MKS Inc.

MKS Inc.

November 02, 2006 17:25 ET

MKS Announces Preliminary Second Quarter Results for Fiscal 2007

WATERLOO, ONTARIO--(CCNMatthews - Nov. 2, 2006) - MKS Inc. (MKS) (TSX:MKX), today announced preliminary results for the second quarter of fiscal 2007. MKS expects to report second quarter fiscal 2007 revenue in the range of $11.3 to $11.6 million, compared to revenue of $11.5 million reported in the second quarter of fiscal 2006 and down from revenue of $12.6 million the first quarter of fiscal 2007. MKS expects to report operating costs in the range of $12.4 to $12.8 million for the second quarter.(1)

MKS expects to report application lifecycle management (ALM) licensing revenue for the second quarter in the range of $3.2 to $3.5 million, significantly lower than expected. Other components of ALM revenue, including maintenance and services, grew at expected rates. As a result, MKS expects to report overall ALM revenue similar to the same period last year.

Over the past few quarters, MKS has released technology upgrades that extend the applicability of its platform across a significantly broader user base within its target enterprise customers. While this has generated significant interest among new large enterprise customers, increasing the value of our solution and promising to establish much deeper adoption of the platform by them, it has added to the complexity of sales initiatives and lengthened sales cycles. During the second quarter of fiscal 2007 in particular, the number of such initiatives with new large customers, and the associated longer sales cycles, affected MKS's ability to close ALM license transactions in the amounts it had expected.

Additionally, MKS has not yet begun to realize significant sales from sales reps added near the end of its last fiscal year, nor on the investment being made in its Asia Pacific operations.

"With the expansion of capability in our ALM platform, we are making an important transition to much broader enterprise deployments," said Philip Deck, chairman and CEO of MKS Inc. "While the transition is causing longer sales cycles than we had anticipated, we continue to make adjustments to our sales model and are confident that we will succeed in re-establishing more rapid rates of license growth."

MKS's closing cash balance at October 31, 2006 was $14.7 million.

MKS will report final results for the second quarter fiscal 2007 after close of market on November 29, 2006. The Company will hold a conference call at 5:00 pm EST on that date.

Outlook & Guidance

Based on today's announcement, MKS is suspending all current annual revenue and profitability guidance and will release updated guidance when it announces complete results for the second quarter of fiscal 2007.

Conference Call Details

The Company will hold a conference call on November 29, 2006 at 5:00 p.m. EST to discuss its second quarter of fiscal 2007 performance. Interested parties may access the call by dialing 877-871-9526 or 416-620-2400. A digital recording of the call will be available for one (1) week from November 29, 2006 to December 06, 2006 and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21283994.

(1) Reported in US dollars under US Generally Accepted Accounting Principles (US GAAP).

About MKS

MKS is the premier provider of application lifecycle management solutions for the global 1000. MKS's flagship ALM solution, MKS Integrity, is the most highly integrated ALM platform in the industry today, spanning all aspects of the software development lifecycle and supporting critical business transformations including SOA, application rationalization and outsourcing. MKS Integrity's single architecture drives high levels of user productivity, facilitates rapid deployment and process standardization while delivering a complete view of application development activity through real time metrics, trends and reporting. MKS Integrity also provides essential support for IT operations through software deployment and issue management. Founded in 1984, MKS serves more than 10,000 customers in countries across the world. Whether through deployment of MKS's solution strategically on an enterprise scale, or by leveraging individual components to solve project-level challenges, our customers can use MKS's software to enable higher levels of process maturity, better manage global development activity and safeguard their most critical business applications and software assets. Under its widely known MKS Toolkit brand, MKS also provides UNIX-Windows co-existence and system administration that significantly cut development and administrative costs and reduce time to market, while enabling enhanced performance. More information about MKS can be found at or by calling 1-800-265-2797 (US & Canada), +49-711-351775-0 (Germany), +44-1483-733900 (United Kingdom) and 1-519-884-2251 (Rest of World).

Copyright (C) 2006 MKS Inc. MKS and MKS Toolkit are trademarks or registered trademarks of MKS Inc. All other trademarks mentioned in this release are the property of their respective owners.

This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect the Company's current views with respect to future events and are subject to such risks and uncertainties. Although the Company believes the expectations represented by such forward looking statements are reasonable, there can be no assurance that those expectations will prove to be correct. Many factors could cause the Company's actual results to differ materially from the statements made including those factors detailed from time to time in filings made by the Company with Canadian securities regulatory authorities including fluctuations in quarterly results, the Company's focus on the ALM market and the associated complex and lengthy sales cycle, exchange rate fluctuations, management of growth, dependence on and retention of management and key employees, importance of maintenance contracts, economic uncertainty, international sales, dependence on a limited number of products, acquisitions, distribution channels in the interoperability market, potential for undetected errors in software, protection of intellectual property, reliance on third party relationships, limited financial resources, litigation, concentration of ownership, intense competition, rapid technological change and development of the software application management market. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. The Company does not intend and does not assume any obligation to update these forward-looking statements.

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