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February 28, 2010

Authentec acquires SafeNet’s Embedded Security Solutions Division

To strengthen its security and identity management offerings

By CBR Staff Writer

AuthenTec, a provider of smart fingerprint sensors and offerings, has acquired SafeNet’s Embedded Security Solutions Division for $8.5mn in cash and 1.2 million shares (valued at $2.8mn at the closing) of its common stock, to strengthen its security and identity management offerings.

The transaction also calls for an earn-out of up to $2.5 million in cash based on the attainment of certain revenue goals for the remainder of 2010.

SafeNet’s Embedded Security Solutions recorded embedded IP and software revenues of $15.5m in 2009 with gross margins exceeding 90% and operating income margins of over 20% (the unaudited results of the business are subject to adjustment during the audit process).

Upon completion of the transaction, AuthenTec will become the exclusive worldwide supplier of SafeNet’s SafeXcel security processor ICs, representing over $3m in incremental sales in 2009. The deal is expected to be accretive to AuthenTec’s non-GAAP earnings in 2010, after consideration of the division’s deferred revenue.

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AuthenTec said that it will benefit from the addition of SafeNet’s Embedded Security offerings staff of encryption, algorithm, software and silicon design engineers and its expansive portfolio of software, IP and hardware products. These include SafeXcel IP Cores, QuickSec Embedded Security toolkits, Mobile VPN and Digital Rights Management (DRM) Fusion Solutions.

In addition, the compahy will also add SafeNet’s security and encryption IP content and expertise, which aligns with AuthenTec’s longer term strategy to generate its own IP licensing revenue. These IP cores will also reduce the company’s planned licensed IP expenses.

The Embedded Security Solutions team will continue to operate from engineering locations in the Netherlands and Finland, while also strengthening AuthenTec’s existing sales and support locations in Japan, Korea, Taiwan, the US and Europe.

Scott Moody, CEO of AuthenTec, said: “This acquisition continues our transformation from a component supplier to a more comprehensive source of security, identity management and touch control offerigs. The addition of SafeNet’s Embedded Security offerings not only significantly strengthens our offerings in our existing markets, but also broadens our revenue base.

“By leveraging the expertise of the SafeNet engineering team in software development, network security and secure communication, AuthenTec will have the ability to offer secure end-to-end solutions, from the individual PC or cell phone all the way to the network server in the cloud. This acquisition also helps drive additional revenue growth while improving gross margin and accelerating our return to profitability.”

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