WatchGuard Posts Earnings, Purchase

SEATTLE -- WatchGuard Technologies, Inc. (Nasdaq:WGRD), a leading provider of Internet security solutions, today announced its financial results for the quarter and year ended December 31, 2001. WatchGuard reported net revenue of $12.4 million for the fourth quarter of 2001, compared to $17.3 million in the third quarter, in line with the previously released revenue estimates of $11.0 million to $13.0 million disclosed on December 21, 2001. For the full year, net revenue was $64.3 million in 2001, up from $60.7 million in 2000. The decline in fourth quarter revenue was primarily due to challenging economic conditions, a slowdown in sales of higher-end products, and disruptions caused by the Company's realignment of its sales organization and channel. Product revenue was $7.5 million for the fourth quarter of 2001, compared to $12.8 million in the third quarter. Service subscription revenue was $4.9 million for the quarter, up from $4.5 million in the third quarter. In a separate release:

WatchGuard Technologies, Inc. (Nasdaq: WGRD), a leading provider of Internet security solutions, today announced that it has signed a definitive agreement to acquire RapidStream, Inc., a privately held provider of high performance ASIC-based firewall and VPN appliances, for approximately $48 million. The transaction is expected to close early in the second quarter and is subject to certain conditions to closing, as discussed below. "The acquisition of RapidStream represents a great combination of talented people, advanced ASIC technology, and a family of high performance systems that will strengthen our position in the SME market," said Jim Cady, President and CEO of WatchGuard. "By combining the power of WatchGuard's comprehensive and integrated security architecture and services, along with one of the fastest and most advanced silicon platforms available today, we will be able to provide our customers with what we believe is an unparalleled security solution." RapidStream, based in San Jose, California, is a developer of scalable, integrated firewall and VPN solutions. RapidStream's RapidCore processor is a programmable network security ASIC that includes four embedded RISC CPU's and embedded memory cache. The RapidCore, which integrates encryption, authentication, and firewall acceleration, offers one of the highest performance, integrated security acceleration solutions on the market. WatchGuard Technologies Inc. RapidStream Inc.