SAN MATEO, Calif.--(BUSINESS WIRE)--April 3, 2006--Keynote Systems
-- Keynote Boosting Mobile Service Level Management (SLM)
-- SIGOS SITE System for Mobile Network Testing and Monitoring is
Installed in Major Wireless Data Operators in Europe
-- SIGOS Revenues Have Grown Over 20% Annually for the Past 3
Years; Acquisition Expected to Add Approximately USD 10
Million in Revenue in Fiscal 2007
Keynote Systems (Nasdaq:KEYN), the worldwide leader in services
that improve online business and communications technologies, today
announced the acquisition of SIGOS, the leading supplier of mobile
data network testing and active service monitoring systems to major
wireless operators in Europe, for EUR 25 million in cash, or
approximately USD 30 million. In addition, Keynote will pay earn-out
proceeds up to an additional EUR 8 million, or approximately USD 9.6
million in cash if certain revenue and profitability milestones are
achieved in calendar 2006.
SIGOS has approximately 55 large enterprise customers including
Vodafone, T-Mobile, Telephonica and Orange. Based in Nuremberg,
Germany, SIGOS was founded in 1989 and employs 65 people, all of whom
are joining Keynote.
By acquiring SIGOS, Keynote is moving to aggressively grow its
overall business in Europe and across the world by expanding into the
fast growing mobile market with leading technology solutions for
testing, monitoring and improving wireless networks and applications.
The acquisition underscores Keynote's commitment to provide the
premier testing and monitoring solutions to support the growth of The
New Internet, of which mobility is an increasingly critical part.
SIGOS has been profitable for the last three years and expects to
continue its profitability as a stand-alone subsidiary of Keynote.
Keynote will consolidate SIGOS's financial reporting under U.S. GAAP
rules starting in its current fiscal quarter ending June 30, 2006.
Upon conversion of the SIGOS financial statements from German to U.S.
GAAP, their systems license revenue will be required to be ratably
recognized over the initial duration of each customer contract, which
is usually 12 months. As a result of this accounting change, Keynote
will recognize as revenues only a fraction of SIGOS sales during the
remainder of fiscal 2006. The transaction will therefore be dilutive
to Keynote U.S. GAAP net income for the first three fiscal quarters
after the acquisition, although cash flow from operations is expected
to be positive throughout. Based on preliminary estimates the
acquisition will add USD 10 million of revenue to Keynote's operating
results in fiscal 2007.
Keynote will operate SIGOS as a wholly owned subsidiary and rename
the company Keynote SIGOS. Johannes Reis, CEO of SIGOS, will continue
in his position as CEO of the subsidiary and report to Umang Gupta,
chairman and CEO of Keynote. The remainder of SIGOS's executive
management is expected to remain in place.
"Keynote up to now had a fledging business in the mobile service
level management (SLM) space largely focused on wireless data services
benchmarking and competitive trending with key customers such as
Cingular, Sprint, Verizon and MSN," said Umang Gupta. "With the
acquisition of SIGOS, Keynote is now positioned to take on a more
central role in the mobile market by providing heavy-duty network
testing, active service monitoring and alerting systems to mobile
network operators and content providers. SIGOS has a strong customer
base with well-respected technology that we expect to aggressively
leverage in the rest of the world, including the United States. Over
the past year as we became more familiar with each other, Keynote and
SIGOS realized that we not only have very complementary technologies,
but an excellent cultural fit between the two companies. We are truly
pleased to welcome all the employees of SIGOS to the Keynote family."
Johannes Reis said, "SIGOS has spent over 16 years developing its
world-class technology, blue-chip customer base and brand recognition
in Europe as a leader in mobile testing and active service monitoring.
To move our business to the next level an acquirer would need name
recognition, a solid financial base of a well-positioned profitable
public company and complementary technology." Reis continued, "As the
lines between the Internet and mobility blur, our respective strengths
will complement each other as Keynote is the leader in Internet
service level management (SLM) in the U.S., and SIGOS is a leader in
mobile SLM in Europe. We look forward to serving our customers and
expanding our footprint in the U.S. and across the world."
More About What SIGOS Does
As specialists in active testing of mobile networks, services and
components, SIGOS offers automated test equipment, software systems
and highly sophisticated consulting service for end-to-end service
quality management. Mobile operators need SIGOS's services because
they are differentiating themselves from each other on the quality of
their service (QoS). Dropped voice calls, inaccurate billing and lost
data connections all encourage churn and can inflict serious damage on
an operator's financial results.
SIGOS provides an automated, centrally administered system with
physical probes distributed over the whole network for performing
efficient end-to-end active monitoring and testing for a network
operator or carrier. The SIGOS test system is called SITE and
typically includes a central service appliance and numerous remote
agent appliances (probes). The central server acts as the brains of
the system where tests are created, scheduled, stored and analyzed.
"SIM Multiplexers" physically store thousands of subscriber
identity modules (SIMs) and allow for the data on the SIMs to be
virtually transferred to the mobiles on demand. The remote agents are
similar to Keynote's private agents (measurement computers), but more
sophisticated since they can take on multiple SIM identities and
execute various system tests such as wireless access protocol (WAP),
interactive voice recognition (IVR), revenue assurance, prepaid SIM
card assurance, streaming, Web browsing, multimedia message service
(MMS) and voice quality tests. The system can then simulate a wide
range of subscriber actions ranging from international roaming to
voice mailbox services. All tests can be repeated under exactly the
same conditions, so reports and statistics assist the test engineers
in troubleshooting problems.
Prices for a typical SITE system range from USD 120,000 to over
Keynote will host a conference call and simultaneous Web cast at
8:30 a.m. (EDT), today April 3, 2006 to discuss this news. To listen
to the live conference call in the U.S. and Canada dial (866)
271-6293. Outside the U.S. and Canada dial (706) 679-4457. The
conference ID is #7027756. The Web cast of the call will be available
at the Investor Relations section of Keynote's Web site at
www.keynote.com under 'Investors.'
Playback of the conference call will be available at 9:30 a.m.
(EDT) on Monday, April 3, 2006. To access the replay in the U.S. and
Canada dial (800) 642-1687. To access the replay outside the U.S. and
Canada dial (706) 645-9291. The passcode is #7027756.
Founded in 1995, Keynote Systems (Nasdaq:KEYN) is the worldwide
leader in services that improve online business performance and
communications technologies. Keynote helps approximately 2,300
corporate customers and 11,000 individual subscribers become "the best
of the best" online. The business premise supporting Keynote's mission
is: "Online businesses can't manage what they don't measure." As an
independent and trusted third-party, Keynote provides IT and marketing
executives with unbiased benchmarking data, competitive analysis and
operational metrics from the customer perspective. This data measures
service levels and customer experience of Web sites, broadband
services and mobile communications.
Known as The Internet Performance Authority(R), Keynote manages a
market-leading infrastructure of 1,600+ measurement computers and
mobile devices in over 114 locations and 66+ metropolitan areas
worldwide that assess service levels and a panel of over 160,000
consumers who participate in interactive Web site tests that assess
user experience. These online user experience tests capture customer
attitude and behavior to answer the critical "why" behind the "what."
Keynote's geographically distributed measurement services, on-site
monitoring appliances, competitive intelligence and custom studies
ensure that its customers outpace their competitors in online service
levels and overall user experience.
Keynote Systems, Inc. is headquartered in San Mateo, California
and can be reached at www.keynote.com or by phone in the U.S. at
This press release contains forward-looking statements that are
not purely historical regarding the Company or management's
intentions, hopes, beliefs, expectations and strategies for the
future. Because such statements deal with future events, they are
subject to various risks and uncertainties, and actual results could
differ materially from the Company's current expectations.
Forward-looking statements in this release include, but are not
limited to, those related to revenue contribution of Sigos and other
future financial effects of the transaction, the integration of Sigos
products and technology with those of Keynote, and products and
services and their benefits after the closing of the transaction and
plans for the geographic expansion of both companies. It is important
to note that actual outcomes and Keynote's actual results could differ
materially from those in such forward-looking statements. Factors that
could cause actual results to differ materially include risks and
uncertainties such as the need to retain existing customers and obtain
new customers in order for the revenues of Sigos to meet estimated
targets during fiscal 2007, differences between German GAAP, which is
how the financial statements of Sigos were previously prepared and
U.S. GAAP, under which financial statements of the combined company
will be prepared, and the fact that differences in those standards
could result in significant differences in the currently estimated
future results for the combined company, the acquisition of Sigos may
not be accretive to GAAP operating income or net income (which
includes the effect of the amortization of intangibles), as the amount
of the intangibles to be amortized and the period over which such
amortization will occur will not be finally determined until after the
closing of the merger, Keynote's ability to control costs, unforeseen
expenses related to the Sigos business, which is a new business line
for Keynote, Keynote's ability to retain key Sigos personnel,
continued customer acceptance of the Sigos services after the merger,
particularly as many customers do not have long term commitments to
continue using Sigos' services, pricing pressure with respect to
services, competition, Keynote's ability to develop and introduce new
services in the U.S., including those based on Sigos' services, in a
timely manner and customer acceptance of new services, and unforeseen
issues with respect to the integration of technologies and personnel
of Sigos, risks related to international expansion and conducting
operations in foreign countries, as Keynote currently has minimal
operations outside the US and little experience in operating a
business internationally. Readers should also refer to the risks
outlined in Keynote's reports filed with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for its fiscal
year ended September 30, 2005, and its quarterly reports on Form 10-Q
and any current reports on Form 8-K filed during the fiscal year.
All forward-looking statements and reasons why results might
differ included in this release are made as of the date of this press
release, based on information available to Keynote as of the date of
this press release, and Keynote assumes no obligation to update any
such forward-looking statement or reasons why results might differ.
Keynote and The Internet Performance Authority are registered
trademarks of Keynote Systems, Inc. Other trademarks are the property
of their respective owners. (C) 2006 Keynote Systems, Inc.
Dan Berkowitz, 650-403-3305 (US Media/Investor Relations)
or 415-518-7870 (mobile)
Johnson King PR
Flora Haslam, 4420 7357 7799 (UK Media)
or 4477 4864 0038 (mobile)
Emmanuelle Rouard, 49 89 89 40 85 12 (German Media)
Keynote Systems, Inc.