(EMAILWIRE.COM, January 18, 2001 ) SAN MATEO, California -- Keynote Systems (Nasdaq: KEYN), The Internet Performance Authority®, today announced final financialresults for the quarter ended December 31, 2000. Revenues for the first quarter of fiscal 2001 were $13.0 million,which represented an increase of 171% over the corresponding quarter infiscal 2000 and an 8% increase over the previous quarter. Pro forma netincome for the quarter was $3.0 million, or $0.11 per fully diluted share,compared to a net loss of $2.0 million, or $0.09 per share, for thecorresponding quarter a year ago and a net income of $3.4 million or $0.12per share, for the preceding quarter. Reported net loss for the quarter was $4.4 million, or $0.16 pershare, compared to a net loss of $2.0 million, or $0.09 per share, for thecorresponding quarter a year ago and a net loss of $2.0 million or $0.07 pershare, for the preceding quarter. Reported net loss increased similarlyas a result of $2.1 million of additional accelerated amortization ofacquisition related charges, goodwill and stock-based compensation. "In light of our less than expected revenue from the Internetservice provider portion of our business, I am extremely pleased with ourability to successfully manage costs and meet our expectations for thecurrent quarter's earnings, " said Umang Gupta, Chairman and CEO of Keynote."Over the next few quarters, we will continue to target new corporate andenterprise customers with an e-business presence. We plan to aggressivelymarket to our existing customer accounts through our expanding nationalaccounts sales teams. We are also committed to delivering additionalbenchmarking services, while we expand our suite of enterprise-classperformance management solutions, securing our position as The InternetPerformance Authority." Keynote experienced approximately 15% sequential quarterly growth inthe U.S. corporate accounts, international resellers and consulting segmentsof its business, which represented approximately 63% of total revenue. Thegrowth in these segments offset reductions in subscription revenues from theservice provider and dot.com sectors, announced earlier this month. Theservice provider sector of the technology industry, which representedapproximately 23% of total revenue, includes content distribution companies,web hosting companies, and band-width providers, which have been undertremendous pressure from the capital markets to reduce costs and improvetheir operating margins. As a result, Keynote has experienced reductions insubscription revenues from this portion of its business. In addition, thedot.com sector, which represents approximately 15% of total revenue, hasbeen experiencing global weakness and as a result there has been a loss ofsome of the smaller and weaker dot.com companies. As of December 31, 2000, the Company's total worldwide customer basehad grown to over 2,900 companies. Keynote added 450 new customers duringthe quarter, and maintained a 97% monthly customer retention rate. Newcustomers during the quarter included companies such as, Aim FundsManagement, Alcatel Networks, Blue Cross/Blue Shield, Circuit City, Corning,The Franklin Mint, Honeywell, International Data Corp, Nike, Polo RalphLauren, The Port Authority of New York and New Jersey, and Starwood Hoteland Resorts. Keynote currently provides its services to approximately 78%of the current Media Metrix Top 50 Web Sites, 60% of the Media Metrix Top500 Web Sites in the U.S., and approximately 70 of the Fortune 100companies. As of December 31, 2000, Keynote measured approximately 13,600URLs, which was down slightly from the prior quarter, primarily as a resultof reductions by Internet service providers.Highlights for the quarter:* General Electric chose Keynote as the preferred vendor for Internetperformance measurement across all of its businesses.* Resonate Inc. began incorporating Keynote data in their ResonateQualTest Service to provide Resonate's customers with end-to-endinfrastructure health monitoring and reporting to support delivery of theirService Level Agreements.* In October 2000, Keynote debuted Streaming Index(tm) and StreamingQuality Scale at Streaming Media West, which established the industry'sfirst benchmark and standard for streaming quality on the web.* Keynote announced new e-commerce transaction benchmarks, which areperformance standards established for vertical markets including: retail,banking, and business travel.* Loudcloud began deploying its Global Response Smart Cloud* servicepowered by Keynote and integrating Keynote data into Loudcloud's customportal, myLoudcloud.* Speedera chose Keynote's web performance benchmarking services toprove the value of its content distribution network technology to itscustomers and potential customers. In addition, Speedera began resellingKeynote services.* Ameritrade touted its position at the top of the Keynote Consumer 40Index, for a record thirty-two consecutive weeks.* Traditional brick and mortar companies such as Target and AAAMichigan, announced they use Keynote to measure, assure and compare web siteperformance for optimal online services.* In December 2000, Keynote and HyPerformix partnered on sophisticatedweb performance modeling solutions.* Keynote's announced a new industry-of-the-month program, whichbenchmarks web performance in vertical industries, starting with oil & gasin January 2001. Expectations for the Second Quarter of Fiscal 2001 and Fiscal 2001The statements in this section of this press release are forward lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. Keynote currentlyexpects that total revenues should be between $12.4 and $12.6 million, forthe second quarter of fiscal 2001. Keynote currently expects costs ofsubscriptions to represent approximately 25% of subscription relatedrevenues for the second quarter of fiscal 2001. Keynote currently expectscosts of consulting to represent approximately 140% of consulting revenuefor the second quarter of fiscal 2001. Total operating expenses, excludingcosts of subscriptions and consulting, are currently expected to remainrelatively flat as compared to the December quarter. We expectacquisition-related charges and amortization of goodwill and stock basedcompensation to be approximately $5.7 million for the second quarter offiscal 2001, absent any additional acquisitions or other extraordinarytransactions.For fiscal 2001, Keynote currently expects total revenues to grow to between$50.0 and $52.0 million and expects consulting revenue to amount toapproximately 4% to 6% of total revenue for the year. Keynote currentlyexpects costs of subscription revenues to represent 25-26% of totalsubscription revenues for fiscal 2001. Keynote currently expects costs ofconsulting to represent approximately 125-127% of consulting revenue forfiscal 2001. Total operating expenses, excluding costs of subscriptionsand consulting, are currently expected to increase 38-42%, over fiscal 2000.Keynote currently expects operating margins to deteriorate slightly duringthe second quarter, and then gradually improve for the rest of the year.We expect interest income, net to be approximately $5.4 million per quarterabsent any transactions, assuming a stable interest rate environment. Weexpect acquisition-related charges and amortization of goodwill and stockbased compensation to be $4.1 million in each of the third and fourthquarters of fiscal 2001, absent any additional acquisitions or otherextraordinary transactions. We expect net income before tax per fullydiluted share to be between $0.43 and $0.46. We expect fully dilutedearnings per share after tax to be $0.41 to $0.43. Due to the use of netoperating loss carry forwards (NOLs) and tax credits, we currently expectour tax rate to be approximately 5-7% for the year ended September 30, 2001.For determining earnings per share, Keynote had 28.9 fully diluted sharesoutstanding at December 31, 2000; we would expect fully diluted sharesoutstanding to increase about 1% per quarter, assuming no additionalacquisitions using shares of Keynote stock as the consideration. Capitalexpenditures are expected to be $2.0 to $3.0 million per quarter in fiscal2001. The company will host a conference call and simultaneous web cast at 2:00 pm(PDT), today January 17, 2001. The web cast of the call will be availableat the Investor section of our web site at www.keynote.com, www.vcall.com, and www.streetfusion.com. Thereplay will be available after the call by dialing (888) 203-1112, and thepass code is 661759. If you would like to listen to the live call, pleasecontact Maricel Buangan at (650) 522-1225. Forward-Looking Statements This press release contains forward-looking statements that are not purelyhistorical regarding the company or management's intentions, hopes, beliefs,expectations and strategies for the future. Because such statements dealwith future events, they are subject to various risks and uncertainties, andactual results could differ materially from the company's currentexpectations.Forward-looking statements in this release include, but are not limited to,statements regarding forecasts concerning Keynote's expected revenues,operating expenses and margins, as well as statements regarding obtainingadditional customers, the level of sales to current customers and theintroduction of new services. It is important to note that actual outcomesand Keynote's actual results could differ materially from those in suchforward-looking statements. Factors that could cause actual results todiffer materially include risks and uncertainties such as Keynote's shortoperating history with an unproven business model, which makes it difficultto evaluate its current business and future prospects, Keynote's reliance oncustomers renewing their subscriptions and purchasing additional services,increased competition, which could result in pricing pressure or theadoption of a competitor's Internet performance measurement service as theindustry standard for measuring the speed and reliability of websites,improvements to the Internet infrastructure which could have the effect ofreducing demand for Keynote's services, Keynote's ability to achievebenefits from its recent acquisitions , unforeseen changes in expenselevels, the effect of any future acquisitions, widespread acceptance and useof the Internet as a means for commerce, Keynote's ability to develop andintroduce new services in a timely manner and the effect of any unforeseendelays in the development and introduction of new services, customeracceptance of new services, Keynote's ability to keep pace withtechnological changes and Keynote's ability to successfully operateinternational operations. Readers should also refer to the risk disclosuresoutlined in Keynote's reports filed with the Securities and ExchangeCommission, including its Annual Report on Form 10-K for its fiscal yearended September 30, 2000, and its quarterly reports on Form 10-Q filedduring the current fiscal year. All forward-looking statements and reasons why results might differ includedin this release are made as of the date hereof, based on informationavailable to Keynote as of the date hereof, and Keynote assumes noobligation to update any such forward-looking statement or reasons whyresults might differ. About KeynoteFounded in 1995, Keynote (Nasdaq "KEYN"), The Internet PerformanceAuthority®, is the worldwide leader in e-commerce benchmarking and Webperformance management services that improve the quality of e-business. Thecompany's low-cost and hassle-free performance measurement solutions areused by more than 2,900 B2B and B2C e-businesses, Web-hosters, InternetService and Content Delivery Providers. Keynote Systems, Inc. isheadquartered in San Mateo, California. The company can be reached atwww.keynote.com or by phone in the U.S. at 650-522-1000. # # #Keynote and The Internet Performance Authority are trademarks of KeynoteSystems, Inc. Other trademarks are the property of their respective owners.Note: The above pro forma consolidated unaudited statements of operationsexclude acquisition-related charges and amortization of goodwill andstock-based compensation.Editorial Contacts:Public Relations Dan Berkowitz Keynote Systems, Inc. (650) 522-1168dberkowitz@keynote.com Media-relationsHotline (650) 522-1234 Investor Relations Jenniffer Siemaszko KeynoteSystems, Inc. (650) 522-1026 jsiemaszko@keynote.com Jason PfannenstielPublic Relations CoordinatorKeynote Systems, Inc.jasonp@keynote.com(650) 522-1343

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