RSA Security Acquires PassMark Security

"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," said Art Coviello, president and CEO of RSA Security. "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, and customers and prospects of both organizations 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.

Mr. Coviello continued: "RSA Security has clearly differentiated itself in the authentication market with a broad-based, adaptive approach. Now we are gaining from the addition of more than 20 leading financial institutions to our consumer online banking portfolio – and the deep market knowledge and experience of this group."

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 behavior 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.

Bill Harris, chairman of PassMark, added, "Joining forces with RSA Security is the right move at the right time: as the industry moves to facilitate the mass-adoption of identity protection solutions, success will depend on the availability of a full suite of authentication offerings – and genuine flexibility and choice for enterprises and their customers. I am delighted that PassMark’s technology will form part of a robust and complete solution from RSA Security, with its strong history of technical excellence, customer service and support."

RSA also announced the appointment of Bill Harris to RSA Security’s board of directors, effective immediately following the closing of the transaction. Mr. Harris co-founded PassMark and served as the chairman of its board of directors. In an extraordinary career marked by innovation and entrepreneurial achievement, Mr. Harris has co-founded a number of companies and overseen significant growth, expansion and increased profitability during his tenure on the boards of directors of organizations including EarthLink, Macromedia and LowerMyBills.com. Mr. Harris has also served as the chief executive officer of Intuit and PayPal.

"We are delighted to welcome Mr. Harris to our board of directors," said James K. Sims, chairman of RSA Security’s board of directors. "His deep knowledge of the financial services industry and consumer market, combined with his great experience as an entrepreneur, will make him a valuable advisor to our Company. Mr. Harris is a man of vision and has an established reputation as one of the leaders of our industry; we are excited about working alongside him as we extend our leadership in the protection of identities and assets online."

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 (based on the average of the prior 30 days’ closing stock price as quoted by The NASDAQ Stock Market). For purposes of generally accepted accounting principles (GAAP), this transaction will be accounted for as a purchase, and the securities issued will be valued based on the average of the closing stock price on or around the closing date; as a result, for GAAP purposes, the merger consideration is currently estimated to be approximately $48.2 million.