IBM and FileNet have announced that the two companies have entered into a definitive agreement for IBM to acquire FileNet, a publicly held company based in Costa Mesa, Calif., in an all-cash transaction at a price of approximately $1.6 billion, or $35 per share. The acquisition is subject to FileNet shareholder approval, regulatory reviews and other customary closing conditions. It is expected to close in the fourth quarter of 2006.

FileNet is a leading provider of business process and content management solutions. This acquisition builds upon IBM’s Information on Demand initiative, launched in February 2006, to address the growing market opportunity around combining IBM’s software, services, partners and industry consulting expertise to improve clients’ business performance. The Information on Demand strategy aims to provide clients with data exactly when and how they need it to improve their business processes, quickly respond to market needs and rapidly identify new business opportunities.

Following completion of the acquisition, IBM intends to:

• Combine FileNet’s operations with IBM’s Content Management business in the Information Management unit led by General Manager Ambuj Goyal.

• Preserve and enhance customer investments in both FileNet and IBM Content Management platforms, leveraging IBM’s market-leading InformationIntegration technology to develop broader ECM solutions.

• Integrate IBM’s BPM and Service Oriented Architecture technologies with the FileNet platform.

• Train IBM and FileNet partner and services teams on both IBM and FileNet technology.

Through this acquisition, the thousands of customers using IBM and FileNet solutions will now have a more powerful base of industry-leading content management products to build upon as they explore next-generation information management solutions.