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Micromuse Enters into Agreement to Acquire Quallaby Corporation

April 8, 2005 - San Francisco, CA

Micromuse Inc. (NASDAQ: MUSE), the leading provider of ultra-scalable, realtime business and service assurance software, announced today that it has entered into an agreement to acquire Quallaby Corporation, a privately-held software company based in Lowell, Massachusetts, for $33 million in cash. Micromuse will host a conference call and simultaneous Web cast today at 8 AM PST/ 11 AM EST to provide more details about today’s announcement, (access information is provided below).

Micromuse’s planned acquisition of Quallaby will significantly advance our ability to manage today’s mission-critical, converged IP services through an integrated console that combines Micromuse’s Netcool® realtime fault management technology with Quallaby’s ultra-scalable PROVISO® performance management software. As the industry’s vision of integrated voice, data, and video becomes a reality, this powerful combined service assurance solution enables the world’s leading service providers and large enterprises to deliver these “triple play” services more reliably, affordably, and competitively than ever before. Micromuse and Quallaby have been alliance partners for several years and many common customers already appreciate the value of an integrated service assurance platform that will underpin their triple play initiatives.

“As convergence becomes a reality, enabling multiple revenue-generating services to be delivered effectively across virtually any type of IP-based infrastructure, service providers face a new competitive equilibrium in which service differentiation becomes more important than ever before,” said Lloyd Carney, Micromuse Chairman and CEO. “With this planned acquisition, we become the only best-of-breed vendor in the marketplace capable of delivering comprehensive, scalable service assurance for today’s leading wireline, wireless, broadband, cable, and managed service providers. I am thrilled that our valued customers will be able to leverage the best attributes of two industry-leading vendors within a single, integrated service assurance platform.”

“We are impressed with Quallaby’s unique approach to data aggregation and correlation, which enables both realtime and trended performance analysis to be conducted reliably within the world’s largest networked infrastructures,” said Dr. Craig Farrell, Micromuse’s Chief Technology Officer. “For service providers who are striving to gain competitive or financial advantage through complex initiatives like triple play or 3G, reliable performance and QoS metrics will be critical to their success.”

According to Greg Ferguson, Quallaby CEO, “Like Micromuse, Quallaby has focused intensively on building a scalable, flexible, and broadly integrated architecture. Just as Micromuse is often referred to as the industry’s leading ‘manager-of-managers’ for fault management, Quallaby has also built a powerful ‘manager-of-managers’ platform that leverages and analyzes performance data no matter where it resides within a large, complex network.”

“The IP driven convergence brings new service opportunities and challenges to the market, including a vast increase in diversity of touch points combined with a requirement for customer-centric service assurance, “ said Sanjay Mewada, Vice President, Telecom Software Strategies, Yankee Group. “There is a real market need for an end-to-end solution combining fault and performance management for next generation of services such as triple play and VoIP over converged networks.”

Micromuse and Quallaby already are integrated within several large service provider networks, including those of BT, France Telecom, Telefonica, Neuf Telecom, Telia Sonera, Completel, and Telecom New Zealand. These and other service providers now will be able to leverage more effectively the combined data collection, warehousing, and correlation capabilities of the Netcool® and PROVISO® Solutions.

According to Phillip Radley, Head of Customer Network Reporting Design at OneIT, BT, “With this acquisition, Micromuse strengthens its leadership in IP service assurance and further distances itself from other packaged vendors in the assurance space. Our company invests only in service assurance software that has proved its functionality and performance under the most challenging conditions. Both Netcool and PROVISO have demonstrated this standard within BT’s network, so from our perspective this is a very logical and promising combination.”

The partnering strategies of the two companies are also highly complementary, enabling rapid deployment of integrated Netcool and PROVISO solutions through indirect channels. Both companies already partner successfully with leading companies such as Alcatel, Cisco, Sun Microsystems, Juniper Networks, and Tecsidel. “We are highly energized by the opportunity to deploy management solutions that combine the best of Micromuse’s and Quallaby’s technology platforms,” said Frederic Rose, President of Alcatel’s Integration and Services activities. “In today’s fast-moving market, our customers expect rapid delivery of comprehensive, pre-integrated service assurance solutions on top of their converged networks and services.”

Micromuse and Quallaby expect to complete the transaction within six weeks. The acquisition has been approved by the board of directors of each company and is subject to various closing conditions. Micromuse expects the acquisition to be earnings per share neutral in FY2005 and to be accretive to FY2006 earnings per share on a non-GAAP basis (excluding one-time, non-cash, non-recurring and acquisition related items).