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September 22, 2006

Research Associate: Deepa Agarwal, MF

Editor: Christopher R. Jones, CFA

Sr. Ed.: Ian Madsen, CFA: imadsen@; 1-800-767-3771 x417

155 North Wacker Drive ( Chicago, IL 60606

|RSA Security Inc. |(RSAS - NASDAQ) |$28.00 |

Note: All new or revised material since last the report is highlighted.

Reason for Report: RD Coverage Ceased via EMC Acquisition (Previous: Minor changes in estimate, Aug. 30)

Overview

Based in Bedford, Massachusetts, RSA Security, Inc. (RSAS) and its subsidiaries provide solutions for establishing online identities, access rights, and privileges for people, applications, and devices. Its solutions help organizations protect their information and manage the identities of the people and applications accessing and exchanging that information. The company’s portfolio of e-security solutions includes identity and access management, secure mobile and remote access, secure enterprise access, secure transactions, and consumer identity protection. Its solutions include RSA SecurID authenticators, RSA Authentication Manager Software, RSA Certificate Manager Software, RSA ClearTrust software, RSA BSAFE encryption software and protocol products, RSA Certificate Manager Components, and maintenance and professional services associated with these products. RSA Security offers its solutions to customers in the technology, hardware, and software sectors; banking and insurance; professional services; telecommunications; healthcare and pharmaceuticals; manufacturing, distribution, and transportation; and federal, state, and local governments. RSA Security has strategic partnerships with Accenture, Microsoft Corporation, and Citrix. On September 18, 2006, EMC, a major vendor in protecting and managing identities and digital assets, announced that it has completed the acquisition of RSA. For more information about the company, please visit its website at .

On July 19, 2006, RSAS reported 2Q06 EPS of $0.14, compared to $0.12 in 2Q05 and $0.14 in 1Q06, and slightly above the Street estimate of $0.13. Total revenues were $92.9M, up 24.1% YoY and 6.2% sequentially. In light of the definitive agreement about the company being acquired by EMC, announced on June 29, 2006, the Company has not provided financial guidance for its operations for the third quarter of 2006.

|Key Positive Arguments |Key Negative Arguments |

|Stable Core – RSA derives approximately 80% of its revenues from its core |Competition – Competition in the authentication space is increasing, which |

|token business. The company commands a dominant 75% market share of the |could lead to pricing pressure and hurt RSA’s healthy margins. |

|traditional authentication business. This market is growing in low single | |

|digits. RSAS’s revenues are influenced by the token renewal cycle, which is |Economic Cycles – Though security remains a high budgetary priority, a weak |

|expected to turn positive in 2H06. |technology spending environment could adversely affect the company’s |

| |performance. |

|Healthy Balance Sheet – The company’s balance sheet remains strong with RSA | |

|generating healthy operating cash flow sufficient to carry out the announced|Regulatory Overhangs – The issue of a subpoena by the Attorney for the |

|share repurchase activity. |Southern District of New York following the informal inquiry by the SEC into|

| |option grants of the company weighs down on the stock. |

|Acquisition Benefits – The company is expected to gain strategically | |

|(gaining of a broad suite of consumer solutions) as well as financially | |

|(synergistic benefits) through the acquisitions of Cyota and PassMark. | |

RSAS’s Fiscal Year ends on December 31st.

Recent Events

Goldleaf Technologies, Inc. Teams with RSA Security

On August 28, 2006, RSA Security announced that Goldleaf Technologies, Inc., a wholly- owned subsidiary of Goldleaf Financial Solutions, Inc. (NASDAQ: GFSI), now offers the RSA(R) Adaptive Authentication solution to its banking and credit union customers. Goldleaf is a leading provider of technology-based solutions for financial institutions; the strategic relationship with RSA Security enables Goldleaf's participating financial institutions to be more proactive in the prevention of online fraud -- and have the tools to remain compliant with federal guidelines for multi-factor authentication.

Takeover Deal

On September 18, 2006, EMC, a major vendor in protecting and managing identities and digital assets, announced it has completed the acquisition of Massachusetts-based RSA Security (RSAS: NASDAQ). Under terms of the definitive agreement announced on June 29, 2006, EMC paid $28.00 per share in cash in exchange for each outstanding share of RSAS and the assumption of outstanding options for a total purchase price of approximately $2.1 billion, net of RSA's existing cash balance. RSA Security stockholders approved the acquisition on September 14, 2006. EMC's acquisition of RSA brings together two market leaders with a shared vision for helping organizations of all sizes securely manage their information throughout its lifecycle. The acquisition adds industry-leading identity and access management solutions and encryption and key management software to EMC's expanding, information-centric security portfolio.

Authentication for Online Banking

On June 19, 2006, Share One, Inc., a technology Credit Union Service Organization (CUSO) providing core processing and home banking services for credit unions, announced that it has entered into an alliance with RSA Security to comply with federal multi-factor authentication guidelines for online banking. Share One will offer the RSA Adaptive Authentication solution (including RSA Security's risk-based authentication technology) to its credit union customers and will also integrate the product into its own home banking solution.

Launch of RSA Access Manager 6.0

On June 13, 2006, the company announced that it has launched Access Manager 6.0 software to help protect Web-based resources and enforce centralized user access policies as companies struggle with compliance requirements and strive to improve their overall security posture. New features of the Access Manager include hierarchical delegated administration, operational instrumentation and health monitoring, expanded logging, and extended interoperability with Microsoft technology.

Comprehensive Enterprise Data Protection Initiative

On June 5, 2006, RSA Security announced an initiative to provide companies with a more comprehensive approach to enterprise data protection (EDP). RSA Security's EDP approach is designed to provide a robust framework for protecting an organization's sensitive data in any place: at the application-level, within databases, in files and operating systems, on laptops and mobile devices, and in storage.

Revenue

|Revenue ($M)- FYE Dec 31 |

|Positive |11.1% |

|Neutral |88.9% |

|Negative |0.0% |

|Avg. Target Price |$28.00 |

|Digest High |$28.00 |

|Digest Low |$28.00 |

|No. of Analysts with Target Price/Total # |5/15 |

Hypothetically speaking, risks to the achievement of the target price involve EMC backing away from the deal or if another company aggressively pursues RSA.

Please refer to the Zacks Research Digest spreadsheet on RSAS for further details on valuation.

Capital Structure/Solvency/Cash Flow/Governance/Other

Operational Metrics

Customers: RSA Security closed its business with more than 6,600 customers in the second quarter, including approximately 900 new customers. The company shipped approximately 2.5 million authentication credentials during the second quarter, a 44% increase from the first quarter of 2006. Approximately 1.3 million of those credentials were consumer related, a 116% increase from the consumer credentials shipped during the first quarter of 2006.

Products and Solutions: During the second quarter, RSA Security announced an initiative to provide companies with a more comprehensive approach to enterprise data protection (EDP). RSA Security's EDP approach is designed to provide a robust framework for protecting an organization's sensitive data in any place where data reside: at the application-level; within databases; in files and operating systems; on laptops and mobile devices, and in storage. In addition, this EDP framework addresses the management of associated encryption keys, access control and authentication -- helping organizations mitigate risk and reduce costs, while protecting consumer, employee and partner information.

Acquisition of PassMark

On April 24, 2006, RSA Security announced the acquisition of PassMark Security, a private vendor of software-based authentication to consumer-based financial institutions. Total consideration was approximately $44.7M, consisting of $9M in cash and 2M shares of RSAS stock. In addition, RSA Security has set aside $2.7 million to fund employee retention plans and termination costs. The company will also reserve approximately 80,000 shares of its common stock related to the assumption of PassMark’s stock option plan.

Share Repurchase Program

During the quarter, in accordance with the Company's approved share repurchase program, RSA Security repurchased 450,000 shares of its common stock for $8.5 million. The Board of Directors of RSA Security approved an amendment to the share repurchase program extending it for an additional two years, until June 30, 2008. As of June 30, 2006, there were approximately 6.0 million shares eligible for repurchase under the plan.

Corporate Governance

On May 09, 2006, RSA Security announced the appointment of Charles F. Kane to the position of senior vice president of finance and chief financial officer (CFO) with effect from May 15, 2006. As CFO, Kane will be responsible for the company's global financial procedures and will oversee all treasury functions of the company. Kane will report to Art Coviello, president and chief executive officer, at RSA Security.

Balance Sheet

The company’s balance sheet remains healthy with RSA generating $12M in operating cash flow during the quarter, up 144% YoY. Total cash and cash equivalents increased 11% sequentially to $208M or approximately $2.74 per share. DSOs increased 2 days YoY to 60 days in 2Q06.

Potentially Severe Problems

RSA has received a subpoena from the Attorney for the Southern District of New York for records dating from 1996 to the present related to stock option grants. This follows the informal inquiry by the SEC into option grants from 1997-2002, specifically the grants highlighted in the report published by CFRA (Center for Financial Research and Analysis). While these items remain headline risks, analysts remain concerned that if some additional negative items are found as a result of the above investigations, it will further impact the stock.

Long-Term Growth

Of the 19 analysts covering the stock, 5 have provided LTG rates. Digest long-term growth rates quoted by analysts range from 10% (Lehman) to 22% (Raymond James), with an average of 15.4%.

The enterprise security market remains controversial given 1Q06 misses by most of RSAS’s peers. One analyst (Cowen) believes spending is holding stable in the market and the primary reasons are aggressive forecasting and flawed execution. Yet, most analysts believe the core business of RSAS is showing signs of improvement and increasing renewal volumes should serve to help this business through 2006. Similar to RSAS’s acquisition of Cyota in December, 2005, one analyst (Raymond James) believes the recent acquisition of PassMark broadens the company’s channel and adds more than 20 new financial institution customers, including BankofAmerica, Fiserv, and Scottrade. It should enhance RSAS’s competitive positioning in the market for consumer authentication, which, due to the recent US federal government guidelines, should show accelerating growth in 2006 and beyond. The integration of Cyota and PassMark with RSAS’s core token products positions the company with a broad suite of consumer solutions, superior to most of its peers.

Upcoming Events

|Date |Event |

|October 26, 2006 |Earnings Results for 3Q06; if still not integrated with EMC |

Individual Analyst Opinions

POSITIVE RATINGS (29%)

ThinkEquity – Buy ($28.00- target price): 07/20/06 –INVESTMENT SUMMARY: Since much of the upside has been realized at this time, the analyst does not recommend an active buy on the stock. They believe the risks to the deal are minimal.

NEUTRAL RATINGS (67%)

Brean Murray – Hold (no target price): 07/20/06 – The firm believes that management remains bullish about the macro environment, particularly the banking sector. UK and US appear to be inclined on risk-based authentications. INVETMENT SUMMARY: The brokerage firm reiterated a Hold rating reflecting the analyst’s optimism about the favorable spending climate for authentication technologies.

Raymond James – Market Perform (no target price): 07/20/06 – With Entrust and RSA acquiring private fraud-detection vendors, the firm believe that the company’s peers are at a competitive disadvantage in the US market without a similar offering. INVESTMENT SUMMARY: The combination of higher anticipated strong enterprise renewal cycle and the building momentum in the consumer business should continue to drive numbers higher through 2007.

Cowen – Neutral (no target price): 07/20/06 – According to the analyst, financial results were better than expected with strong execution, consumer momentum and easy 2005 compares all contributing to the upside. INVESTMENT SUMMARY: It believes it is likely RSAS shareholders will approve the EMC acquisition and thus believes the stock price will remain fixed near the $28.00 EMC bid.

Deutsche Bank – Hold ($28.00- target price): 07/19/06 – The analyst tweaked up its target price from $17.00 to $28.00 subscribing to the immense likelihood of the EMC deal. INVESTMENT SUMMARY: The recent acquisitions of PassMark and Cyota strategically positions RSAS with a substantial share in the consumer authentication market. However, the analyst maintains a Neutral rating on the stock based on valuation concerns.

Goldman – In-Line ($28.00 – target price): 07/19/06 – The analyst notes that RSAS’s traction in consumer token sales bodes well for others in the identity and access management business. INVESTMENT SUMMARY: With consumer business now picking up some slack, the analyst is more positive on the stock and expects it to benefit as the year progresses and the renewal cycle gains momentum.

Jefferies – Hold (no target price): 07/20/06 – RSAS’s combination hardware/software portfolio positions it well to capture the growing consumer market opportunity. INVESTMENT SUMMARY: The recent acquisitions made by the company should help drive growth. However, its rich valuation already reflects these potential catalysts in the stock.

Lehman – Equal Weight ($28.00- target price): 07/20/06 – The brokerage firm is impressed with the recent acquisition made by the company and notes it is consistent with RSAS’s strategy to build out its consumer platform as it pursues emerging growth opportunities in online retail banking. INVESTMENT SUMMARY: At current levels, the firm believes the stock is richly valued and hence looks to get more constructive at lower levels.

UnionBankSwitz. – Neutral ($28.00- target price): 07/20/06 – The firm maintained a Neutral rating. INVESTMENT SUMMARY: The firm believes fundamentals of the business are still intact. However, associated risks related to the EMC takeover weigh down on the stock.

NOT EXPLICITLY RATED: FAVORABLE REPORT

Morgan Keegan – (no target price): 07/20/06 – Given favorable trends, emerging new products, and the above-average growth of the company, the analyst continues to believe that RSAS will outperform the market in the longer term. INVESTMENT SUMMARY: The analyst expects RSAS can continue to post above-average topline growth with significant room for operating margin expansion in 2006 and 2007, which should bode well for acquirer EMC.

DROPPED COVERAGE

Stifel Nicolaus – 09/19/06 – The firm has terminated coverage on the stock following RSAS’s acquisition by EMC.

Friedman, Billings – 09/20/06 – The firm has terminated coverage on the stock following the company’s announced acquisition by EMC.

Piper Jaffray – 08/30/06 – The firm has terminated coverage on the stock following the definitive agreement through which the company was taken over by EMC.

R W. Baird – 09/15/06 – The firm has terminated coverage on the stock following the company’s announcement that it would be acquired by EMC.

CIBC – 07/19/06 – The firm has terminated coverage on the stock following its announced acquisition by EMC.

Wedbush – 08/14/06 – In lieu of analyst’s departure, the firm has terminated coverage on the stock.

Copy Editor: Joyoti D.

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