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Witness Systems to acquire Blue Pumpkin Software

  • 20 December, 2004 11:00

<p>- Combination extends workforce optimisation market leadership -
- Company expects transaction to be accretive to earnings in 2005; raises core guidance -</p>
<p>SYDNEY (December 20, 2004) - Witness Systems (NASDAQ: WITS), a global provider of performance optimisation software and services, today announced that it has reached an agreement to purchase Blue Pumpkin Software, Inc., an industry leader in enterprise workforce management solutions, for approximately US$75 million. Approximately US$40 million of the purchase price is being paid in cash and the remainder in Witness Systems stock. The merger reinforces the company’s position in the burgeoning global contact centre workforce optimisation market, and is expected to be accretive to earnings for the 2005 calendar year.</p>
<p>Uniting Witness Systems’ established lead in customer interaction recording with Blue Pumpkin’s market strength in workforce management offers customers a compelling and seamless set of applications to help optimise workforce performance and capture customer intelligence. The combination will create a unique leadership position in the two anchor segments of the broader workforce optimisation landscape (quality monitoring and workforce management), which represents 78 percent of the market, according to Datamonitor. The combination positions Witness Systems to compete successfully in these competitive and rapidly evolving markets.</p>
<p>“In the technology industry, market leadership and first-mover advantage drive growth and competitive edge. By acquiring Blue Pumpkin, we are able to integrate two essential components of workforce optimisation - quality monitoring and workforce management,” said Dave Gould, chairman and CEO of Witness Systems. “The resulting solution set represents a unique value proposition for our customers and partners, which now have a comprehensive offering to optimise customer service delivery from a single supplier. We’re also excited about Blue Pumpkin’s established channel relationships with Avaya, Cisco, Nortel and Siemens and strength in the mid-market.”</p>
<p>Doron Aspitz, chairman and CEO of Blue Pumpkin added, “Enterprises looking to derive the greatest value, both in terms of efficiency gains and performance improvement, are requiring a complete workforce optimisation solution. Efficiency has been the first area to be addressed, most significantly through workforce management’s automation of the scheduling and planning of resources in the contact centre. Quality monitoring software was the first solution to initiate effectiveness change. The combination of these two market innovators will continue to demonstrate the technology leadership that both companies have exhibited in their respective segments of the market, offering a compelling option for customers worldwide.”</p>
<p>According to Saddletree Research, a custom and syndicated industry research firm for emerging and high-growth communications markets, workforce management and quality monitoring should be closely connected in the evolving workforce optimisation market. According to the firm’s published research, “These productivity tools are inexplicably linked by virtue of their ability, both individually and as a group, to positively impact contact centre efficiency and operational effectiveness at all levels of the enterprise, from the contact centre agent on the front lines to the executives on ‘Mahogany Row.’ While each of these individual solutions offers a compelling productivity solution as a standalone application, we believe their true value is most evident when working together to collectively impact operational results.”</p>
<p>Blue Pumpkin has developed a strong reputation in the small- to medium-sized business (SMB) segment of the market, which is expected to be the fastest growing segment over the next five years. “The ability to bundle a single offering that provides comprehensive customer service delivery is compelling for end users and channel partners in the SMB market, both of which tend to avoid point systems requiring significant interface effort,” said Gould.</p>
<p>Financial Outlook
The combination has received all required Blue Pumpkin board and stockholder approvals, and is subject to customary closing conditions, including expiration or early termination of the Hart Scott Rodino waiting period. The combination was approved by the board of directors of Witness Systems and is not subject to Witness Systems stockholder approval. The company expects the combination to be completed in the first quarter of 2005. The total cash consideration for the acquisition will be financed from Witness Systems’ existing cash resources. The maximum number of additional Witness Systems shares to be issued to the Blue Pumpkin shareholders is 2.4 million; the minimum number is 2.1 million.</p>
<p>The company currently expects to increase its 2005 guidance for annual revenue and core earnings, as adjusted for certain fair value purchase price adjustments required by generally accepted accounting principles (GAAP), once the transaction closes. Assuming an early first quarter close, the company would expect adjusted revenue in 2005 to be in the range of US$176 - US$180 million and adjusted core earnings per share in the range of $0.55 - $0.59. These revised estimates assume additional revenue of approximately $28 million and earnings accretion of $0.03 per share. At this time, it is not possible to estimate the impact of the transaction on the 2005 results of operation reported under GAAP due to the need to revalue certain assets and liabilities, including deferred maintenance revenue, to fair value at the purchase date.</p>
<p>William Evans, CFO for Witness Systems added, “We have an established, proven model in place to ensure a successful integration of products, marketing, employees and operations, enabling meaningful value creation for our customers and shareholders. We believe this combination will be accretive to earnings in 2005 and greatly enhance our future value proposition.”</p>
<p>For more information:
Alba Oni
Witness Systems
+61 2 8907 0320
aoni@witness.com</p>
<p>David Matthews
Porter Novelli
+61 2 9463 7600
dmatthews@porternovelli.com.au</p>
<p>About Blue Pumpkin
Blue Pumpkin provides industry-leading workforce management solutions that improve the performance of a customer contact centre’s most important and valuable asset - its people. Addressing critical business challenges and creating competitive advantage with both innovative technology and best practices professional services, the company helps customers Balance and Optimise™ three critical and often competing priorities: business growth through customer loyalty, employee satisfaction and retention, and operating costs. For more information, visit Blue Pumpkin at www.bluepumpkin.com.</p>
<p>About Witness Systems
Witness Systems (NASDAQ: WITS) provides the contact centre industry’s first integrated performance optimisation software suite to help global enterprises capture customer intelligence and optimise workforce performance. The browser-based eQuality® software is comprised of compliance, high-volume and business-driven recording solutions for customer contact centres and IP telephony, as well as performance analysis and actionable learning applications. The closed-loop suite enables companies to capture and retrieve, learn and train, and report and analyse customer interactions and back office transactions to develop staff, increase revenue, reduce costs, and achieve greater customer retention and loyalty. An integrated business consulting, implementation and training methodology provides services to support an effective, rapid deployment of eQuality that enables organisations to maximise their return on investment. For additional information about Witness Systems and its eQuality software suite, visit www.witness.com.</p>
<p>Cautionary Note Regarding Forward-looking Statements: Information in this release that involves Witness Systems’ expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. They are identified by words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based upon information available to Witness Systems as of the date of this release, and the company assumes no obligation to update any such forward-looking statement. Forward-looking statements believed true when made may ultimately prove to be incorrect. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from our current expectations. Some of the factors that could cause actual future results to differ materially from current expectations include fluctuations in customer demand and the timing of orders; the company’s ability to manage its growth; the risk of new product introductions and customer acceptance of new products; the rapid technological change which characterises the company’s markets; the risks associated with international sales as the company expands its markets, including the risks associated with foreign currency fluctuations; the ability of the company to complete and integrate successfully any acquisitions or investments it may make; and the ability of the company to compete successfully in the future, as well as other risks identified under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s quarterly report on Form 10-Q for the period ending September 30, 2004, and any other reports filed from time to time with the Securities and Exchange Commission.</p>
<p>Witness, eQuality and the Witness logo are United States registered trademarks of Witness Systems, Inc., protected by laws of the U.S. and other countries. All other trademarks mentioned in this document are the property of their respective owners.</p>
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