Aladdin Knowledge Systems Takes Home the Frost & Sullivan Product Innovation Award for its eToken NG

Palo Alto, Calif. — May 17, 2005 — Frost & Sullivan’s recent analysis, World Hardware Authentication Devices, selected Aladdin Knowledge Systems Ltd. (NASDAQ: ALDN) as the recipient of the 2005 Product Innovation Award in the hardware authentication devices market. This Award acknowledges its introduction of the eToken NG, a hybrid universal serial bus (USB) token that integrates a smart card with a one-time password (OTP)-generating feature.

The Award recognizes the company that has demonstrated excellence in new products and technologies within its industry. The recipient company has shown innovation by launching a broad line of emerging products and technologies.

The hybrid token combines the full functionality of a smartcard based USB authentication token with one-time password technology. The smart card feature enables the USB authentication token to facilitate applications such as public key infrastructure (PKI), digital signing, and storage of secure credentials in the connected mode. The smart card can generate, store, and protect users’ personal details such as private keys, passwords and digital certificates.

“The USB interface makes it possible to connect to the network or user devices even without an extensive smart card reader infrastructure by using the ubiquitous USB ports,” says Frost & Sullivan Research Analyst Zubin Baben. The OTP functionality can be used for strong authentication to network resources when a USB port is not available.

“The hybrid token provides unprecedented extensibility, flexibility and integration,” adds Baben, “and is particularly suitable for diverse environments where there is a need to support both connected and unconnected applications.”

After the successful launch of the eToken NG, VeriSign, Inc. entered an original equipment manufacturer (OEM) relationship with Aladdin to distribute the product and re-branded it as the VeriSign Hybrid token. The product supports the OATH OTP algorithm published by The Initiative for Open Authentication (OATH), an industry-wide collaboration to develop open reference architecture by leveraging existing open standards for the universal adoption of strong authentication.

Aladdin won a key U.S. patent for USB tokens with embedded smart cards. This and other key intellectual property assets are critical for the company. In January 2005, it announced that RSA Security, Inc., the world leader in two-factor authentication, would also license USB authentication technology.

The relationship allows Aladdin to extend its reach into the market by enabling the company’s USB-based token technology to be integrated into solutions from RSA Security.

“The USB authentication tokens are expected to gain an increasing share of the total hardware authentication devices market, and hybrid tokens may dominate the USB tokens segment of the market in future,” notes Baben. “Aladdin, with its technology leadership in this segment, is expected to be a major beneficiary of this shift in the market toward USB tokens.”

“We are extremely honored and pleased that Aladdin eToken received such a prestigious Award from Frost & Sullivan,” said Leedor Agam, vice president of the Aladdin eToken Business Unit. “This Award underscores our commitment to providing customers with the latest, most innovative solution for authentications, password management and identity theft protection.”

About Aladdin Knowledge Systems

Aladdin Knowledge Systems Ltd. is a global provider of security solutions that reduce software theft, authenticate network users and protect against unwanted Internet and e-mail content, including spam and viruses. Its security products are organized into two segments: Software Digital Rights Management (DRM) and Enterprise Security. Aladdin’s Software DRM products allow software publishers to limit revenue loss from software theft and piracy. Its Enterprise Security solutions enable organizations to secure their information technology assets by controlling who has access to their networks (authentication) and what content their users can utilize (content security). Visit the Aladdin Web site at www.Aladdin.com.

About Frost & Sullivan

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company’s industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit www.frost.com.