Keynote Systems, Inc. (KEYN): Should You Follow the Big Money Into the Web Analytics Biz?

Page 1 of 2

Keynote Systems, Inc. (NASDAQ:KEYN)As businesses, both large and small, move their operations online, they are looking to software companies for the ability to track user experiences and gain an advantage over the competition. Specialists like Keynote Systems, Inc. (NASDAQ:KEYN) and Compuware Corporation (NASDAQ:CPWR)’s Gomez unit have built their businesses around ensuring that companies’ websites are delivering value at a continuously high performance level. As growth rates in the sector decline, private equity sees an opening, with investment firm Thoma Brava recently offering to acquire Keynote for roughly $395 million. So, should investors follow its lead?

What’s the value?

Keynote Systems, Inc. (NASDAQ:KEYN) runs one of the world’s largest quality control networks for commercial websites, with 300 monitoring locations in 180 countries. It has also been focusing on the large enterprise market due to the proliferation of mobile devices and the increasing need to manage website performance across operating systems. With large companies looking to outsource to a limited number of globally connected suppliers, Keynote improved its product offerings by acquiring mobile specialist Mobile Complete in 2011.

In FY2013, Keynote Systems, Inc. (NASDAQ:KEYN) has generated relatively weak financial results, with decreases in revenues and adjusted operating income of 0.7% and 10.8%, respectively, versus the prior-year period. Despite signing up a rising number of customers to its website monitoring platform, the company’s top-line growth was hurt by declines in its mobile business, especially in the European region. In addition, Keynote’s operating profitability was negatively impacted by rising tech development costs as it competes with larger competitors for skilled labor. While Thoma Brava’s acquisition price was expensive, at roughly 17 times trailing adjusted EBITDA, the investment firm should be able to create operating efficiencies with its control position.

Finding another story

Meanwhile, industry competitor Compuware Corporation (NASDAQ:CPWR) has also been an acquisition target lately, with large stakeholder Elliott Associates offering to buy the company in January 2013. The company has a leading position in the web analytics business through its Gomez and dynaTrace units, which manage a hosted network across 33 countries. However, Compuware has been plagued by declining sales and profit for a number of years, as customer purchases of its mainframe software and maintenance products continue to dwindle.

In its latest fiscal year, Compuware Corporation (NASDAQ:CPWR) reported poor financial results, with declines in revenues and adjusted operating income of 6.5% and 28.4%, respectively, compared to the prior year. The company’s operating income was hurt by double-digit sales declines in its mainframe unit, the source of most of its profit, as well as higher compensation and development costs. On the upside, Compuware’s web analytics unit generated higher sales, up 11% for the period, and is the company’s likely future growth engine. Despite attempts to shake Elliott with an upcoming initial public offering of its growing collaboration software unit, Compuware seems to have a long-term battle on its hands with the activist hedge fund.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!