WatchGuard Technologies Inc. –

SEATTLE – Watchguard Technologies Inc., a provider of Internet security solutions, held an initial public offering July 30. The company offered 3.5 million shares at $13 apiece, the high end of its $11 to $13 filing range.

Dain Rauscher Wessels, Warburg Dillon Read, SoundView Technology Group and Wit Capital Corp. underwrote the initial public offering, which left 18.45 million shares outstanding.

Matrix Partners IV, Olympic Venture Partners III and RRE Investors II were venture investors, none of whom were among the selling shareholders, who sold 250,000 shares.

WatchGuard’s Internet security solutions protect small- to medium-size businesses and organizations that use the Internet for e-commerce and communications. The company’s LiveSecurity product broadcasts threat responses, software updates and information alerts on the Internet, helping users keep up-to-date security systems with minimal effort.

The $41.1 million earned in the offering will be used to repay debt and for general corporate purposes.

The company has never been profitable, losing $9.1 million in 1998.

Andrew Verhalen, a general partner of Matrix Partners, and Charles Waite Jr., a general partner of Olympic Venture Partners, joined the company’s board of directors, followed in April 1998 by Stuart Ellman, co-founder of RRE Investors.

WatchGuard Technologies – Selected Financial

(in thousands, except per share data)

February 14, 1996 (inception) Six Months

to December 31, Year Ended December 31, Ended June 30,

1996 1997 1998 1998* 1999

Revenue 331 5,098 11,379 5,017 8,575

Net loss -468 -4,334 -9,119 -3,258 -6,661

Net loss per share – -17.17 -11.34 -4.70 -4.65