also defends against various worms, Trojans, and
    backdoor exploits. The service not only protects networks from
    attacks originating outside the network (WAN), but also from
    internal attacks targeting network segments (LANs), and provides
    a robust database of attack and vulnerability signatures that is
    dynamically updated as new exploits and vulnerabilities are
    discovered.  Competition
     10




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
    Enterprise firewall software vendors such as Check Point,
    Microsoft, and Symantec;
    Network equipment manufacturers such as Cisco Systems, Lucent
    Technologies, Nortel Networks and Nokia;
    Security appliance suppliers such as WatchGuard Technologies and
    Juniper Networks.
    Content security suppliers such as Barracuda Networks and Secure
    Computing Corporation.    Customer
    Service and Technical Support
      Customers
    End
    Users
   11




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Sales and
    Marketing
  e-commerce, retail/point-of-sale easy-to-use,
      Domestic Channel.
    International Channel.
  Original Equipment Manufacturer Channel.
  Research
    and Development
   12




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Intellectual
    Property
    U.S. Government
    Export Regulation Compliance
    Manufacturing
        Information
    about Segments and Geographic Areas
   13




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Employees
    Where You
    Can Find More Information
  Form 10-K, Form 10-Q, Form 8-K, www.sonicwall.com
   
  ITEM 1A.
    Risk
    Factors  You should carefully review the following risks associated
    with owning our common stock. Our business, operating results or
    financial condition could be materially adversely affected in
    the event any of the following risks were to be realized. You
    should also refer to the other information set forth in this
    report and incorporated by reference herein, including our
    financial statements and the related notes. Given these risks
    and uncertainties, readers are cautioned not to place undue
    reliance on such forward-looking statements.
  Rapid
    changes in technology, regulatory requirements and industry
    standards could render our products, software and services
    unmarketable or obsolete, and we may be unable to successfully
    introduce new products and services.
   14




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We
    depend on three major distributors for a significant amount of
    our revenue, and if they or others cancel or delay purchase
    orders, and we are unable to offset these cancellations or
    delays with revenue from other purchasers, our revenue may
    decline and the price of our stock may fall.
    2006


2005


2004Distributors/Resellers


98
%


97
%


98
%     Customers

2006


2005


2004Alternative Technology


18
%


13
%


7
%Tech Data


18
%


21
%


21
%Ingram Micro


17
%


18
%


17
%         December 31,2006


2005Alternative Technology

$
5.3M



23
%

$
0.5M



4
%Tech Data

$
1.9M



8
%

$
1.4M



11
%Ingram Micro

$
4.0M



17
%

$
2.0M



15
%     If we
    are unable to compete successfully in the highly competitive
    market for Internet security products, software, and services,
    our business could be adversely affected.
     15




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Difficulty
    predicting our future operating results or profitability due to
    volatility in general economic conditions and in the security,
    productivity, mobility, and data protection markets may result
    in a misallocation in spending, and a shortfall in revenue which
    would harm our operating results.
    The
    selling prices of our solution offerings may decrease, which may
    reduce our gross profits.
    We
    offer retroactive price protection to our major distributors and
    if we fail to balance their inventory with end-user demand for
    our products, our allowance for price protection may be
    inadequate. This could adversely affect our results of
    operations.
    We are
    dependent on international sales for a substantial amount of our
    revenue. We face the risk of international business and
    associated currency fluctuations, which might adversely affect
    our operating results.
   16




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Delays
    in deliveries from our suppliers could cause our revenue to
    decline and adversely affect our results of
    operations.
    We
    license intellectual property, including certain databases and
    software, and if our licensors experience delays in product
    updates or provide us with products of substandard quality, the
    revenue we receive from our products and services that use this
    intellectual property would be at risk.
    We
    rely primarily on contract manufacturers for our product
    manufacturing and assembly, and if these operations are
    disrupted for any reason, we may not be able to ship our
    products.
   17




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Sales
    of our solutions may be adversely affected by various factors
    which would adversely affect our revenue.
  quarter-to-quarter
  Environmental
    regulations enacted in various jurisdictions in which we do
    business may increase the component costs of our products and if
    we experience delays in shipment of compliant products our
    revenue would decline and our operating results would be
    adversely affected.
    If we
    fail to maintain an effective system of internal controls, we
    may not be able to accurately report our financial results. As a
    result, current and potential shareholders could lose confidence
    in our financial reporting which would harm our business and the
    trading price of our stock.
    Acquisitions
    could be difficult to integrate, disrupt our business, dilute
    shareholder value and the products and services acquired may not
    be accepted by the market. As a result, our operating results
    would be adversely affected.
   18




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day-to-day
    We
    cannot be certain that our internal controls over financial
    reporting will be effective or sufficient when tested by
    increased scale of growth or the impact of
    acquisitions.
    We
    cannot be certain that the remediation efforts concerning our
    internal control over financial reporting will be effective or
    sufficient.
    Our
    Financial Statements could be affected by the need to restate
    previously issued annual or interim financial
    statements.
    Changes
    in our effective tax rate may have an adverse effect on our
    results of operations.
   19




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If our
    estimates or judgments relating to our critical accounting
    policies are based on assumptions that change or prove to be
    incorrect, our operating results could fall below expectations
    of securities analysts and investors, resulting in a decline in
    our stock price.
      We
    must attract and retain qualified financial personnel to
    maintain effective controls over the application of generally
    accepted accounting principles within the financial reporting
    process.
    Changes
    to our senior management may have an adverse effect on our
    ability to execute our business strategy.
    We
    must be able to hire and retain sufficient qualified employees
    or our business will be adversely affected.
   20




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We may
    be unable to adequately protect our intellectual property
    proprietary rights, which may limit our ability to compete
    effectively.
    Potential
    intellectual property claims and litigation could subject us to
    significant liability for damages and invalidation of our
    proprietary rights.
    
    stop or delay selling, incorporating or using products that
    incorporate the challenged intellectual property;
    pay damages;
    enter into licensing or royalty agreements, which may be
    unavailable on acceptable terms; or
    redesign products or services that incorporate infringing
    technology.    We
    have been named as defendant in litigation matters that could
    subject us to liability for significant damages.
    day-to-day
  Any
    alleged or actual failure of our products, software or services
    to operate as warranted may require us to defend product
    liability or breach of warranty claims.
   21




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A
    security breach of our internal systems could harm our
    business.
    If our
    transition of certain technical support activities to India is
    not completed in a timely and efficient manner, our support
    costs may increase and our ability to support our customers may
    be adversely affected.
    If our
    solutions do not interoperate with our end customers
    networks, installations could be delayed or cancelled, which
    could significantly reduce our revenue.
    Product
    errors or defects could result in loss of revenue, delayed
    market acceptance, and claims against us.
   22




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Industry
    consolidation may lead to increased competition and may harm our
    operating results.
    If we
    are unable to meet our future capital requirements, our business
    will be harmed.
    Governmental
    regulations of imports or exports affecting Internet security
    could affect our revenue.
    Our
    stock price may be volatile.
    
    general economic conditions and the effect that such conditions
    have upon customers purchasing decisions;
    variations in quarterly operating results;
    changes in financial estimates by securities analysts;
    changes in market valuations of technology and Internet
    infrastructure companies;
    announcements by us of significant contracts, acquisitions,
    strategic partnerships, joint ventures or capital commitments;
    the accretive or dilutive effects of acquisitions on operating
    results;
    loss of a major client or failure to complete significant
    license transactions;
    additions or departures of key personnel;
    our ability to remediate material weaknesses
    and/or
    significant deficiencies, if any, in internal controls over
    financial reporting in an effective and timely manner;
    receipt of an adverse or qualified opinion from our independent
    auditors regarding our internal controls over financial
    reporting; 23




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
    sales of common stock in the future; and
    fluctuations in stock market price and volume, which are
    particularly common among highly volatile securities of
    Internet-related companies.  The
    long sales and implementation cycles for our solutions may cause
    revenue and operating results to vary
    significantly.
      The
    inability to obtain any third-party license required to develop
    new products or software or enhancements to our products or
    software could require us to obtain substitute technology of
    lower quality or performance standards or at greater cost, which
    could seriously harm our business, financial condition, and
    results of operations.
    Seasonality
    and concentration of revenue at the end of the quarter could
    cause our revenue to fall below the expectations of securities
    analysts and investors, resulting in a decline in our stock
    price.
    The
    requirement to record compensation expense for the value of
    stock options or other stock-based awards that we issue to our
    employees will harm our earnings.
  Share-based Payment
 24




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Our
    business is especially subject to the risks of earthquakes,
    floods and other natural catastrophic events, and to
    interruption by manmade problems such as computer viruses or
    terrorism.
    We
    face risks associated with changes in telecommunications
    regulation and tariffs.
    Due to
    the global nature of our business, economic or social conditions
    or changes in a particular country or region could adversely
    affect our sales or increase our costs and expenses, which would
    have a material adverse impact on our financial
    condition.
   
  ITEM 1B.
    Unresolved
    Staff Comments   25




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ITEM 2.
    Properties        
 ITEM 3.
    Legal
    Proceedings     26




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No. 06-CV-00445, and/or and/or
   
  ITEM 4.
    Submission
    of Matters to a Vote of Security Holders   
  PART II
 
  ITEM 5.
    Market
    for Registrants Common Equity and Related Stockholder
    Matters    High


LowFiscal 2005First Quarter

$
6.50


$
5.00Second Quarter

$
6.27


$
4.97Third Quarter

$
6.49


$
5.33Fourth Quarter

$
8.02


$
5.57Fiscal 2006First Quarter

$
8.74


$
6.52Second Quarter

$
9.17


$
7.20Third Quarter

$
11.00


$
8.71Fourth Quarter

$
11.31


$
8.42    27




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STOCK
    PERFORMANCE GRAPH
  60-month
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
 Among SonicWALL, Inc., the NASDAQ Composite Index, the Russel
    2000 Index,
 and the RDG Technology Composite Index.
  
  *
    
    $100 invested on 12/31/01 in stock or index-including
    reinvestment of dividends.
    Fiscal year ending December 31. 28




---



##### Table of Contents



ITEM 5c.
    Issuer
    Purchases of Equity Securities (in thousands, except per-share
    amounts)      Total








Value of Shares ThatNumber of


Average


Total Number of Shares


May Yet be PurchasedShares


Price Paid


Purchased as Part of Publicly


Under the Plans orPeriod

Purchased


per Share


Announced Plans or Programs


Programs(In thousands except per share amounts)January 1, 2004 to
    December 31, 2004


3,183


$
6.08



3,183


$
80,644January 1, 2005 to
    December 31, 2005


4,998


$
6.05



4,998


$
50,426January 1, 2006 to
    December 31, 2006


2,417


$
8.73



2,417


$
29,326Total


10,598







10,598    29




---



##### Table of Contents



ITEM 6.
    Selected
    Consolidated Financial Data  Form 10-K.
  Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Statements of Operations
    Data:Revenue:Product

$
92,797


$
75,525


$
82,994


$
65,931


$
78,184License and service


82,741



59,799



42,655



28,470



25,035Total revenue


175,538



135,324



125,649



94,401



103,219Cost of revenue:Product


39,164



27,699



30,118



27,913



25,343License and service


12,287



8,031



7,002



5,617



4,659Amortization of purchased
    technology


5,387



4,552



4,543



4,543



4,543Total cost of revenue


56,838



40,282



41,663



38,073



34,545Gross profit


118,700



95,042



83,986



56,328



68,674Operating expenses:Research and development


33,670



22,768



23,412



19,934



19,203Sales and marketing


71,256



53,403



47,353



40,537



43,835General and administrative


20,324



15,535



14,365



12,118



11,359Amortization of purchased
    intangible assets


2,721



2,893



3,089



5,333



5,744Impairment of goodwill


















87,640Restructuring charges (reversals)


1,409







(171
)


1,833



3,969In-process research and development


1,580















Total operating expenses


130,960



94,599



88,048



79,755



171,750Income (loss) from operations


(12,260
)


443



(4,062
)


(23,427
)


(103,076
)Interest income and other expense,
    net


9,713



6,867



4,050



4,169



6,044Income (loss) before income taxes


(2,547
)


7,310



(12
)


(19,258
)


(97,032
)(Provision for) income taxes


(8,206
)


(1,034
)


(301
)


1,590



3,119Net (loss) income

$
(10,753
)

$
6,276


$
(313
)

$
(17,668
)

$
(93,913
)Net (loss) income per share:Basic

$
(0.17
)

$
0.10


$
(0.00
)

$
(0.26
)

$
(1.40
)Diluted

$
(0.17
)

$
0.09


$
(0.00
)

$
(0.26
)

$
(1.40
)Shares used in computing net
    (loss) income per share:Basic


65,117



64,684



70,850



67,895



67,124Diluted


65,117



66,797



70,850



67,895



67,124   As of December 31,2006


2005


2004


2003


2002Consolidated Balance Sheet Data:


(In thousands, except per share data)Cash and cash equivalents

$
25,927


$
42,593


$
23,446


$
30,467


$
23,030Short-term investments


209,251



197,849



229,226



213,010



209,854Total assets


416,291



387,683



386,845



381,721



405,098Total shareholders equity


318,068



320,170



337,976



344,269



357,183Long-term liabilities


6,269



636











12,272  30




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##### Table of Contents



ITEM 7.
    Managements
    Discussion And Analysis Of Financial Condition And Results Of
    Operations  This
    Form 10-K
    contains forward-looking statements which relate to future
    events or our future financial performance. In many cases you
    can identify forward-looking statements by terminology such as
    may, will, should,
    expect, plan, anticipate,
    believe, estimate, predict,
    potential, intend or
    continue, or the negative of such terms and other
    comparable terminology. In addition, forward-looking statements
    in this document include, but are not limited to, those
    regarding the dedication of resources to develop new products
    and services and marketing those products and services to
    channel partners and customers, the introduction of more service
    offerings on our platforms as a vehicle to generate additional
    revenue from our installed base of products; our ability to
    deliver comprehensive and profitable solutions to our channel
    partners, the level of comfort of our channel partners in
    offering our solutions to their customers, the growth of the
    Network Security, Secure Content Management and Business
    Continuity markets, the impact of a failure to achieve greater
    international sales ,our ability to maintain and enhance current
    product lines, develop new products, maintain technological
    competitiveness and meet the expanding range of customer
    requirements; our ability to deliver comprehensive solutions to
    channel partners, the positive characteristics of our software
    license and service revenue model on future revenue growth, the
    impact on gross margin from factors such as competitive product
    offerings, product and service mix, new product introductions
    and enhancements, fluctuations in manufacturing volume, the cost
    of components and manufacturing labor; the direction of sales
    and marketing expenses toward expansion of markets, introduction
    of products and establishment and expansion of new distribution
    channels; expected growth in license and subscription service
    revenue; the impact on revenue of the combination of
    subscription services sold in conjunction with new product
    offerings; expected competition in the Internet security market
    and our ability to compete in markets in which we participate;
    impact of service renewal rates on lowering selling and
    marketing expense, our ability to achieve increased incremental
    revenue per transaction through success of our software license
    and service revenue model, the impact of IT spending on demand
    for our products and services, the current and likely future
    impact of share based compensation expense as required by
    SFAS 123R on reported operating results, anticipated
    revenue contributions of new products including continuous data
    protection, email security and SSL-VPN products and related
    services; the anticipation that relatively few distributors and
    resellers will continue to account for a significant portion of
    our revenue; our ability to successfully introduce new products
    and services; pricing pressures on our solution based offerings;
    anticipated higher gross margins associated with our license and
    service offerings; the future predictability of our revenue
    stream; the probability of realization of all deferred tax
    assets; our ability to sustain success in targeted vertical
    markets; assessment of future effective tax rates and the
    continued need for a valuation allowance; the possibility of
    taking an impairment charge associated with the acquisition of
    our email security products; the potential for product gross
    margins to erode based upon changes in product mix, downward
    pressure on product pricing or upward pressure on production
    costs, the impact of product mix on product gross profits; our
    ability to maintain investment in current and future product
    development and enhancement efforts, the introduction of new
    products and the broadening of existing product offerings, the
    rate of change of general and administrative expenses, the
    impact of geopolitical and macro-economic conditions on demand
    for our offerings; the ability of our contract manufacturers to
    meet our requirements; the belief that existing cash, cash
    equivalents and short-term investments will be sufficient to
    meet our cash requirements at least through the next twelve
    months; factors potentially impacting operating cash flows in
    future periods; expected fluctuations in day sales outstanding
    and the impact of litigation on future liquidity and capital
    reserves. These statements are only predictions, and they are
    subject to risks and uncertainties. Our actual results may
    differ materially from those anticipated in these
    forward-looking statements as a result of a variety of factors,
    including, but not limited to, those set forth herein under the
    heading Risk Factors and also under the heading
    Risk Factors. References to we,
    our, and us refer to SonicWALL, Inc. and
    its subsidiaries.
  Overview
   31




---



##### Table of Contents



Key
    Success Factors of our Business
    Channel
    Product
    and Service Platform
    Distributed
    Architecture
   32




---



##### Table of Contents



Market
    Acceptance
    Integrated
    Design
  ease-of-use,
  Our
    Opportunities, Challenges, and Risks
  and/or
  International
    Growth
      License
    and Services Revenue
    Macro-Economic
    Factors Affecting IT Spending
   33




---



##### Table of Contents



and/or and/or
  Critical
    Accounting Policies and Critical Accounting Estimates
    Revenue
    recognition
    Revenue Recognition in Financial Statements 00-21.
  97-2, Software Revenue Recognition (SOP No. 97-2), 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, With Respect to Certain
    Transactions (SOP No. 98-9), 03-05, Applicability of AICPA Statement of Position
    97-2,
    Software Revenue Recognition, to Non-Software Deliverables in an
    Arrangement Containing
    More-Than-Incidental
    Software 03-05), SOP 97-2
     34




---



##### Table of Contents



transaction-by-transaction
            Sales
    returns and other allowances, allowance for doubtful accounts,
    and warranty reserve
     35




---



##### Table of Contents



Valuation
    of inventory
    Accounting
    for income taxes
      Valuation
    of long-lived and intangible assets and goodwill
   36




---



##### Table of Contents



Goodwill
    and Other Intangible Assets
    Share-based
    compensation
  Accounting for Stock-Based
    Compensation (Revised) Accounting
    for Stock Issued to Employees
    Accounting for Stock-Based Compensation
   37




---



##### Table of Contents



Share-based
    Compensation
  Significant
    Transactions
  Acquisitions
       38




---



##### Table of Contents



Business Combinations Goodwill and
    Other Intangible Assets.
    Restructuring
   39




---



##### Table of Contents



Results
    of Operations
    Year Ended December 31,2006


2005


2004Revenue:Product


52.9
%


55.8
%


66.1
%License and service


47.1
%


44.2
%


33.9
%Total revenue


100.0
%


100.0
%


100.0
%Cost of revenue:Product


22.3
%


20.5
%


24.0
%License and service


7.0
%


5.9
%


5.6
%Amortization of purchased
    technology


3.1
%


3.4
%


3.6
%Total cost of revenue


32.4
%


29.8
%


33.2
%Gross profit


67.6
%


70.2
%


66.8
%Operating expenses:Research and development


19.2
%


16.8
%


18.6
%Sales and marketing


40.5
%


39.5
%


37.7
%General and administrative


11.6
%


11.5
%


11.4
%Amortization of purchased
    intangible assets


1.6
%


2.1
%


2.5
%Restructuring charges (reversals)


0.8
%


0.0
%


(0.1
)%In-process research and development


0.9
%


0.0
%


0.0
%Total operating expenses


74.6
%


69.9
%


70.1
%Income (loss) from operations


(7.0
)%


0.3
%


(3.2
)%Interest income and other expense,
    net


5.5
%


5.1
%


3.2
%Income (loss) before income taxes


(1.5
)%


5.4
%


(0.0
)%Provision for income taxes


(4.6
)%


(0.8
)%


(0.2
)%Net income (loss)


(6.1
)%


4.6
%


(0.2
%)     Revenue
    (in thousands, except for Percentage points)
  Year Ended December 31,


Dollar Change


Percent Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004


2006 vs. 2005


2005 vs. 2004Product

$
92,797


$
75,525


$
82,994


$
17,272


$
(7,469
)


23
%


(9
)%% of total revenue


53
%


56
%


66
%License and service


82,741



59,799



42,655



22,942



17,144



38
%


40
%% of total revenue


47
%


44
%


34
%Total revenue

$
175,538


$
135,324


$
125,649


$
40,214


$
9,675



30
%


8
%   Product
    revenue
   40




---



##### Table of Contents



License
    and Service Revenue
      Channel
    data
     41




---



##### Table of Contents



Geographic
    revenue data (in thousands, except for percentage
    points)
  Year Ended December 31,


Dollar Change


Percent Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004


2006 vs. 2005


2005 vs. 2004Americas

$
124,806


$
94,956


$
87,450


$
29,850


$
7,506



31
%


9
%Percentage of total revenues


71
%


70
%


70
%EMEA


32,865



23,725



23,275



9,140



450



39
%


2
%Percentage of total revenues


19
%


18
%


18
%APAC


17,867



16,643



14,924



1,224



1,719



7
%


12
%Percentage of total revenues


10
%


12
%


12
%Total revenues

$
175,538


$
135,324


$
125,649


$
40,214


$
9,675



30
%


8
%   non-U.S. net
    Cost
    of Revenue and Gross Profit
    Year Ended December 31,


Percent Variance2006


2005


2004


2006 vs. 2005


2005 vs. 2004(In thousands)Product

$
39,164


$
27,699


$
30,118



41
%


(8
)%License and service


12,287



8,031



7,002



53
%


15
%Amortization of purchased
    technology


5,387



4,552



4,543



18
%


0
%Total cost of revenue

$
56,838


$
40,282


$
41,663



41
%


(3
%)    42




---



##### Table of Contents



Gross Profit Amount


Gross ProfitYear Ended December 31,


Year Ended December 31,2006


2005


2004


2006


2005


2004(In thousands)Product

$
53,633


$
47,826


$
52,876



58
%


63
%


64
%License and service


70,454



51,768



35,653



85
%


87
%


84
%Amortization of purchased
    technology


(5,387
)


(4,552
)


(4,543
)Total gross profit

$
118,700


$
95,042


$
83,986



68
%


70
%


67
%   Cost of
    Product Revenue and Gross Profit
        Cost of
    License and Service Revenue and Gross Profit
     43




---



##### Table of Contents



Amortization
    of purchased technology
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
5,387


$
4,552


$
4,543Percentage of total revenue


3
%


3
%


4
%Year over year change in Dollars


835



9Year over year change in Percent


18
%


0
%         Fiscal Year2007

$
1,6352008


1,6352009


1,6352010


9932011


Total

$
5,898     Operating
    Expenses
  Research
    and development
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
33,670


$
22,768


$
23,412Percentage of total revenue


19
%


17
%


19
%Year over year change in Dollars


10,902



(644
)Year over year change in Percent


48
%


(3
)%    44




---



##### Table of Contents



Sales and
    marketing
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
71,256


$
53,403


$
47,353Percentage of total revenue


41
%


39
%


38
%Year over year change in Dollars


17,853



6,050Year over year change in Percent


33
%


13
%        45




---



##### Table of Contents



General
    and administrative
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
20,324


$
15,535


$
14,365Percentage of total revenue


12
%


12
%


11
%Year over year change in Dollars


4,789



1,170Year over year change in Percent


31
%


8
%         Amortization
    of purchased intangible assets included in operating
    expenses
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
2,721


$
2,893


$
3,089Percentage of total revenue


2
%


2
%


2
%Year over year change in Dollars


(172
)


(196
)Year over year change in Percent


(6
)%


(6
%)        46




---



##### Table of Contents



AmortizationFiscal Year

Amount2007

$
2202008


1242009


1052010


1052011


1052012


18Total

$
677   Restructuring
    charges
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
1,409


$



$
(171
)Percentage of total revenue


1
%


0
%


0
%Year over year change in Dollars


1,409



171Year over year change in Percent


100
%


(100
%)       In-Process
    Research and Development
  Year Ended December 31,2006


2005


2004(In thousands)Expenses

$
1,580


$



$
Percentage of total revenue


1
%


0
%


0
%Year over year change in Dollars


1,580



Year over year change in Percent


100
%


0
%    47




---



##### Table of Contents



Interest
    income and other expense, net.
    Provision
    for income taxes.
  Year Ended December 31,2006


2005


2004(In thousands)Provision for income taxes

$
(8,206
)

$
(1,034
)

$
(301
)Percentage of income (loss) before
    taxes


322
%


14
%


2501
%Percentage of total revenue


(4.7
)%


(0.8
)%


0
%Year over year change in Dollars


(7,172
)


(733
)Year over year change in Percent


694
%


244
%      48




---



##### Table of Contents



49




---



##### Table of Contents



Quarterly
    Results of Operations
  Form 10-K.
  Year Ended December 31, 2006


Year Ended December 31, 2005Q4


Q3


Q2


Q1


Q4


Q3


Q2


Q1(In thousands, except per share data)


(In thousands, except per share data)Revenue:Product

$
24,917


$
24,087


$
22,709


$
21,084


$
19,649


$
18,236


$
19,032


$
18,608License and service


21,794



21,103



21,105



18,739



16,766



15,782



14,054



13,197Total revenue


46,711



45,190



43,814



39,823



36,415



34,018



33,086



31,805Cost of revenue:Product


10,487



10,210



9,571



8,896



7,379



6,994



6,879



6,447License and service


3,257



3,228



3,314



2,488



2,165



1,956



1,932



1,978Amortization of purchased
    technology


963



1,501



1,558



1,365



1,142



1,138



1,136



1,136Total cost of revenue


14,707



14,939



14,443



12,749



10,686



10,088



9,947



9,561Gross profit


32,004



30,251



29,371



27,074



25,729



23,930



23,139



22,244Operating expenses:Research and development


8,191



8,391



8,758



8,330



6,246



5,494



5,647



5,381Sales and marketing


16,789



17,782



18,858



17,827



14,947



13,339



12,946



12,171General and administrative


5,116



5,418



4,976



4,814



4,574



3,414



3,997



3,550Amortization of purchased
    intangible assets


419



767



734



801



786



701



703



703Restructuring charges










17



1,392















In-process research and development














1,580















Total operating expenses


30,515



32,358



33,343



34,744



26,553



22,948



23,293



21,805Income (loss) from operations


1,489



(2,107
)


(3,972
)


(7,670
)


(824
)


982



(154
)


439Interest income and other expense,
    net


2,783



2,621



2,143



2,166



2,199



1,748



1,564



1,356Income (loss) before income taxes


4,272



514



(1,829
)


(5,504
)


1,375



2,730



1,410



1,795Provision for income taxes


(3,831
)


(2,756
)


(1,543
)


(76
)


(580
)


(162
)


(171
)


(121
)Net income (loss)

$
441


$
(2,242
)

$
(3,372
)

$
(5,580
)

$
795



2,568



1,239



1,674Net income (loss) per share:Basic

$
0.01



(0.03
)


(0.05
)


(0.09
)

$
0.01



0.04



0.02



0.03Diluted

$
0.01



(0.03
)


(0.05
)


(0.09
)

$
0.01



0.04



0.02



0.02Shares used in computing net
    income (loss) per share:Basic


65,855



65,329



64,479



64,828



64,733



64,308



63,995



65,713Diluted


69,174



65,329



64,479



64,828



67,503



66,183



65,595



67,998  50




---



##### Table of Contents



Liquidity
    and Capital Resources
    Operating
    Activities
    
    Accounts receivable increased due to higher sales and the
    normalization of our collection cycle. Our DSO in accounts
    receivable was 45 days at December 31, 2006 compared
    to 32 days at December 31, 2005. The increase in DSO
    at December 31, 2006 as compared to December 31, 2005
    was primarily due to the timing of shipments and billings
    combined with the increase in revenue. Collection of accounts
    receivable and related DSO will fluctuate in future periods due
    to the timing and amount of our future shipments and billings,
    the payment terms that we extend to our customers and the
    effectiveness of our collection efforts.
    Deferred revenue increased due to increased sales of
    subscription services as well as an increase related to
    shipments to distributors whereby revenue is recognized on a
    sell-through basis. In addition, there was approximately
    $2.2 million in deferred revenue derived through the
    acquisition of MailFrontier.
    The increase in prepaid expenses and other current assets was
    primarily due to (1) an increase in our restricted cash in
    escrow in connection with the acquisition; (2) an increase
    in our Deferred Compensation asset primarily from participant
    contributions; and (3) the deferral of certain cost of
    goods to match the corresponding deferral of revenue on certain
    shipments.
    The increase in accrued payroll and related benefits was
    primarily attributed to (1) an increase in the accrual of
    bonuses; (2) an increase in the accrual related to our
    Deferred Compensation plan; (3) an increase in the amount
    withheld and accrued under our ESPP plan; and (4) an
    increase in our vacation accrual.
    The decrease in accrued restructuring was caused by the payment
    of employee severance benefits and facility costs for space no
    longer needed in connection with the 2006 Restructuring Plan.
    The increase in other accrued liabilities was primarily due to
    (1) an increase in the accrual related to the restricted
    cash in escrow in connection with the acquisition of
    MailFrontier; (2) an increase in the accrual related to
    royalty contracts; and (3) an increase in the accrual
    related to travel expenses.   51




---



##### Table of Contents



Form 10-K.
  Investing
    Activities
    Financing
    Activities
    Liquidity
    and Capital Resource Requirements
   52




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Contractual
    Obligations
    Payments Due by PeriodLess Than


1 to 3


3 to 5Contractual Obligations

Total


One Year


Years


YearsOperating lease obligations

$
4,168


$
706


$
2,136


$
1,326Non-Cancelable Purchase obligations

$
11,392


$
11,392


$



$
     Stock
    Repurchase Program
      Recent
    Accounting Pronouncements
   
  ITEM 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Interest
    rate risk
  available-for-sale.
 53




---



##### Table of Contents



Maturing InLess Than


More ThanOne Year


One Year


Total(In thousands, except percentage data)Short-term investments

$
100,732


$
108,519


$
209,251Weighted average interest rate


4.53
%


5.33
%   Foreign
    currency risk
   54




---



##### Table of Contents



ITEM 8.
    Financial
    Statements and Supplementary Data 
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND
 FINANCIAL STATEMENT SCHEDULE
  PageReports of Independent Registered
    Public Accounting Firm


56Consolidated Balance Sheets


59Consolidated Statements of
    Operations


60Consolidated Statements of
    Shareholders Equity


61Consolidated Statements of Cash
    Flows


62Notes to Consolidated Financial
    Statements


63Financial Statement
    Schedule  Valuation and Qualifying Accounts


96  55




---



##### Table of Contents



REPORT OF
    ARMANINO MCKENNA LLP, INDEPENDENT REGISTERED
 PUBLIC ACCOUNTING FIRM
  The Board
    of Directors and Shareholders, SonicWALL, Inc.
        Internal Control 
    Integrated Framework
       56




---



##### Table of Contents



REPORT OF
    ARMANINO MCKENNA LLP, INDEPENDENT REGISTERED
 PUBLIC ACCOUNTING FIRM
  The Board
    of Directors and Shareholders, SonicWALL, Inc.
  Internal Control  Integrated Framework
                57




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To the
    Board of Directors and Shareholders of SonicWALL,
    Inc.:
       Form 10-K/A
 58




---



##### Table of Contents



SONICWALL,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(In thousands, exceptshare data)ASSETSCurrent Assets:Cash and cash equivalents

$
25,927


$
42,593Short-term investments


209,251



197,849Accounts receivable, net of
    allowance for doubtful accounts of $152 and $123 in 2006 and
    2005, respectively


23,205



13,113Inventories


5,210



3,707Prepaid expenses and other current
    assets


10,888



7,331Total current assets


274,481



264,593Property and equipment, net


4,085



2,595Goodwill


130,399



109,005Purchased intangibles and other
    assets, net


7,326



11,490Total assets

$
416,291


$
387,683LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
6,677


$
7,445Accrued payroll and related
    benefits


13,593



9,054Other accrued liabilities


9,900



6,277Deferred revenue


61,622



44,006Income taxes payable


162



95Total current liabilities


91,954



66,877Deferred revenue, non-current


6,269



636Total liabilities


98,223



67,513Commitments and contingencies
    (Note 10)Shareholders Equity:Common stock, no par value;
    200,000,000 shares authorized; 65,385,629 and
    65,026,138 shares issued and outstanding


453,409



440,172Accumulated other comprehensive
    loss, net


(1,197
)


(1,367
)Accumulated deficit


(134,144
)


(118,635
)Total shareholders equity


318,068



320,170Total liabilities and
    shareholders equity

$
416,291


$
387,683    59




---



##### Table of Contents



SONICWALL,
    INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004(In thousands, except per share data)Revenue:Product

$
92,797


$
75,525


$
82,994License and service


82,741



59,799



42,655Total revenue


175,538



135,324



125,649Cost of revenue:Product


39,164



27,699



30,118License and service


12,287



8,031



7,002Amortization of purchased
    technology


5,387



4,552



4,543Total cost of revenue


56,838



40,282



41,663Gross profit


118,700



95,042



83,986Operating expenses:Research and development


33,670



22,768



23,412Sales and marketing


71,256



53,403



47,353General and administrative


20,324



15,535



14,365Amortization of purchased
    intangible assets


2,721



2,893



3,089Restructuring charges (reversals)


1,409







(171
)In-process research and development


1,580







Total operating expenses


130,960



94,599



88,048Income (loss) from operations


(12,260
)


443



(4,062
)Interest income and other expense,
    net


9,713



6,867



4,050Income (loss) before income taxes


(2,547
)


7,310



(12
)Provision for income taxes


(8,206
)


(1,034
)


(301
)Net income (loss)

$
(10,753
)

$
6,276


$
(313
)Net income (loss) per share:Basic

$
(0.17
)

$
0.10


$
(0.00
)Diluted

$
(0.17
)

$
0.09


$
(0.00
)Shares used in computing net
    income (loss) per share:Basic


65,117



64,684



70,850Diluted


65,117



66,797



70,850    60




---



##### Table of Contents



SONICWALL,
    INC.
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedOther





TotalCommon Stock


Comprehensive


Accumulated


ShareholdersShares


Amount


Income (Loss)


Deficit


Equity(In thousands, except for share data)Balance at December 31, 2003


68,613,012


$
468,905


$
(38
)

$
(124,598
)

$
344,269Issuance of common stock upon
    exercise of stock options


2,805,521



12,208











12,208Issuance of common stock in
    connection with the Employee Stock Purchase Plan (ESPP)


387,509



1,717











1,717Stock-based compensation






75











75Repurchase of common stock


(3,183,000
)


(19,356
)










(19,356
)Income tax benefit from stock
    option exercises






184











184Comprehensive loss:Change in unrealized loss on
    investment securities










(808
)






(808
)Net loss














(313
)


(313
)Total comprehensive loss


















(1,121
)Balance at December 31, 2004


68,623,042



463,733



(846
)


(124,911
)


337,976Issuance of common stock upon
    exercise of stock options


1,072,878



4,702











4,702Issuance of common stock in
    connection with ESPP


328,018



1,623











1,623Stock options assumed in
    connection with acquisition






110











110Stock-based compensation






201











201Repurchase of common stock


(4,997,800
)


(30,218
)










(30,218
)Income tax benefit from stock
    option exercises






21











21Comprehensive income:Change in unrealized loss on
    investment securities










(521
)






(521
)Net income














6,276



6,276Total comprehensive income


















5,755Balance at December 31, 2005


65,026,138



440,172



(1,367
)


(118,635
)


320,170Issuance of common stock upon
    exercise of stock options


2,362,576



14,123











14,123Issuance of common stock in
    connection with ESPP


414,156



2,146











2,146Stock options assumed in
    connection with acquisition






109











109Share-based compensation






13,202











13,202Repurchase of common stock


(2,417,241
)


(16,343
)






(4,756
)


(21,099
)Comprehensive loss:Change in unrealized gain on
    investment securities










170







170Net loss














(10,753
)


(10,753
)Total comprehensive loss


















(10,583
)Balance at December 31, 2006


65,385,629



453,409



(1,197
)


(134,144
)


318,068    61




---



##### Table of Contents



SONICWALL,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
(10,753
)

$
6,276


$
(313
)Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Depreciation and amortization


10,246



9,847



11,216Adjustment of goodwill


6,826



885



In process research and development


1,580







Share-based compensation expense
    related to employee stock options and ESPP


13,202



201



75Income tax benefit from exercise
    of employee stock options






22



184Change in allowance for doubtful
    accounts and others


61



(110
)


(104
)Non-cash restructuring charges
    (reversals)










(171
)Changes in operating assets and
    liabilities, net of effects of businesses acquired:Accounts receivable


(8,899
)


1,158



(4,936
)Inventories


(1,543
)


(1,342
)


(236
)Prepaid expenses and other current
    assets


(2,039
)


(3,099
)


520Other assets


(346
)


315



(284
)Accounts payable


(2,331
)


1,592



(1,639
)Accrued payroll and related
    benefits


4,071



1,537



2,354Accrued restructuring


(828
)


(398
)


(682
)Other accrued liabilities


3,404



1,554



889Deferred revenue


20,854



14,469



10,993Income taxes payable


67



(405
)


(327
)Net cash provided by operating
    activities


33,572



32,502



17,539Cash flows from investing
    activities:Purchase of property and equipment


(3,378
)


(1,440
)


(2,105
)Cash paid for acquisitions, net of
    cash acquired


(29,501
)


(16,637
)


Increase in restricted cash in
    escrow


(4,708
)


(2,163
)


Decrease in restricted cash in
    escrow


3,412







Maturity and sale of short-term
    investments


229,888



236,898



320,832Purchase of short-term investments


(241,121
)


(206,119
)


(337,856
)Net cash provided by (used in)
    investing activities


(45,408
)


10,539



(19,129
)Cash flows from financing
    activities:Issuance of common stock under
    employee stock options and purchase plans


16,269



6,324



13,925Repurchase of common stock


(21,099
)


(30,218
)


(19,356
)Net cash used in financing
    activities


(4,830
)


(23,894
)


(5,431
)Net increase (decrease) in cash
    and cash equivalents


(16,666
)


19,147



(7,021
)Cash and cash equivalents at
    beginning of year


42,593



23,446



30,467Cash and cash equivalents at end
    of year


25,927



42,593



23,446Supplemental disclosure of cash
    flow information:Cash paid for income taxes

$
1,220


$
498


$
445Supplemental disclosure of
    non-cash investing and financing activities:Issuance of common stock and
    assumption of stock options and warrants in connection with
    acquired businesses

$
109


$
110



Unrealized gain (loss) on
    short-term investments, net of taxes

$
170


$
(521
)

$
(808
)    62




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    The Company and Summary of Significant Accounting
    Policies:
  e-mail
  Consolidation
    Use of
    estimates
    Foreign
    Currencies
    Cash
    and cash equivalents and short-term investments
  Accounting for Certain Investments in Debt and Equity
    Securities available-for-sale,
  Fair
    value
   63




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Concentration
    of credit risk, foreign operations and significant
    customers
      Customers

2006


2005


2004Alternative Technology


18
%


13
%


7
%Tech Data


18
%


21
%


21
%Ingram Micro


17
%


18
%


17
%     December 31,2006


2005Alternative Technology


23
%


4
%Tech Data


8
%


11
%Ingram Micro


17
%


15
%       Inventories
  first-in,
 64




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Property
    and equipment
    Purchased
    intangibles
    Goodwill
    and Impairment of goodwill
    Impairment
    of other long-lived assets
    Interest
    income and other expense, net
    Share-based
    compensation
   65




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting
    for Stock Issued to Employees
    Accounting for
    Stock-Based Compensation
     66




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2006


2005


2004Cost of sales  Product

$
470


$



$
Cost of sales  License
    and service


144







Share-based compensation expense
    included in cost of sales


614







Research and development


4,368







Sales and marketing


4,959







General and administrative


4,474







Share-based compensation expense
    included in operating expenses


13,801







Share-based compensation expense
    included in income before taxes


14,415







Income taxes


(623
)






Share-based compensation expense
    included in net income

$
13,792


$



$
Share-based compensation effect on
    net income (loss) per share:Basic and diluted

$
0.21


$



$
     Year Ended December 31,2005


2004Net income (loss):As reported

$
6,276


$
(313
)Expensed stock compensation under
    the intrinsic value method, net of related tax effect


201



75Stock-based compensation expense
    that would have been included in the determination of net income
    (loss) had the fair value method been applied, net of related
    tax effect


(14,431
)


(17,520
)Pro forma net loss

$
(7,954
)

$
(17,758
)Net income (loss) per
    share  basic and diluted:Basic  as reported

$
0.10


$
0.00Diluted  as reported

$
0.09


$
0.00Basic  pro forma

$
(0.12
)

$
(0.25
)Diluted  pro forma

$
(0.12
)

$
(0.25
)  67




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    recognition
    Revenue Recognition in Financial Statements 00-21.
  97-2, Software Revenue Recognition (SOP No. 97-2), 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, With Respect to Certain
    Transactions (SOP No. 98-9), 03-05, Applicability of AICPA Statement of Position
    97-2,
    Software Revenue Recognition, to Non-Software Deliverables in an
    Arrangement Containing
    More-Than-Incidental
    Software 03-05), SOP 97-2
        transaction-by-transaction
   68




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Sales
    returns and other allowances, allowance for doubtful accounts
    and warranty reserve.
       69




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Shipping
    and Handling Costs
    Income
    taxes
    Research
    and development and capitalized software development
    costs
    Reclassifications
    Advertising
    Costs
  The Company expenses advertising costs as
    incurred.
  No. 01-09, Accounting for Consideration Given by a Vendor to a
    Customer.
  Computation
    of net income (loss) per share
   70




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2006


2005


2004Numerator:Net income (loss)

$
(10,753
)

$
6,276


$
(313
)Denominator:Weighted average shares used to
    compute basic EPS


65,117



64,684



70,850Effect of dilutive securities:Dilutive common stock equivalents






2,113



Weighted average shares used to
    compute diluted EPS


65,117



66,797



70,850Net income (loss) per share:Basic

$
(0.17
)

$
0.10


$
(0.00
)Diluted

$
(0.17
)

$
0.09


$
(0.00
)     Recent
    accounting pronouncements
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109 .
  Fair Value Measurements
 71




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 2 
    Balance Sheet Components:
  December 31,2006


2005(In thousands)Prepaid expenses and other current
    assetsCash in escrow

$
5,100


$
3,807Deferred compensation asset


2,567



1,804Other prepaid expenses


3,220



1,720$
10,887


$
7,331Property and equipment, net:Equipment

$
11,815


$
9,610Office equipment and furniture


2,078



1,913Leasehold improvements


1,648



1,432Software


7,671



6,88723,212



19,842Less: accumulated depreciation


(19,127
)


(17,247
)$
4,085


$
2,595Purchased intangibles and other
    assets, net:Purchased intangible assets

$
60,990


$
57,400Other assets


751



39761,741



57,797Less: accumulated amortization


(54,415
)


(46,307
)$
7,326


$
11,490Other accrued liabilitiesAccrued acquisition costs

$
4,683


$
2,649Warranty reserves


811



800Other accrued liabilities


4,406



2,828$
9,900


$
6,277  72




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3 
    Goodwill and Purchased Intangibles:
    December 31,2006


2005Balance as of beginning of the year

$
109,005


$
97,953Acquisitions:enKoo






1,286Lasso






10,651MailFrontier


28,220



Adjustments(1)


94



Tax adjustment related to Phobos
    acquisition in 2000 (see Note 8)


(6,920
)


(885
)Balance as of end of the year

$
130,399


$
109,005       (1)
    
    The adjustments represent the
    true-up of
    cost at the time of the acquisition related to Lasso Logic.    WeightedAverage


December 31, 2006


December 31, 2005Amortization


Gross Carrying


Accumulated





Gross Carrying


AccumulatedPeriod


Amount


Amortization


Net


Amount


Amortization


NetPurchased technology


68 months


$
34,471


$
(28,573
)

$
5,898


$
31,771


$
(23,190
)

$
8,581Non-compete agreements


36 months



7,249



(7,115
)


134



7,019



(7,019
)


Customer base


69 months



18,770



(18,227
)


543



18,140



(15,694
)


2,446Other


16 months



500



(500
)






470



(404
)


66Total intangibles





$
60,990


$
(54,415
)

$
6,575


$
57,400


$
(46,307
)

$
11,093     Amortization


AmortizationAmount to


Amount toCost of


OperatingFiscal Year

Revenue


Expenses2007

$
1,635


$
2202008


1,635



1242009


1,635



1052010


993



1052011






1052012






18Total

$
5,898


$
677   Note 4 
    Acquisitions:
   73




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Business Combinations
      Intangible assets

$
3,590IPR&D


1,580Goodwill


28,220Net liabilities assumed


(3,594
)Total purchase consideration

$
29,796         Year Ended December 31,2006


2005Total revenue

$
176,970


$
141,633Pro forma net (loss) income

$
(11,291
)

$
(3,555
)Pro forma net (loss) income per
    share  basic and diluted

$
(0.17
)

$
(0.05
)Reported net (loss) income

$
(10,753
)

$
6,276Reported net (loss) income per
    share  basic

$
(0.17
)

$
0.10Reported net (loss) income per
    share  diluted

$
(0.17
)

$
0.09    74




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Business Combinations
    Goodwill and Other
    Intangible Assets.
  Net tangible assets

$
1,351Intangible assets

$
14,421Total purchase consideration

$
15,772        75




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5 
    Financial Instruments:
  available-for-sale
  Year Ended December 31, 2006Gross


GrossUnrealized


UnrealizedFair Value


Gains


(losses)


Book ValueMarketable securitiesCorporate debt securities

$
194,432






$
(989
)

$
195,421U.S. government securities


13,846







(197
)


14,043Municipal bonds and notes


973







(11
)


984Total marketable securities

$
209,251


$



$
(1,197
)

$
210,448   Year Ended December 31, 2005Gross


GrossUnrealized


UnrealizedFair Value


Gains


(Losses)


Book ValueMarketable securitiesCorporate debt securities

$
164,517


$
80


$
(979
)

$
165,416U.S. government securities


32,401







(444
)


32,845Municipal bonds and notes


931







(24
)


955Total marketable securities

$
197,849


$
80


$
(1,447
)

$
199,216   yield-at-cost mark-to-market
    Unrealized Losses Less


Unrealized Losses 12Than 12 Months


Months or Greater


TotalGross





Gross





GrossUnrealized





Unrealized





UnrealizedDecember 31, 2006

Fair Value


(Losses)


Fair Value


(Losses)


Fair Value


(Losses)Marketable securitiesCorporate debt securities

$
84,675


$
(738
)

$
44,096


$
(251
)

$
128,771


$
(989
)U.S. government securities


5,551



(9
)


6,266



(187
)


11,817



(196
)Municipal bonds and notes










973



(12
)


973



(12
)Total marketable securities

$
90,226


$
(747
)

$
51,335


$
(450
)

$
141,561


$
(1,197
)  76




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Unrealized Losses Less


Unrealized Losses 12Than 12 Months


Months or Greater


TotalGross





Gross





GrossUnrealized





Unrealized





UnrealizedDecember 31, 2005

Fair Value


(Losses)


Fair Value


(Losses)


Fair Value


(Losses)Marketable securitiesCorporate debt securities

$
25,181


$
(189
)

$
51,301


$
(790
)

$
76,482


$
(979
)U.S. government securities


10,703



(332
)


21,698



(112
)


32,401



(444
)Municipal bonds and notes










931



(24
)


931



(24
)Total marketable securities

$
35,884


$
(521
)

$
73,930


$
(926
)

$
109,814


$
(1,447
)     Maturity

2006Due within one year

$
100,732Due between one and five years


21,892Due between five and ten years


7,893Due after 10 years(1)


78,734Total short-term investments

$
209,251       (1)
    
    Represents auction rate securities of $22.2 million that
    have re-auction periods of 90 days or less but whose
    underlying agreements have original maturities of more than
    90 days and asset backed securities of $56.5 million.  Note 6 
    Restructuring Charges:
  2006
    Restructuring Plan
  Accounting for Costs
    Associated with Exit or Disposal Activities Employees Accounting for Postemployment
    Benefits
 77




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     EmployeeSeveranceBenefits


Facility Costs


TotalAccrual balance at
    December 31, 2005

$



$
(7
)

$
(7
)Restructuring charges incurred


1,409







1,409Amount charged to goodwill


553



282



835Cash payments


(1,962
)


(275
)


(2,237
)Accrual balance at
    December 31, 2006

$



$



$
     Note 7 
    Shareholders Equity:
  1999
    Employee Stock Purchase Plan
      Stock
    Option Plans
   78




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Options OutstandingOptions





WeightedAvailable


Number


Average Exercisefor Grant


Outstanding


Price per ShareBalance at December 31, 2003


1,391,802



14,556,952


$
6.22Authorized


2,744,520







Granted


(3,793,070
)


3,793,070


$
6.09Exercised






(2,805,521
)

$
4.35Canceled


1,617,149



(1,989,789
)

$
9.79Balance at December 31, 2004


1,960,401



13,554,712


$
6.05Authorized


2,744,922







Options assumed related to
    acquisition






59,589


$
0.30Granted


(5,925,524
)


5,925,524


$
6.77Exercised






(1,072,878
)

$
4.38Canceled


1,567,766



(1,643,509
)

$
6.98Balance at December 31, 2005


347,565



16,823,438


$
6.33Authorized


2,601,046







Options assumed related to
    acquisition






76,848


$
1.46Granted


(3,726,000
)


3,726,000


$
8.63Exercised






(2,362,576
)

$
5.98Canceled


1,568,952



(1,606,190
)

$
6.62Balance at December 31, 2006


791,563



16,657,520


$
6.85     Options Outstanding


Option ExercisableWeightedAverage


Weighted








WeightedRemaining


Average








AverageContractual


Exercise


Aggregate





Exercise


AggregateRange of Exercise

Number


Life


Price per


Intrinsic


Number


Price per


IntrinsicPrices

Outstanding


(in Years)


Share


Value


Exercisable


Share


Value$ 0.30 - $ 0.39


33,484



7.7


$
0.30


$
271,755



20,605


$
0.31


$
167,178$ 0.63 - $ 0.94


4,656



1.8



0.93



34,889



1,755



0.93



13,140$ 1.41 - $ 1.42


39,006



3.3



1.41



273,391



14,807



1.41



103,756$ 2.87 - $ 4.28


3,169,886



6.1



3.44



15,799,712



2,975,319



3.43



14,838,998$ 4.93 - $ 7.34


5,213,616



7.4



5.89



13,180,017



2,723,596



5.79



7,155,610$ 7.47 - $10.75


7,925,262



8.7



8.17



3,805,676



2,173,610



7.83



1,468,882$11.26 - $16.49


48,610



3.9



13.52







48,610



13.52



$17.03 - $18.79


103,000



4.6



17.94







103,000



17.94



$29.75 - $29.75


20,000



3.4



29.75







20,000



29.75



$45.56 - $45.57


100,000



3.5



45.56







100,000



45.56



Total


16,657,520



7.7


$
6.85


$
33,365,440



8,181,302


$
6.20


$
23,747,564  79




---



##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  in-the-money
          2006

2005

2004Expected volatility

42.38% to 48.35%

48% to 71%

89%Risk-free interest rate

4.36% to 5.21%

3.46% to 4.43%

2.52% to 3.55%Expected life

2.92  to 3.12 years

3.1 to 4 years

4 yearsDividend yield

0%

0%

0%     2006

2005

2004Expected volatility

32.1% to 44.7%

60%

60%Risk-free interest rate

3.65% to 5.27%

1.00% to 2.77%

1.00% to 1.73%Expected life

0.5 year to 1 year

0.5 year

0.5 yearDividend yield

0%

0%

0%     Expected Volatility:
 80




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Risk-Free Interest Rate:
  Expected Term:
  Expected Dividend:
  Stock
    Repurchase Program
         81




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8 
    Income Taxes:
    Year Ended December 31,2006


2005


2004Current tax benefit (expense):Federal

$
(762
)

$
193


$
39State


(445
)


(74
)


(77
)Foreign


(79
)


(268
)


(263
)(1,286
)


(149
)


(301
)Deferred tax expense:Federal


(6,920
)


(885
)


State










(6,920
)


(885
)


$
(8,206
)

$
(1,034
)

$
(301
)         December 31,2006


2005Deferred tax assets:Net operating loss carryforwards

$
16,714


$
13,789Inventory reserves


520



419Deferred revenue


3,591



2,095Tax credits


8,260



6,404Share-based compensation


2,101



Other reserves and accruals


8,079



6,172Total deferred tax assets


39,265



28,879Valuation allowance


(36,345
)


(24,813
)Net deferred tax assets

$
2,920


$
4,066Deferred tax liabilities:Intangible assets

$
(2,920
)

$
(4,066
)  82




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year Ended December 31,2006


2005


2004Federal statutory rate (benefit)


(35
)%


35
%


(35
)%State taxes, net of federal benefit


(4
)


4



(4
)Deferred compensation charge










1,532Share-based compensation


100







Tax credits


(59
)


(2
)


(922
)Change in valuation allowance


283



(18
)


2,244Other


37



(5
)


(314
)322
%


14
%


2501
%    83




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2006


2005


2004Domestic

$
(2,191
)

$
6,479


$
(822
)Foreign


(356
)


831



810Total

$
(2,547
)

$
7,310


$
(12
)   Note 9 
    Segment Reporting:
  Disclosures About Segments of an Enterprise and
    Related Information
    Year Ended December 31,2006


2005


2004United States

$
120,405


$
90,432


$
83,757All other countries


55,133



44,892



41,892Total

$
175,538


$
135,324


$
125,649     Year Ended December 31,2006


2005


2004United States

$
3,997


$
2,679


$
3,381All other countries


838



313



386Total

$
4,835


$
2,992


$
3,767     Customers

2006


2005


2004Alternative Technology


18
%


13
%


7
%Tech Data


18
%


21
%


21
%Ingram Micro


17
%


18
%


17
%     Note 10 
    Commitments and Contingencies:
   84




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Year EndingDecember 31,2007


7062008


1,1382009


9982010


6632011


663$
4,168   Purchase
    commitments
    Product
    warranties
  90-day
  Year Ended December 31,2006


2005


2004(In thousands)Beginning balance

$
790


$
1,071


$
1,290Accruals for warranties issued


599



402



386Settlements made during the period


(578
)


(683
)


(605
)Ending balance

$
811


$
790


$
1,071  85




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Guarantees
    and Indemnification Agreements
        Legal
    Proceedings
   86




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      No. 06-CV-00445, and/or and/or
    Note 11 
    Employee Benefits:
  Pension
    Plan
     87




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##### Table of Contents



SONICWALL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Deferred
    Compensation Plan
   88




---



##### Table of Contents



ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   
  ITEM 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Management
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f). Internal Control  Integrated
    Framework
  Form 10-K,
  Changes
    in Internal Control over Financial Reporting
  Rules 13a-15(f)
  Inherent
    Limitations on Effectiveness of Controls
   89




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##### Table of Contents



ITEM 9B.  Other
    Information
   
  PART III
  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance    www.sonicwall.com
 
  ITEM 11.
    Executive
    Compensation   
  ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   
  ITEM 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   
  ITEM 14.
    Principal
    Accounting Fees and Services  Proposal 2-  Ratification
 90




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##### Table of Contents



PART IV
 
  ITEM 15.
    Exhibits
    and Financial Statement Schedules  The following documents are filed as part of this
    report:
  Financial Statements
  Financial Statement
    Schedules Form 10-K.
  Exhibits
  Number

Description2
.1

Agreement and Plan of Merger and
    Reorganization, dated as of October 16, 2000, among
    Registrant, Pluto Acquisition Corp., Phobos Corporation, and GMS
    Capital Partners, L.P. (Incorporated by reference to
    Registrants Current Report on
    Form 8-K
    (File
    No. 000-27723)
    filed on November 27, 2000).2
.2

Amendment to Agreement and Plan of
    Merger dated as of November 6, 2000, by and among
    Registrant, Pluto Acquisition Corp., Phobos Corporation, and GMS
    Capital Partners, L.P. (Incorporated by reference to
    Registrants Current Report on
    Form 8-K
    (File
    No. 000-27723)
    filed on November 27, 2000).2
.3

Agreement and Plan of Merger and
    Reorganization, dated March 1, 2001, among Registrant, ITI
    Acquisition Corp., Ignyte Technology, Inc., and Jeff Stark.
    (Incorporated by reference to Registrants Registration
    Statement on
    Form S-3
    (File
    No. 333-61168),
    filed on May 17, 2001).2
.4

Amendment No. 1 to the
    Agreement and Plan of Merger and Reorganization by and among
    Registrant, ITI Acquisition Corp., Ignyte Technology, Inc., and
    Jeff Stark, dated as of March 6, 2001. (Incorporated by
    reference to Registrants Registration Statement on
    Form S-3
    (File
    No. 333-61168),
    filed on May 17, 2001).3
.1

Registrants Amended and
    Restated Articles of Incorporation (Incorporated by reference to
    the Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).3
.2

Registrants Bylaws, as
    amended December 12, 2003 (Incorporated by reference to the
    Registrants Annual Report on Form 10-K (File
    No. 000-27723) for the year ended December 31,2005).4
.1

Registrants specimen common
    stock certificate (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.1

Registrants 1994 Stock
    Option Plan, as amended to date (Incorporated by reference to
    the Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.2

Form of Stock Option Agreement for
    Registrants 1994 Stock Option Plan (Incorporated by
    reference to the Registrants Filing on Schedule TO
    (File
    No. 005-58485),
    filed on January 9, 2003).10
.3

Registrants 1998 Stock
    Option Plan, as amended to date (Incorporated by reference to
    the Registrants 2000 Definitive Proxy Statement (File
    No. 000-27723),
    which was filed on November 7, 2001).10
.4

Form of Stock Option Agreement for
    Registrants 1998 Stock Option Plan (Incorporated by
    reference to the Registrants Filing on Schedule TO
    (File
    No. 005-58485),
    filed on January 9, 2003).10
.5

Registrants 1999 Employee
    Stock Purchase Plan (Incorporated by reference to the
    Registrants 2003 Definitive Proxy Statement (File
    No. 000-27723),
    which was filed on November 5, 2003).10
.6

Form of Stock Option Agreement
    under Phobos Corporation 1998 Stock Plan (Incorporated by
    reference to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-54976),
    filed on February 5, 2001).10
.7

Form of Stock Option Agreement
    under Phobos Corporation 1999 Stock Plan (Incorporated by
    reference to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-54976),
    filed on February 5, 2001).10
.8

RedCreek Communications, Inc. 2001
    Stock Option Plan (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-8
    (File
    No. 333-81492),
    filed on January 28, 2002). 91




---



##### Table of Contents



Number

Description10
.9

Employment agreement dated
    June 21, 2003 between Registrant and Kathleen Fisher
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2003).10
.10

Registrants Form of
    Individual Compensation Arrangements (Incorporated by reference
    to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-81492),
    filed on January 28, 2002).10
.11

Form of Indemnification Agreement
    entered into by Registrant with each of its officers and
    directors (Incorporated by reference to the Registrants
    Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2001, filed on
    November 14, 2001).10
.12

Loan and Security Agreement dated
    May 26, 1995 between Registrant and Comerica Bank
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.13++

Distribution Agreement dated
    February 9, 1999 between Registrant and Tech Data Product
    Management, Inc. (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.14++

Distribution Agreement dated
    July 5, 1998 between Registrant and Sumitomo Metal Systems
    Development Co., Ltd. (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.15++

Distribution Agreement dated
    November 11, 1992 between Registrant and Ingram Micro, Inc.
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.16

Agreement of Sublease dated as of
    October 26, 1998 between Registrant and AMP Incorporated
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.17

Purchase Agreement dated
    September 28, 1999 between Registrant and Flash Electronics
    Inc. (Incorporated by reference to the Registrants
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.18

Lease dated September 27,
    1999 between Registrant, as Tenant, and AMB Property, L.P., as
    Landlord (Incorporated by reference to the Registrants
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.19

First Amendment to Lease dated
    May 2, 2001 between Registrant, as Tenant, and AMB
    Property, L.P., as Landlord (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.20

Second Amendment to Lease dated
    September 26, 2001 between Registrant, as Tenant, and AMB
    Property, L.P., as Landlord (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.21++

OEM Hardware (with Software)
    License and Purchase Agreement effective as of May 29, 2001
    between Registrant and Cisco Systems, Inc. (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.22++

Amendment Number One to OEM
    Hardware (with Software) License and Purchase Agreement dated
    June 25, 2002 between Registrant and Cisco Systems, Inc.
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2002).10
.23

Employment agreement dated
    March 14, 2003 between Registrant and Matthew Medeiros
    (Incorporated by reference to the Registrants Annual
    Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 21, 2002.10
.24

Employment agreement dated
    August 11, 2003 between Registrant and Michael Stewart
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2003).10
.25

Employment agreement dated
    October 29, 2003 between Registrant and Robert Knauff
    (Incorporated by reference to the Registrants Annual
    Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2003). 92




---



##### Table of Contents



Number

Description10
.26

Manufacturing and Purchase
    Agreement dated June 4, 2004 by and between Flash
    Electronics, Inc. and SonicWALL, Inc. (Incorporated by reference
    to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.27

Third Amendment to Lease executed
    on April 28, 2004 by and between AMB Property, L.P., as
    Landlord, and SonicWALL, Inc. as Tenant. (Incorporated by
    reference to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.28

Retention and Severance Agreement
    for Executive Officers dated April 20, 2004. (Incorporated
    by reference to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.29

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.30

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.31

SonicWALL, Inc. Matthew Medeiros
    Employment Agreement as amended and restated July 29, 2004
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.32

SonicWALL, Inc Stock Option
    Agreement for Outside Directors dated July 29, 2004
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.33

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.34

Issuer Repurchase Plan Agreement
    dated November 29, 2004 between SonicWALL, Inc. and RBC
    Dain Rauscher Inc. (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2004).10
.35

Amended and Restated Issuer
    Repurchase Plan Agreement dated February 15, 2005 between
    SonicWALL, Inc. and RBC Dain Rauscher Inc. (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2004).10
.36

Agreement and Plan of Merger and
    Reorganization, dated November 18, 2005, by and among the
    Registrant, Spectrum Acquisition Corporation and Lasso Logic,
    Inc., et al. (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2005).10
.37

Agreement and Plan of Merger,
    dated February 7, 2006, by and among the Registrant,
    Meridian Acquisition Corporation, MailFrontier, Inc., and
    Anne Bonaparte and Sonja Hoel, as the Representatives. (Filed on
    Form 8-K
    (File
    No. 0000950134-06-003922)
    dated February 28, 2007.10
.38*

Lease dated December 19, 2006
    between Registrant, as Tenant, and Kolte Patil Developers
    Limited, as Landlord.10
.39*

Amended and Restated Issuer
    Repurchase Plan Agreement dated November 3, 2006 between
    SonicWALL, Inc. and RBC Dain Rauscher Inc.10
.40*

SonicWALL, Inc. Employee Stock
    Purchase Plan, dated August 24, 1999, as amended
    August 1, 2006.21


Subsidiaries (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).23
.1*

Consent of Independent Registered
    Public Accounting Firm23
.2*

Consent of Independent Registered
    Public Accounting Firm31
.1*

Certification of Chief Executive
    Officer pursuant to Securities Exchange Act
    Rules 13a-15(e)
    and
    15d-15(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002. 93




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##### Table of Contents



Number

Description31
.2*

Certification of Chief Financial
    Officer pursuant to Securities Exchange Act
    Rules 13a-15(e)
    and
    15d-15(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1*

Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.++
    
    Confidential treatment has been obtained or requested for
    portions of this exhibit. The omitted material has been
    separately filed with the Securities and Exchange Commission.  Exhibits
    Financial Statement Schedules
   94




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##### Table of Contents



SIGNATURES
      By:
    /s/  Matthew
    Medeiros  Matthew Medeiros
 Chief Executive Officer
    Signature

Title

Date/s/  Matthew
    MedeirosMatthew
    Medeiros

President, Chief Executive Officer
    and Director
    (Principal Executive Officer)

March 14, 2007/s/  Robert
    SelviRobert
    Selvi

Chief Financial Officer
    (Principal Financial Officer)

March 14, 2007/s/  Robert
    KnauffRobert
    Knauff

Chief Accounting Officer
    (Principal Accounting Officer)

March 14, 2007/s/  John
    C. ShoemakerJohn
    C. Shoemaker

Chairman of the Board of Directors

March 14, 2007/s/  Charles
    BergerCharles
    Berger

Director

March 14, 2007/s/  David
    W. GarrisonDavid
    W. Garrison

Director

March 14, 2007/s/  Keyur
    A. PatelKeyur
    A. Patel

Director

March 14, 2007/s/  Charles
    KissnerCharles
    Kissner

Director

March 14, 2007/s/  Edward
    F. ThompsonEdward
    F. Thompson

Director

March 14, 2007/s/  Cary
    ThompsonCary
    Thompson

Director

March 14, 2007  95




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##### Table of Contents



Schedule II
 
  VALUATION
    AND QUALIFYING ACCOUNTS
  Balance at





Charged to


Deductions/


BalanceBeginning of





Cost and


Write-off of


at End ofYear


Other


Expenses


Accounts


Year(In thousands)Year ended December 31, 2004Allowance for doubtful accounts

$
449


$



$
(104
)

$
(157
)

$
188Inventory reserves


1,491







712



(1,026
)


1,177Year ended December 31, 2005Allowance for doubtful accounts


188







27



(92
)


123Inventory reserves


1,177







171



(283
)


1,065Year ended December 31, 2006Allowance for doubtful accounts


123







53



(24
)


152Inventory reserves


1,065







742



(506
)


1,301  96




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##### Table of Contents



EXHIBIT
    INDEX
  Number

Description2
.1

Agreement and Plan of Merger and
    Reorganization, dated as of October 16, 2000, among
    Registrant, Pluto Acquisition Corp., Phobos Corporation, and GMS
    Capital Partners, L.P. (Incorporated by reference to
    Registrants Current Report on
    Form 8-K
    (File
    No. 000-27723)
    filed on November 27, 2000).2
.2

Amendment to Agreement and Plan of
    Merger dated as of November 6, 2000, by and among
    Registrant, Pluto Acquisition Corp., Phobos Corporation, and GMS
    Capital Partners, L.P. (Incorporated by reference to
    Registrants Current Report on
    Form 8-K
    (File
    No. 000-27723)
    filed on November 27, 2000).2
.3

Agreement and Plan of Merger and
    Reorganization, dated March 1, 2001, among Registrant, ITI
    Acquisition Corp., Ignyte Technology, Inc., and Jeff Stark.
    (Incorporated by reference to Registrants Registration
    Statement on
    Form S-3
    (File
    No. 333-61168),
    filed on May 17, 2001).2
.4

Amendment No. 1 to the
    Agreement and Plan of Merger and Reorganization by and among
    Registrant, ITI Acquisition Corp., Ignyte Technology, Inc., and
    Jeff Stark, dated as of March 6, 2001. (Incorporated by
    reference to Registrants Registration Statement on
    Form S-3
    (File
    No. 333-61168),
    filed on May 17, 2001).3
.1

Registrants Amended and
    Restated Articles of Incorporation (Incorporated by reference to
    the Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).3
.2

Registrants Bylaws, as
    amended December 12, 2003 (Incorporated by reference to the
    Registrants Annual Report on Form 10-K (File
    No. 000-27723) for the year ended December 31, 2005).4
.1

Registrants specimen common
    stock certificate (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.1

Registrants 1994 Stock
    Option Plan, as amended to date (Incorporated by reference to
    the Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.2

Form of Stock Option Agreement for
    Registrants 1994 Stock Option Plan (Incorporated by
    reference to the Registrants Filing on Schedule TO
    (File
    No. 005-58485),
    filed on January 9, 2003).10
.3

Registrants 1998 Stock
    Option Plan, as amended to date (Incorporated by reference to
    the Registrants 2000 Definitive Proxy Statement (File
    No. 000-27723),
    which was filed on November 7, 2001).10
.4

Form of Stock Option Agreement for
    Registrants 1998 Stock Option Plan (Incorporated by
    reference to the Registrants Filing on Schedule TO
    (File
    No. 005-58485),
    filed on January 9, 2003).10
.5

Registrants 1999 Employee
    Stock Purchase Plan (Incorporated by reference to the
    Registrants 2003 Definitive Proxy Statement (File
    No. 000-27723),
    which was filed on November 5, 2003).10
.6

Form of Stock Option Agreement
    under Phobos Corporation 1998 Stock Plan (Incorporated by
    reference to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-54976),
    filed on February 5, 2001).10
.7

Form of Stock Option Agreement
    under Phobos Corporation 1999 Stock Plan (Incorporated by
    reference to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-54976),
    filed on February 5, 2001).10
.8

RedCreek Communications, Inc. 2001
    Stock Option Plan (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-8
    (File
    No. 333-81492),
    filed on January 28, 2002).10
.9

Employment agreement dated
    June 21, 2003 between Registrant and Kathleen Fisher
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2003).10
.10

Registrants Form of
    Individual Compensation Arrangements (Incorporated by reference
    to the Registrants Registration Statement on
    Form S-8
    (File
    No. 333-81492),
    filed on January 28, 2002).10
.11

Form of Indemnification Agreement
    entered into by Registrant with each of its officers and
    directors (Incorporated by reference to the Registrants
    Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2001, filed on
    November 14, 2001).10
.12

Loan and Security Agreement dated
    May 26, 1995 between Registrant and Comerica Bank
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).




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##### Table of Contents



Number

Description10
.13++

Distribution Agreement dated
    February 9, 1999 between Registrant and Tech Data Product
    Management, Inc. (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.14++

Distribution Agreement dated
    July 5, 1998 between Registrant and Sumitomo Metal Systems
    Development Co., Ltd. (Incorporated by reference to the
    Registrants Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.15++

Distribution Agreement dated
    November 11, 1992 between Registrant and Ingram Micro, Inc.
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.16

Agreement of Sublease dated as of
    October 26, 1998 between Registrant and AMP Incorporated
    (Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.17

Purchase Agreement dated
    September 28, 1999 between Registrant and Flash Electronics
    Inc. (Incorporated by reference to the Registrants
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.18

Lease dated September 27,
    1999 between Registrant, as Tenant, and AMB Property, L.P., as
    Landlord (Incorporated by reference to the Registrants
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-85997),
    which became effective on November 9, 1999).10
.19

First Amendment to Lease dated
    May 2, 2001 between Registrant, as Tenant, and AMB
    Property, L.P., as Landlord (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.20

Second Amendment to Lease dated
    September 26, 2001 between Registrant, as Tenant, and AMB
    Property, L.P., as Landlord (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.21++

OEM Hardware (with Software)
    License and Purchase Agreement effective as of May 29, 2001
    between Registrant and Cisco Systems, Inc. (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).10
.22++

Amendment Number One to OEM
    Hardware (with Software) License and Purchase Agreement dated
    June 25, 2002 between Registrant and Cisco Systems, Inc.
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2002).10
.23

Employment agreement dated
    March 14, 2003 between Registrant and Matthew Medeiros
    (Incorporated by reference to the Registrants Annual
    Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 21, 2002.10
.24

Employment agreement dated
    August 11, 2003 between Registrant and Michael Stewart
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2003).10
.25

Employment agreement dated
    October 29, 2003 between Registrant and Robert Knauff
    (Incorporated by reference to the Registrants Annual
    Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2003).10
.26

Manufacturing and Purchase
    Agreement dated June 4, 2004 by and between Flash
    Electronics, Inc. and SonicWALL, Inc. (Incorporated by reference
    to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.27

Third Amendment to Lease executed
    on April 28, 2004 by and between AMB Property, L.P., as
    Landlord, and SonicWALL, Inc. as Tenant. (Incorporated by
    reference to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.28

Retention and Severance Agreement
    for Executive Officers dated April 20, 2004. (Incorporated
    by reference to the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended June 30, 2004).10
.29

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.30

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).




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##### Table of Contents



Number

Description10
.31

SonicWALL, Inc. Matthew Medeiros
    Employment Agreement as amended and restated July 29, 2004
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.32

SonicWALL, Inc Stock Option
    Agreement for Outside Directors dated July 29, 2004
    (Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.33

SonicWALL, Inc. Stock Option
    Agreement dated July 29, 2004 (Incorporated by reference to
    the Registrants Quarterly Report on
    Form 10-Q
    (File
    No. 000-27723)
    for the quarter ended September 30, 2004).10
.34

Issuer Repurchase Plan Agreement
    dated November 29, 2004 between SonicWALL, Inc. and RBC
    Dain Rauscher Inc. (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2004).10
.35

Amended and Restated Issuer
    Repurchase Plan Agreement dated February 15, 2005 between
    SonicWALL, Inc. and RBC Dain Rauscher Inc. (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2004).10
.36

Agreement and Plan of Merger and
    Reorganization, dated November 18, 2005, by and among the
    Registrant, Spectrum Acquisition Corporation and Lasso Logic,
    Inc., et al. (Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the year ended December 31, 2005).10
.37

Agreement and Plan of Merger,
    dated February 7, 2006, by and among the Registrant,
    Meridian Acquisition Corporation, MailFrontier, Inc., and Anne
    Bonaparte and Sonja Hoel, as the Representatives. (Filed on
    Form 8-K
    (File
    No. 0000950134-06-003922)
    dated February 28, 2007.10
.38*

Lease dated December 19, 2006
    between Registrant, as Tenant, and Kolte Patil Developers
    Limited, as Landlord.10
.39*

Amended and Restated Issuer
    Repurchase Plan Agreement dated November 3, 2006 between
    SonicWALL, Inc. and RBC Dain Rauscher Inc.10
.40*

SonicWALL, Inc. Employee Stock
    Purchase Plan, dated August 24, 1999, as amended
    August 1, 2006.21


Subsidiaries (Incorporated by
    reference to the Registrants Annual Report on
    Form 10-K
    (File
    No. 000-27723)
    for the fiscal year ended December 31, 2001).23
.1*

Consent of Independent Registered
    Public Accounting Firm23
.2*

Consent of Independent Registered
    Public Accounting Firm31
.1*

Certification of Chief Executive
    Officer pursuant to Securities Exchange Act
    Rules 13a-15(e)
    and
    15d-15(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.2*

Certification of Chief Financial
    Officer pursuant to Securities Exchange Act
    Rules 13a-15(e)
    and
    15d-15(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1*

Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.++
    
    Confidential treatment has been obtained or requested for
    portions of this exhibit. The omitted material has been
    separately filed with the Securities and Exchange Commission.  Exhibits
    Financial Statement Schedules