Keane Acquires Offshore Outsourcing Business, Posts Decreased RevenueKeane Acquires Offshore Outsourcing Business, Posts Decreased Revenue

Keane Inc. is adding offshore outsourcing to its service offerings with its acquisition of SignalTree Solutions Holding Inc., a private company based in the United States with two software development centers and 400 employees in India.

The IT consulting firm is paying $62 million for SignalTree. SignalTree, whose U.S. headquarters are in Irvine, Calif., provides application outsourcing, IT management, and offshore development for customers that include transportation company CSX and food manufacturer Nabisco (now part of Kraft Foods Holdings).

Purchasing SignalTree gives Keane an already developed methodology on how to work with clients both locally and from offshore locations, says Gary Dean, senior analyst with Robert W. Baird. "If you can buy something that's proven at a reasonable price, it's more desirable to do so," he says, rather than developing the methodology on your own. The deal is scheduled to close by late March and would be accretive to Keane's earnings in 2003.

Keane also reported fourth-quarter revenue for the quarter ended Dec. 31, 2001, of $187.2 million, which was down from $202.7 million in the year-ago quarter. Fiscal year 2001 revenue, excluding its divested help-desk business, was $773.9 million, down 7% from fiscal year 2000 revenue of $834 million. Including one-time charges of $10.4 million related to the acquisition of Metro Information Services, Keane reported a net loss for the fourth quarter of $3.1 million, or 1 cent diluted earnings per share, compared with last year's fourth-quarter loss of $1.4 million, or 1 cent per share. Net income for the year was $23.5 million, or 46 cents per share, compared with $28.4 million, or 51 cents per share for 2000.

Keane attributes its decreased revenue to soft market conditions. Keane CEO Brian Keane offered first-quarter 2002 earnings and revenue guidance of $210 to $220 million in revenue and diluted earnings of 8 cents to 10 cents per share.