May 5, 2006, 12:00 AM

Keynote’s Q2 revenue takes a dip

Second quarter revenue at web site performance monitoring and management company Keynote Systems Inc. was down 3% from a year ago, Keynote reports. Keynote’s subscription services revenue increased 3%.

Second quarter revenue at web site performance monitoring and management company Keynote Systems Inc. was down 3% to $12.7 million from $13.1 million in the same quarter a year ago, Keynote reports.

The bulk of Keynote’s revenue comes from subscription services and that revenue increased 3% to $9.9 million, which the company says reflects demand for transaction, broadband and mobile monitoring services and a reduction in single-page and single-device Internet monitoring services. The company reports that professional services revenue was down 21% to $2.8 million, due to a reduction of customer experience management engagements.

Net loss in the quarter was $58,000 vs. earnings of $997,000 in the same quarter a year earlier. The company says the loss included $812,000 in stock-based compensation expenses, required under generally accepted accounting principles.

The company said that income over the next three quarters will be negatively affected by its recent acquisition of SIGOS, a German performance monitoring company, and the requirement to amortize most of SIGOS` software license revenues over 12 months.

"While our second quarter total revenue was disappointing primarily due to a shortfall in our customer experience management engagements, our service level management subscriptions grew sequentially this quarter, albeit modestly,” said Umang Gupta, chairman and CEO. “Additionally, we generated $2.6 million in cash from operations and $1.8 million in free cash flow."

"As previously announced, we recently made some significant organizational changes to increase overall sales growth, especially in the CEM business, and to establish greater predictability in revenue forecasting. Also, we acquired SIGOS, a German based technology leader in mobile data network testing and active service monitoring, with more than 55 customers including many major mobile operators in Europe."

As of March 31, Keynote`s total worldwide customer base was approximately 2,400, up from 2,200 in the same quarter a year ago. As of March 31, Keynote measured 9,269 Internet URLs and 6,904 Internet-connected devices through its Red Alert services, as compared to 8,302 Internet URLs and 7,719 devices in the same quarter a year ago. Currently, Keynote captures over 94 million Internet performance measurements daily.

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