Counterpane Internet Security Continues Exceptional Growth in Second Quarter

PEMCO Corporation Computer Services Among Customers Choosing Counterpane Managed Security Services; Counterpane Achieves 211% Growth Rate

MOUNTAIN VIEW, Calif, August 6, 2004 - Counterpane Internet Security, Inc., the leader in Managed Security Services, announced today that it closed another record quarter. In the second quarter of 2004, Counterpane continued broadening its market penetration in the retail and manufacturing / high technology verticals, expanded its European presence through a partnership with Getronics, and achieved a 211 percent increase in bookings from the same quarter a year ago.

"In an intensely competitive marketplace, Counterpane has established itself as the best-of-breed provider of managed security services," said Paul Stich, President and CEO of Counterpane. "Our customers are clearly seeing the difference between Counterpane's innovative and focused approach to security services and the larger, less flexible service providers, which is reflected in the number of competitive customer wins we achieved this quarter."

This growth included a 10 percent increase in Counterpane's customer base, including PEMCO Corporation Computer Services, and continued solid renewal rates among existing customers.

Services Uptake

Counterpane saw continued customer demand for a combination of services across its entire Enterprise Protection Suite. Existing customer upgrades accounted for 25 percent of new bookings in the second quarter. Counterpane's Vulnerability Scanning services were selected by 85 percent of new customers with 30 percent of those customers replacing an existing solution. Device Management services were chosen by 20 percent of new and existing customers with 50 percent of those customers replacing existing products with Counterpane-installed and -managed devices. Customers also continued to express strong interest in Counterpane's Active Response service in order to simplify the challenges posed by new technologies such as intrusion prevention systems (IPS), and used Counterpane's Web Portal as a unified reporting center to consolidate management of security services.

Chris Kaufman, Director of Consulting and Business Systems at PEMCO Corporation Computer Services commented, "Counterpane clearly offered the most advanced services in the industry. Coupled with their stability and impressive revenue and customer growth metrics, it was the right decision to leverage their expertise to increase our level of protection."

Vertical Market Traction

New account growth was achieved across major vertical markets including manufacturing / high technology at 47 percent, retail at 20 percent, and pharmaceuticals and insurance industries each at 15 percent. Counterpane's revenue from existing accounts remained evenly distributed among financial, government, healthcare, manufacturing, utilities, and media industries.

Global Reach

Counterpane announced a strategic partnership with Getronics, one of the world's leading providers of vendor-independent network outsourcing and management services. Already, this partnership has yielded new customers further expanding Counterpane's reach outside of North America. Over 20 percent of overall Counterpane bookings represented global deployments outside the U.S., focused primarily in Europe and Asia.

Additional second quarter accomplishments include:

• Recognition as leading visionary: Counterpane was recognized as the leading pure-play and visionary provider of managed security services in the MSSP Magic Quadrant report published last week. Counterpane was also selected for the 2004 Red Herring Top 100, a list of private companies leading their markets through innovation, technology, strategy, and leadership.
• Ongoing technology advancement: As part of its continuing effort to maintain its leadership through advanced technology, Counterpane added firewall analysis capabilities, improved correlation features and Web Portal upgrades all centered around customized service delivery tailored to individual customer needs.
• Continued commitment to certified channel partners: To further support its continued partner channel success, Counterpane launched a suite of services packaged specifically for the security requirements and resources of small to mid-sized enterprises.
• Expansion of company leadership: Counterpane added Rick Howard as Global Operations Director to manage Counterpane's global network of Security Operations Centers (SOCs). Rick previously served in the Army where he reached the rank of Lieutenant Colonel and last served as the ACERT (Army Computer Emergency Response Team) Chief.

About Counterpane Internet Security

Counterpane is the leader in Managed Security Services, providing global enterprises with the highest level of corporate IT asset protection in the industry. Counterpane alleviates security and regulatory compliance concerns by transforming the challenges posed by deploying complex, global enterprise networks into strategic business advantage. The Counterpane Enterprise Protection Suite™ is a sophisticated suite of scanning, management and consulting services based on Counterpane's unparalleled Managed Security Monitoring service. Combined with its renowned security analysts and global visibility, Counterpane simplifies security by providing a single source for protection and compliance. The company is privately held and headquartered in Mountain View, Calif.

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Counterpane is a trademark of Counterpane Internet Security, Inc. All other companies, brand names or products are trademarks or registered trademarks of their respective companies.