Counterpane Announces Record 2004 Results; Sees Global Demand Surge for Outsourced IT Security Monitoring and Mitigation Services

Leading Protector of Networked Information Increases Revenue by 89 Percent Over Q42003

MOUNTAIN VIEW, Calif., February 1, 2005 - Counterpane Internet Security, Inc., the leading protector of networked information, today announced strong results for the fourth quarter and year-end 2004. Privately-held Counterpane closed the year with its strongest-ever quarterly performance, increasing its recurring revenues by 89 percent over the fourth quarter of 2003 and capping the year with its sixth consecutive quarter of uninterrupted record revenue growth.

New customers in Q4 included Pacific Gas & Electric, a top U.S. electric utility based in California, a major North American global financial services firm, a Fortune 100 global manufacturer, and others in the healthcare, retail, government and telecommunications sectors.

"The simplest explanation for Counterpane's continuing growth over the last six quarters? The growing realization that watching your own network alone won't protect you," said Counterpane CEO Paul Stich. "Increasing numbers of customers are realizing that outsourcing security event monitoring and mitigation to Counterpane buys them the expertise of a team of analysts who continuously monitor hundreds of networks around the globe. This team delivers best practices as they evolve in response to the threat of emerging viruses and worms and sophisticated internal and external hackers.

The aggregated expertise we offer is increasingly viewed as a 'must have' to businesses compelled to open their IT assets up to growing numbers of partners, customers, suppliers, investors and government regulators."

In addition to witnessing growing demand for its outsourced monitoring services, 2004 also saw continued demand for the range of services Counterpane offers as part of its Enterprise Protection Suite:

• Over 50 percent of new customers purchased Counterpane's Vulnerability Scanning services
• Counterpane's Device Management services drew a 20 percent increase in "per account" revenues
• Security Consulting engagements are converting into new managed service agreements.

Service offerings complementing managed security monitoring including management of firewalls, network intrusion detection and prevention systems and network vulnerability scanning had adoption rates of 75% among new customers in 2004. Furthermore, these services have been adopted by 50% of existing customers since their introduction in 2003. Additional 2004 Counterpane highlights include:

• Recognition as the leading visionary provider of managed security services in Gartner's Magic Quadrant for North American Managed Security Service Providers
• Significant expansion in Europe, the Middle East and Africa (EMEA) with the grand opening of a Security Operations Center in Brussels in conjunction with strategic partner Getronics
• Certification as a MasterCard Site Data Protection Compliant vendor, qualified by the card provider and Visa International to help online merchants evaluate the security of their Web sites that store MasterCard account data
• Continued expansion in Asia, primarily in Japan in collaboration with strategic partner Intec Communications.

"Of all of the Counterpane team's accomplishments in the past quarter and the past year, I take personal pride in one above all others," concluded Stich. "In 2004, we successfully defended over 400,000 attacks without one of our customers suffering a financial loss."

About Counterpane

Counterpane is the world's leading protector of networked information - the inventor of outsourced security monitoring and the foremost authority on effective mitigation of emerging IT threats. With the most comprehensive view available of global information security events, Counterpane offers customers the earliest possible warning of internal or external threats to their information security and availability, as well as the expert counsel required to successfully mitigate such threats. Counterpane's managed service model and technology products provide information-intensive organizations the security they require to collaborate with ever-increasing numbers of partners, customers, suppliers, investors and government regulators. 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.