IBM to Acquire Internet Security Systems for 3.72 Times Revenue

Weekly Corporate Growth Report, Aug 28, 2006

The Deal: International Business Machines Corporation has agreed to acquire Internet Security Systems Inc. for $28 per share in cash. The transaction price represents a premium of eight percent over the company's closing share price prior to the deal announcement. The deal requires approval from Internet Security Systems shareholders. The companies expect the transaction to close in the final quarter of 2006.

Discussion: Internet Security Systems provides network security monitoring, detection, and response software and services. The company's software applications are used to protect networks, servers, and PCs. Internet Security Systems' products respond to intrusions, assess system vulnerabilities, provide centralized security management, and collect and analyze data.

International Business Machines, commonly known as IBM, makes a wide range of computer products including mainframes and servers, storage systems, and peripherals. The company is a provider of computer hardware and a leading player in almost every market in which it competes. In addition to hardware, IBM provides software, semiconductors, and various computer-related services.

The acquisition expands IBM's corporate managed security offerings. Internet Security's technical consultants will become part of IBM's services division. The acquisition is the third announced deal for IBM in the past month, following agreements to acquire FileNet Corporation and MRO Software.