Counterpane Internet Security Announces Strong 2003

Network Security Services Leader's New Business Increases Recurring Revenue by 43 Percent

MOUNTAIN VIEW, Calif., January 29, 2004 - Counterpane Internet Security, Inc., the leader in network security services, today announced strong year-end results for 2003. Counterpane closed the year with new business that increases its recurring revenue by 43 percent, with 75 percent of that growth coming from new customers contracted in 2003.

Counterpane experienced strong growth in the utilities and financial services verticals, with the addition of companies such as Northeast Utilities, a Fortune 500 diversified energy company, and Travis Credit Union, a California based financial institution. The company also saw increased traction in the health care, government and manufacturing verticals.

In 2003, Counterpane experienced strong market validation for the quality and breadth of its network security services both through high renewal rates and up sells to existing customers, as well as strong traction with new customers. Counterpane continued to see growth in multi-year contracts with both new and existing customers. Customer growth was particularly significant in the fourth quarter due to the availability of Counterpane's expanded Enterprise Protection Suite. Of particular note, 70 percent of new customers purchased Counterpane's Vulnerability Scanning services. As well, Counterpane's new Device Management services drew a 33 percent increase in per account revenues, and as expected Security Consulting engagements are converting into new managed service agreements.

"Counterpane's momentum accelerated in 2003 as outsourcing security continues to be recognized as a vital and cost effective business strategy for organizations of all sizes," said Paul Stich, president and CEO of Counterpane. "As organizations extend their networks to suppliers, partners and mobile workers and deal with new data privacy and protection laws, Counterpane has proved to be a trusted partner. The changes we have witnessed in 2003 in the growth of network vulnerabilities, complexity of security protection and attention to regulatory compliance have positioned us well for continued growth into 2004."

Key fourth quarter highlights:

• Information Security named Bruce Schneier, Counterpane's founder and CTO, as Best Industry Spokesperson of 2003.
• Counterpane was recognized as the leading visionary provider of managed security services in Gartner's Magic Quadrant for North American MSSPs.
• Continued expansion in Asia primarily focused on Japan.
• Counterpane announced continued expansion in Europe, the Middle East and Africa (EMEA) with the establishment of its European headquarters in the Netherlands, and the appointment of Peter L. Ruyters as managing director of EMEA operations.

Additional 2003 highlights:

• Counterpane built upon its industry leading Managed Security Monitoring service to offer additional complementary services including Device Management, Vulnerability Scanning, Active Response as well as Security Consulting services.
• Paul Stich, formerly president and chief operating officer, assumed the role of president and CEO in August 2003 to focus on expanding the company's portfolio of services, drive international expansion, and further customer and partner relationships.
• Counterpane expanded its presence to 11 U.S. cities, as well as in Europe, the Middle East and Africa (EMEA) and Japan.

About Counterpane

Counterpane is the recognized leader in Network Security Services, providing customers with a single source for complete network security. Counterpane mitigates network disruptions caused by both internal and external attacks, human error and regulatory compliance demands so customers can focus on running their businesses. As enterprises extend their networks to suppliers, remote offices, partners and customers around the world, Counterpane protects critical assets and optimizes network security by preventing attacks as they happen in real-time using 30,000 unique event rules developed for 300 supported devices. Counterpane's Enterprise Protection Suite of complementary managed security services includes Managed Security Monitoring, Vulnerability Scanning, Device Management, Active Response and Security Consulting Services. The company is privately held and headquartered in Mountain View, CA.

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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.