Internet Security Systems Reports Second Quarter 2004 Raises Annual Guidance

Revenues
Revenues were $69,540,000 for the second quarter of 2004, an 18% increase compared with second quarter 2003 revenues of $59,125,000.

GAAP Earnings
Reported net income under generally accepted accounting principles (GAAP) for the second quarter of 2004 was $5,460,000, or $0.11 per diluted share, compared with reported net income of $4,891,000, or $0.10 per diluted share, in the second quarter of 2003.

Non-GAAP Earnings
Non-GAAP net income for the second quarter of 2004 and 2003 excludes the after-tax impact of non-cash expense for amortization of acquisition related intangibles and acquisition related compensation charges for unvested stock options. Non-GAAP net income for the second quarter of 2004 was $6,636,000, or $0.14 per diluted share, compared with $5,878,000, or $0.12 per diluted share, in the second quarter of 2003.

"Throughout ISS' 10-year history, the company has maintained an unwavering commitment to innovation through intensive security research and development," said Tom Noonan, chairman, president and chief executive officer of Internet Security Systems. "Our strong second quarter is a testament to our leadership position in the growing markets of intrusion prevention and vulnerability management. We attribute this growth to the market's endorsement of the need for a new standard in security; security products and services that preemptively protect organizations from Internet threats before they impact business."

Business Outlook
The following Business Outlook is based on current expectations. The statements in this Business Outlook are forward-looking, and actual results may differ materially. These statements do not reflect the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this press release. During the quarter, ISS' corporate representatives may reiterate the company's published Business Outlook during private meetings with investors, investment analysts, the media and others. At the same time, ISS will keep its most current earnings release and any subsequent press releases containing the then current Business Outlook publicly available on its Web site at www.iss.net. Prior to the start of ISS' Quiet Period for the third quarter, the public can continue to rely on the Business Outlook set forth in this press release as being ISS' current expectations on matters covered, unless ISS publishes a notice stating otherwise. During the Quiet Period, ISS and its corporate representatives will not comment concerning the previously published Business Outlook. During the Quiet Period, the company's press releases and filings with the SEC on Forms 10-K and 10-Q should be considered historical, speaking as of prior to the Quiet Period only and not subject to update by the company. ISS' Quiet Period at the end of the third quarter is expected to run from September 15, 2004 until financial results are released in October 2004.

This Business Outlook assumes that the enterprise spending environment for the remainder of 2004 will remain consistent with ISS' current experience during the first half of 2004. The outlook takes into account that the mix of Proventia product offerings impacts our results as they have different proportions of the sale recorded as revenue in current and future periods. ISS remains focused on costs with the expectation to produce further earnings leverage in the second half of the year.

For the year ending December 31, 2004, ISS currently expects to achieve revenues in the range of $280 million to $290 million. GAAP net income is expected to be in the range of $0.49 to $0.57 per diluted share. Non-GAAP net income is expected to be in the range of $0.59 to $0.67 per diluted share.

For the quarter ending September 30, 2004, ISS currently expects to achieve revenues in the range of $69 million to $73 million. GAAP net income is expected to be in the range of $0.12 to $0.15 per diluted share. Non-GAAP net income is expected to be in the range of $0.14 to $0.17 per diluted share.

Non-GAAP net income excludes non-cash acquisition related charges, consisting of amortization of intangibles and compensation charges for unvested stock options and the tax effect of these adjustments, estimated to be $1.1 million for the quarter ending September 30, 2004 and $4.5 million for the year ending December 31, 2004. Non-GAAP financial measures used in this press release are reconciled to the appropriate GAAP measures in the tables contained in the Consolidated Statements of Operations and the Business Outlook Reconciliation included with this press release. Reconciliation information can also be found in ISS' Form 8-K filed today with the Securities and Exchange Commission and available through ISS' Web site at www.iss.net or the Securities and Exchange Commission Web site at www.sec.gov.

Stock Repurchase Program
The ISS Board of Directors also approved a new stock repurchase program following the expiration of ISS' stock repurchase program announced in July 2002. Under the new stock repurchase program, ISS may repurchase up to $50 million of its outstanding common stock over the 12 months ending July 19, 2005. Purchases under the program may be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The program may be discontinued at any time.

Earnings Conference Call
The Company's conference call regarding this press release is being held Wednesday, July 21, 2004 at 4:15 p.m. Eastern Time and can be accessed as follows:
DATE/TIME: Wednesday, July 21, 2004 at 4:15 p.m. EDT
DIAL IN: Domestic 800-299-9086
International 617-786-2903
Passcode ISSX (or 4779)

A live Webcast of this conference call will be available at www.iss.net and the archived Webcast will remain accessible on the ISS Web site until August 31, 2004. An audio rebroadcast of the teleconference will be available through July 28, 2004.

REBROADCAST DIAL IN: 
Domestic 888-286-8010
International 617-801-6888
Passcode ISSX (or 4779) 

Additional investor information can be accessed on the Internet Security Systems Web site or by contacting the Investor Relations department at 888- 901-7477.

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About Internet Security Systems, Inc.
Internet Security Systems is the trusted expert to global enterprises and world governments providing products and services that protect against Internet threats. An established world leader in security since 1994, ISS delivers proven cost efficiencies and reduces regulatory and business risk across the enterprise for more than 11,000 customers worldwide. ISS products and services are based on the proactive security intelligence conducted by ISS' X-Force® research and development team - the unequivocal world authority in vulnerability and threat research. Headquartered in Atlanta, Internet Security Systems has additional operations throughout the Americas, Asia, Australia, Europe and the Middle East. For more information, visit the Internet Security Systems Web site at www.iss.net or call +32 (0)2 479 67 97.

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Forward-Looking Statements
This press 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. Some of these forward-looking statements include our Business Outlook and statements regarding new products, products under development and related plans. The risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: the level of demand for ISS' products; customer budgets; the volume and timing of orders; the mix of products sold and whether revenue is recognized upon sale or deferred to subsequent periods; product and price competition; ISS' ability to develop new and enhanced products; acceptance of new and enhanced products by customers; ISS' ability to accurately forecast and produce demanded quantities of its appliance products and models; ISS' ability to integrate acquisitions or investments; ISS' ability to attract and retain key personnel; reliance on distribution channels through which ISS' products are sold; reliance on contract manufacturers to produce ISS appliance products; availability of component parts of appliance products; changes in accounting policies, standards, guidelines or principles that may be adopted by regulatory agencies or the Financial Accounting Standards Board; the assertion of infringement claims with respect to ISS' intellectual property; foreign currency exchange rates; risks concerning the rapid change of technology; and general economic factors. These risks and others are discussed in ISS' periodic filings with the Securities and Exchange Commission, including ISS' 2003 Annual Report on Form 10-K and ISS' Quarterly Report on Form 10-Q for the first quarter ended March 31, 2004. These filings can be obtained either by contacting ISS Investor Relations or through ISS' Web site at www.iss.net or the Securities and Exchange Commission's Web site at www.sec.gov.

Non-GAAP Financial Measures
ISS believes that Non-GAAP net income, which excludes the after-tax effect of non-cash acquisition related expenses, is an additional meaningful measure of operating performance. Non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with generally accepted accounting principles. ISS believes that its presentation of Non-GAAP net income and Non-GAAP operating margin provides useful information to investors as a measure of operating performance basic to its ongoing operations, which is more comparable from period to period without the charges related to occasional acquisition activity. ISS historically used the Non-GAAP net income measure to provide its forward-looking business outlook and compare with financial analysts estimates, and uses non-GAAP net income and operating margin measures to evaluate its internal performance, including as a basis for calculating incentive compensation.

Internet Security Systems and Proventia are trademarks, and X-Force is a registered trademark of Internet Security Systems, Inc.