RSA Security Acquires PassMark Security

By | April 24, 2006

RSA Security has announced that it has acquired PassMark Security, a privately held company based in Menlo Park. PassMark delivers robust software-based authentication to millions of users worldwide, through some of the largest consumer-facing financial institutions.

RSA Security expects this transaction to add in the range of $4 million to $5 million in revenue over the remainder of 2006 and in the range of $10 million to $15 million in revenue in 2007. Additionally, the Company anticipates that the acquisition will be mildly dilutive in the second and third quarters of 2006 and accretive beginning in the fourth quarter of 2006.

Art Coviello, president and CEO of RSA Security, said: “As financial institutions of all sizes race to address the regulatory community´s guidance on stronger authentication, this acquisition, with its ability to expand the RSA eFraudNetwork, broaden our distribution network and add deep domain expertise in consumer authentication, significantly strengthens our position in the market. Since our successful acquisition of Cyota and the great traction we are gaining in the marketplace, we have become even more bullish about our opportunity.”

The acquisition of PassMark will extend and broaden RSA Security´s channels-to-market in the financial sector by adding further depth to a growing distribution network. Customers and prospects of both organisations are set to gain from an expansion of RSA Security´s sales, implementation and support teams. RSA Security believes that the acquisition will strengthen its move to establish itself as a strategic hub for the financial marketplace, providing the ability to authenticate and protect all aspects of online banking and e-commerce; end-users,

merchants and transactions.

The deal further enhances RSA Security´s broad consumer identity protection portfolio that features a comprehensive range of authentication options and anti-fraud capabilities. It also gives more than 20 leading financial institutions the ability to contribute information to the RSA eFraudNetwork, the world´s largest cross-bank collaborative anti-fraud community, which in turn can benefit their tens of millions of online banking customers by protecting them from online fraud. The Network tracks online criminal behaviour across banking institutions, around the globe, enabling the Company to protect all the businesses on the Network from fraud attempts in real-time. All expansion to the Network helps to make its anti-fraud capabilities and reach more effective and more pervasive to the benefit of every member.

RSA Security is also acquiring PassMark´s proven solutions that are currently protecting millions of online users worldwide every day. These include: a two-factor authentication solution that authenticates each user to a Web site based on a password and specific positive device forensics and at the same time, authenticates the site to the user with visual images, offering both parties assurances that they are taking part in a legitimate transaction; and a voice-based biometric authentication system – that identifies wired and wireless phones in

combination with biometric voiceprints – to instantly authenticate remote users over the phone. RSA Security will continue to develop and support these products to meet the needs of customers. In addition, the Company will leverage these technologies to further enhance its RSA Adaptive Authentication offering, which allows the dynamic tailoring of authentication methodologies according to specific user preferences and scenarios.

RSA Security purchased PassMark for total consideration of $44.7 million, which consisted of $9.0 million in cash and the issuance of approximately 2.0 million shares of RSA Security common stock. In addition, RSA Security is setting aside $2.7 million to fund employee retention plans and termination costs. The Company will also reserve approximately 80,000 shares of its common stock related to the assumption of PassMark´s stock option plan.

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