IBM to Acquire Watchfire to Help Customers Guard Against Online Security Attacks and Compliance Breaches

ARMONK, NY - IBM (NYSE: IBM) today announced it has entered into an agreement to acquire Watchfire Corporation, a privately held security and compliance testing software company based in Waltham, Massachusetts. The acquisition is subject to customary regulatory approvals and is expected to close in the third quarter of 2007. Financial details were not disclosed.

Online security and privacy incidents are on the rise which can result in loss of customer trust, costly technology and business remedies and often legal battles. According to a 2005 CSI/FBI Survey, internal security attacks cost U.S. businesses $400 billion per year. Watchfire technology, together with IBM, can help customers reduce these security risks and the associated costs to their bottom line.

Watchfire technology will extend IBM’s governance and risk management strategy, with broad security and compliance capabilities integrated into the software development lifecycle. Watchfire with IBM Rational software will help customers integrate web application security and compliance early on and throughout the software development process. As a result, customers will now be able to define, test and track the compliance of their applications with security, legal and corporate requirements.

“Security breaches and lack of compliance with industry and government regulations can topple business integrity and customer trust,” said Dr. Danny Sabbah, general manager, IBM Rational software. “Watchfire is a recognized industry leader in the security and compliance market that will further strengthen our ability to help customers mitigate risk by integrating security, quality testing and compliance testing requirements early in the software development process -- before vulnerabilities are exposed.”

Watchfire is a leading provider of web application security and compliance testing solutions. IBM Rational software provides clients with comprehensive software quality management solutions, including the ability to perform functional and performance tests while developing software. With the addition of Watchfire technology, customers will now be able to include security, compliance and quality testing as part of their web application development, which will ensure the business integrity of their applications before they go live. Watchfire technology will also complement existing IBM Tivoli identity, access and compliance management software offerings and ISS by extending security and compliance testing as an integrated element of the application development lifecycle.

IBM’s acquisition of Watchfire builds upon the existing relationship between the two companies. Founded in 1996, Watchfire is a Ready for IBM Rational software Business Partner, meaning Watchfire validated the integration of their offerings to the IBM Rational Software Delivery Platform. Watchfire has more than 800 customers in many industries around the globe, including but not limited to financial services, government, technology, pharmaceutical, energy and utilities, education, and manufacturing which rely on Watchfire to identify, report and help remediate security vulnerabilities.

“Web application attacks can expose high-value data such as personal information, customer records and corporate intellectual property, and these attacks are top-of-mind for companies worldwide,” said Peter McKay, Watchfire President & CEO. “Watchfire technology will extend IBM’s broad security and compliance product and services offerings to help customers address one of today’s most critical and challenging security issues. In addition, Watchfire can seamlessly integrate into IBM’s current offerings to provide a more comprehensive solution.”

Watchfire’s operations will become part of IBM’s Rational software brand, which produced double-digit revenue growth in the first quarter of 2007.

For more information, please visit: www.ibm.com/rational