Internet Security Systems Second Quarter Financial Results Below Expectations

Conference Call and Web Cast to be Held Today at 5:00 PM, EDT

ATLANTA, July 2 /PRNewswire/ — Internet Security Systems, Inc. (ISS) (Nasdaq: ISSX), a leading global provider of security management solutions for the Internet, today announced that its financial results for the second quarter ended June 30, 2001 are below its previously stated expectations.

“ISS is in a growing market sector as information security continues to be a vital investment companies need to make to ensure the protection of their IT infrastructure. We had expected that ISS’ strong pipeline of sales opportunities and usually strong finish in the last weeks of a quarter would allow us to achieve our expectations,” said Tom Noonan, president and chief executive officer of Internet Security Systems. “However, our larger customers deferred a significant amount of business, either lowering the amount purchased in the current quarter or deferring the decision to later periods. We will meet the challenges of the current environment and economic slowdown, continuing to improve our organizational structure, operations and cost controls.”

The company plans to announce its financial results for the second quarter on Wednesday, July 18, 2001 and is currently consolidating its worldwide results. Management now expects revenues in the range of $50 million to $52 million and pro forma earnings (loss) per diluted share in the range of ($0.02) to $0.00.

Pro forma per share amounts do not include the non-cash amortization of goodwill and intangible assets, an in-process research and development write- off and non-cash compensation charge due to unvested options, all arising from ISS’ acquisition of Network ICE Corporation. These additional charges are currently expected to represent an additional $0.16 per share in the quarter. The forgoing anticipated results compare to previous expectations of revenues in the range of $64 million to $67 million and earnings in the range of $0.15 to $0.16 per diluted share. ISS’ revenues for the first quarter ending March 31, 2001 were $ 61 million and earnings per diluted share were $0.14. Revenues for the second quarter ended June 30, 2000 of last year were $44 million and earnings per diluted share were $0.09.

ISS will keep this press release and published expectations publicly available on its Web site (http://www.iss.net ). The public can continue to rely on the expectations published in this press release as being its current expectations on matters covered, unless ISS publishes a notice stating otherwise. ISS anticipates providing its outlook for the third quarter and updating its outlook for the fiscal year ending December 31, 2001 in its earnings release scheduled for July 18, 2001. The public should no longer rely on ISS’ previous outlook for the year.

About Internet Security Systems

Internet Security Systems is a leading global provider of security management solutions for the Internet, protecting digital assets and ensuring safe and uninterrupted e-business. With its industry-leading intrusion detection and vulnerability assessment, remote managed security services, and strategic consulting and education offerings, ISS is a trusted security provider to more than 8,000 customers worldwide including 21 of the 25 largest U.S. commercial banks and the top 10 U.S. telecommunications companies. Founded in 1994, ISS is headquartered in Atlanta, GA, with additional offices throughout North America and international operations in Asia, Australia, Europe, Latin America and the Middle East. For more information, visit the Internet Security Systems web site at http://www.iss.net or call 888-901-7477. A conference call led by Tom Noonan, president and chief executive officer and Rich Macchia, chief financial officer, will be held today at 5:00 p.m. Eastern.

DIAL IN: Domestic 888-469-0564; International 712-271-3622; Passcode ISSX (or 4779)

A live Webcast of this conference call will be available at http://www.iss.net and click on “Investors.” The webcast will remain accessible until July 17, 2001. A rebroadcast of the teleconference will be available from 8:00 a.m., July 3 until 5:00 p.m., July 9, 2001.

REBROADCAST DIAL IN: Domestic 800-839-9137; International 402-998-1665; Passcode ISSX (or 4779)

Forward-Looking Statements

This release, other than historical information, includes forward-looking statements made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include those relating to ISS’ expected results for the second quarter. The risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, ISS’ verification, evaluation and consolidation of financial information from its various operations. Risk factors are discussed in ISS’ periodic filings with the Securities and Exchange Commission, including ISS’ Annual Report on Form 10K filed on March 30, 2001. These filings can be obtained either by contacting ISS Investor Relations or through the Securities and Exchange Commission’s Web site at “http://www.sec.gov ” Internet Security Systems is a trademark of Internet Security Systems, Inc.




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