IBM to Acquire Internet Security Systems (NASDAQ: ISSX)

IBM (NYSE: IBM) and Internet Security Systems, Inc. (NASDAQ: ISSX) today announced the two companies have entered into a definitive agreement for IBM to acquire Internet Security Systems, Inc., a publicly held company based in Atlanta, Ga., in an all-cash transaction at a price of approximately $1.3 billion, or $28 per share. The acquisition is subject to Internet Security Systems, Inc. shareholder and regulatory approvals and other customary closing conditions. The transaction is expected to close in the fourth quarter of 2006.


Internet Security Systems (ISS) provides security solutions to thousands of the world's leading companies and governments, helping to proactively protect against internet threats across networks, desktops and servers. ISS software, appliances and services monitor and manage network vulnerabilities and exploits and rapidly respond in advance of potential threats. This acquisition advances IBM's strategy to utilize IT services, software and consulting expertise to automate labor-based processes into standardized, software-based services that help clients optimize and transform their businesses.

This acquisition also reinforces IBM's position in the rapidly growing area of Managed Security Services. With concerns ranging from data theft to implementing and managing increasingly complex regulatory requirements, addressing IT security has become one of the most complex challenges companies are facing, regardless of size, location or industry.

ISS augments IBM's ability to address this growing industry challenge by combining ISS' complementary automated security platform, services, software and expert consultants with IBM's broad security portfolio, innovative research and global reach. Together, IBM and ISS will help clients of all sizes preemptively stay a step ahead of targeted security threats or attacks.

The acquisition is an important addition to IBM's security and privacy services business. ISS' product line and extensive expertise complements IBM's long-standing security research efforts, consulting and managed service delivery capabilities, which currently provide security solutions to the heterogeneous environments of thousands of IBM's clients. ISS will join IBM as a business unit within IBM Global Services' Security organization.

"Companies recognize that rapidly evolving security threats and complex regulatory requirements have turned security into a mission-critical priority," said Val Rahmani, General Manager, Infrastructure Management Services, IBM Global Services. "ISS is a strategic and valuable addition to IBM's portfolio of technology and services. This acquisition will help IBM to provide companies with access to trained experts and leading-edge processes and technology to evaluate and protect against threats and enforce security policies."

"Clients increasingly recognize that security must become a network-integrated business process rather than a reactive response to individual threats," said Tom Noonan, President and CEO of ISS. "By delivering an integrated security platform that is adaptable and extensible to address new threats and business requirements without incremental complexity and cost, ISS has delivered the foundation for delivering security as a service. These on-demand capabilities, together with our managed security services, appliances and software will further bolster IBM's leading security services and products as we take this innovation out to a larger, global stage."

IBM will utilize ISS' X-Force security intelligence service, which proactively protects networks with detailed analyses of global online vulnerabilities and threat conditions. The ISS global network of security operations centers (SOCs), which include sites in Tokyo, Brussels, Brisbane, Detroit and Atlanta, will also be added to IBM's existing global network of SOCs. IBM security consultants and global sales force will also offer ISS' line of security appliances and software, and fully enable it for IBM and third party products, services and solutions.

ISS has more than 11,000 customers worldwide including 17 of the world's largest banks, 15 of the largest governments, 11 of the top public insurance companies and 13 of the world's top IT organizations. ISS also brings to IBM a network of business partners skilled in selling the ISS product line and an expanded product set to the IBM Business Partner channel.

IBM currently has over 3,500 professionals delivering consulting, implementation and out-tasking security services to thousands of organizations all over the world.

Following completion of the acquisition, IBM intends to:

• Establish ISS' operations as a business unit within IBM's Infrastructure Management Services unit, part of IBM Global Technology Services

• Integrate ISS' software technology with Tivoli's IT service management portfolio, which includes software for Identity Management, Access Management, Service Oriented Architecture (SOA) security and Security Information Management

• Market and sell ISS' Managed Security Services and portfolio of Network, Application, Server and Endpoint Protection products through IBM's and ISS' worldwide sales channels and Business Partners

• Further expand the scope and capabilities of IBM's business and IT asset management consulting practices, and deliver services for ISS-based solutions through IBM Global Services

• Build upon the companies' existing business relationship, which began in 1999

About ISS, Inc.
ISS, Inc. is the security advisor to thousands of the world's leading businesses and governments, providing preemptive protection for networks, desktops and servers. An established leader in security since 1994, the ISS integrated security platform is designed to automatically protect against both known and unknown threats, and helps to keep networks up and running and shields customers from online attacks before they impact business assets. ISS products and services are based on the proactive security intelligence of its X-Force research and development team - a world authority in vulnerability and threat research. The ISS product line is complemented by comprehensive Managed Security Services and Professional Security Services. For more information, visit the ISS Web site at www.iss.net