Ownership Submission
FORM 3
 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF SECURITIES

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940
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(Print or Type Responses)
1. Name and Address of Reporting Person *
  KAELLE JOHN A
 2. Date of Event Requiring Statement (Month/Day/Year)
09/28/2006		 3. Issuer Name and Ticker or Trading Symbol
SHUTTERFLY INC [SFLY]
(Last)
(First)
(Middle)
C/O SHUTTERFLY INC, 2800 BRIDGE PARKWAY SUITE 101		 4. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
_____ Director _____ 10% Owner
__X__ Officer (give title below) _____ Other (specify below)
VP, FINANCE
 5. If Amendment, Date Original Filed(Month/Day/Year)
(Street)

REDWOOD CITY, CA 94065		 6. Individual or Joint/Group Filing(Check Applicable Line)
_X_ Form filed by One Reporting Person
___ Form filed by More than One Reporting Person
(City)
(State)
(Zip)
Table I - Non-Derivative Securities Beneficially Owned
1.Title of Security
(Instr. 4)		 2. Amount of Securities Beneficially Owned
(Instr. 4)		 3. Ownership Form: Direct (D) or Indirect (I)
(Instr. 5)		 4. Nature of Indirect Beneficial Ownership
(Instr. 5)
COMMON STOCK 40,000
D
 

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly. SEC 1473 (7-02)
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Table II - Derivative Securities Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security
(Instr. 4)		 2. Date Exercisable and Expiration Date
(Month/Day/Year)		 3. Title and Amount of Securities Underlying Derivative Security
(Instr. 4)		 4. Conversion or Exercise Price of Derivative Security 5. Ownership Form of Derivative Security: Direct (D) or Indirect (I)
(Instr. 5)		 6. Nature of Indirect Beneficial Ownership
(Instr. 5)
Date Exercisable Expiration Date Title Amount or Number of Shares
EMPLOYEE STOCK OPTION (RIGHT TO BUY)   (1)(2) 10/27/2014 COMMON STOCK 20,000 $ 0.3 D  
EMPLOYEE STOCK OPTION (RIGHT TO BUY)   (1)(3) 08/17/2015 COMMON STOCK 10,000 $ 6 D  
EMPLOYEE STOCK OPTION (RIGHT TO BUY)   (1)(4) 05/08/2016 COMMON STOCK 17,500 $ 10.39 D  

Reporting Owners

Reporting Owner Name / Address Relationships
Director 10% Owner Officer Other
KAELLE JOHN A
C/O SHUTTERFLY INC
2800 BRIDGE PARKWAY SUITE 101
REDWOOD CITY, CA 94065		       VP, FINANCE  

Signatures

/S/ DOUGLAS APPLETON, ATTORNEY-IN-FACT FOR JOHN A. KAELLE 09/28/2006
**Signature of Reporting Person Date

Explanation of Responses:

* If the form is filed by more than one reporting person, see Instruction 5(b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1) IMMEDIATELY EXERCISABLE.
(2) OPTION VESTS MONTHLY AS TO 1,250 SHARES THROUGH OCTOBER 4, 2008.
(3) OPTION VESTS AS TO 25% OF THE SHARES SUBJECT TO THE GRANT ON AUGUST 18, 2006, AND AS TO AN ADDITIONAL 1/48TH OF THE TOTAL NUMBER OF SHARES SUBJECT TO THE GRANT AT THE END OF EACH FULL MONTH THEREAFTER.
(4) OPTION VESTS AS TO 25% OF THE SHARES SUBJECT TO THE GRANT ON MAY 9, 2007, AND AS TO AN ADDITIONAL 1/48TH OF THE TOTAL NUMBER OF SHARES SUBJECT TO THE GRANT AT THE END OF EACH FULL MONTH THEREAFTER.
 
Remarks:
CONFIRMING STATEMENT
THIS STATEMENT CONFIRMS THAT THE UNDERSIGNED, JOHN A. KAELLE, HAS AUTHORIZED AND DESIGNATED STEPHEN E. RECHT AND/OR DOUGLAS APPLETON TO EXECUTE AND FILE ON THE UNDERSIGNED'S BEHALF ALL FORMS 3, 4 AND 5 (INCLUDING ANY AMENDMENTS THERETO) THAT THE UNDERSIGNED MAY BE REQUIRED TO FILE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AS A RESULT OF THE UNDERSIGNED'S OWNERSHIP OF OR TRANSACTIONS IN SECURITIES OF SHUTTERFLY, INC.  THE AUTHORITY OF STEPHEN E. RECHT AND/OR DOUGLAS APPLETON UNDER THIS STATEMENT SHALL CONTINUE UNTIL THE UNDERSIGNED IS NO LONGER REQUIRED TO FILE FORMS 3, 4 AND 5 WITH REGARD TO THE UNDERSIGNED'S OWNERSHIP OF OR TRANSACTIONS IN SECURITIES OF SHUTTERFLY, INC., UNLESS EARLIER REVOKED IN WRITING.  THE UNDERSIGNED ACKNOWLEDGES THAT STEPHEN E. RECHT AND/OR DOUGLAS APPLETON ARE NOT ASSUMING ANY OF THE UNDERSIGNED'S RESPONSIBILITIES TO COMPLY WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934.
DATE:  SEPTEMBER 28, 2006
/S/ JOHN A. KAELLE

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