Local News

IBM Acquires Internet Security Systems In $1.3 Billion Deal

Posted August 24, 2006

— IBM

is acquiring Atlanta-based

Internet Security Systems

in a $1.3 billion deal.

The acquisition is the fifth-largest in IBM's history.

ISS focuses on network security solutions. The company will become part of IBM's Global Services group, which has a major presence in RTP. Many of Global Services' personnel focus on security-based consulting services, according to an IBM spokesperson.

ISS will operate as a business unit within IBM and maintain its headquarters in Atlanta, Val Rahmani, general manager for infrastructure management services at IBM Global Services, said in a conference call to discuss the deal.

"This whole opportunity is about growth," Rahmani said.

Tom Noonan, president and chief executive officer of ISS, and Christopher Klaus, who founded the company while a student at Georgia Tech in 1994, are staying with the company, Noonan said during the call. Noonan joined the company as president in 1995. ISS went public in 1998

"I absolutely am staying," Noonan said. "I'm not leaving Atlanta. I was born here and raised here."

ISS has some 1,300 employees, 65 percent of whom are based in the United States. Both executives said they expected no job cuts as a result of the deal.

"This is a platform for growth, not cost synergies," Noonan said.

IBM (NYSE: IBM) is paying $28 a share in cash for ISS (Nasdaq: ISSX). ISS shares climbed more than 6 percent, closing at $27.62. IBM closed down 28 cents at $78.67.

The deal is the largest for IBM's Global Services group since the acquisition of Price Waterhouse Consulting in 2002.

ISS has thousands of clients worldwide. The company provides a variety of pre-emptive solutions to protect networks and individual machines from security threats. ISS also offers consulting services.

IBM, estimating the global security market at $32 billion, said the acquisition is part of its strategy to provide software-based solutions. "Companies recognize that rapidly evolving security threats and complex regulatory requirements have turned security into a mission-critical priority," Rahmani said in a statement. "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."

ISS operates a network of security operations centers, including locations in Atlanta, Detroit, Tokyo, Brussels and Brisbane. "Clients increasingly recognize that security must become a network-integrated business process rather than a reactive response to individual threats," Noonan said in a statement. "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."

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