The acquired companies are Demos Solutions Consulting Group Ltd, which is also known as Demos Solutions, and Exametric Inc, which supplies workforce optimization services and software to the financial services industry.
Financial details were not released but the aggregate cash purchase price for both companies was $29m. However, there is a potential earn-out of up to $18m which will depend on their growth over the next few years. Purchased from Witness’s cash resources, they are expected to be accretive to revenue in 2007, adding between $13m and $15m.
The plan is to combine the two companies and have them operate as Witness Enterprise Solutions to sell WFO solutions into retail bank branches and operations.
WFO tends to be viewed as a resource management application for use in call centers, but with its new purchases it is hoping to establish itself as an enterprise-wide tool for use throughout end user organizations. It is also looking to the new unit to increase its presence in the financial services sector because although it derives 30% of its revenue from this vertical it does not have much penetration beyond the call center. It is looking at the two companies to enable it to move into bank branches.
Today we’re announcing a pair of innovative, market-changing acquisitions that expand our opportunity by extending workforce optimization into the enterprise, said Dave Gould, CEO of Witness. This combination creates immediate scale and momentum, with over $10m of revenue from a blue-chip customer base in the financial services industry. We’ve been probing this market for a while and believe it will emerge as a real growth driver for us over the next 1824 months.
Witness Systems also issued preliminary revenue estimates for the third quarter of 2006, anticipating revenue in the range of $50m to $51m, excluding hardware revenue of approximately $1m. Financial analysts are expecting revenue of $53m.
The company is in an uncomfortable position because it is currently reviewing its stock-option practices and grants, and does not expect to announce further financial results for the third quarter or file with the SEC until the option review and audit have been finalized. It share price has been falling this year, from a high of around $25.
Last month shares in Witness rose nearly 10% on speculation that Israeli-based Nice Systems Ltd, a larger competitor, was in talks to acquire the company for $750m, based on all-share deal. At the time Witness was valued at $634m but its value has dropped since then.
