RSA acquires PassMark Security for $44.7 million

RSA acquires PassMark Security for $44.7 million

RSA Security has acquired privately-held authentication outfit PassMark Security for $44.7 million in a cash and stock deal.

The acquisition of three-year old PassMark comes four months after RSA's $145 million take-over of anti-fraud firm Cyota. It marks another bold step in RSA's efforts to establish itself as a strategic security hub for the online financial marketplace.

Co-founded by former Intuit CEO Bill Harris, the PassMark authentication system relies on the exchange of personalised digital images between customer and bank Web site in advance of password entry. The platform achieves strong two-factor authentication without new hardware or software and has been gaining traction among bigger banks worldwide. The company currently has some 20 financial sector clients, including Bank of America and the UK's Alliance & Leicester.

PassMark client banks will be invited to contribute information to the RSA eFraudNetwork, which aims to track online criminal behavior across banking institutions and share information on fraud attempts in real-time.

Bill Harris, chairman of PassMark will join the RSA board as soon as the transaction is completed. He says: "Joining forces with RSA Security is the right move at the right time: as the industry moves to facilitate the mass-adoption of identity protection solutions, success will depend on the availability of a full suite of authentication offerings."

In addition to the upfront purchase price of $9 million cash and 2 million shares, RSA Security is setting aside $2.7 million to fund employee retention plans and termination costs. The company will also reserve approximately 80,000 shares of its common stock related to the assumption of PassMark’s stock option plan.

RSA says the transaction should add in the range of $4 million to $5 million in revenue over the remainder of 2006 and between $10 million to $15 million in revenue in 2007.

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