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October 4, 1998

KEANE REAFFIRMS STRENGTH DESPITE SHARE PRICE DROP

By CBR Staff Writer

IT consulting firm Keane Inc said Friday that last week’s plunge in share price was the result of an overly pessimistic view of the company and reaffirmed that business remained strong across the board. At the close of the market on Friday, Keane shares had lost nearly 29% of their value since Tuesday, after having plunged as much as 35%. Last Thursday, analysts at Merrill Lynch downgraded its long term rating on Boston-based Keane, along with two of its rivals, Computer Sciences Corp (CSC) and Cambridge Technologies Inc. This was promptly followed on Friday, by a formal statement from Keane in which the firm denied it was experiencing any problems and reiterated there were no issues or changes in the company’s business outlook. Keane chairman and CEO said in the statement: We are experiencing significant revenue and earnings growth, out sales pipeline is robust, turnover is down and project delivery remains excellent. A spokesperson for the company told ComputerWire that Keane hadn’t been singled out, rather the entire stock market, particularly the services and software sector, is very volatile lately. He said the problems started two Fridays ago when Morgan Stanley downgraded CSC’s stock. This caused a knock-on effect across the other services companies, culminating in Keane’s stock getting pulled down too. In research notes issued last week, Merrill Lynch said it had no concerns about the services sector in the short term, but that long-term, if the predicted recession kicks in, companies may begin to spend less on IT. However the spokesperson said that the analysts’ assumptions were erroneous and that, recession or not, IT budgets are predicted to increase. He added that economic downturn could even prove to work in Keane’s favor, since there would be more companies looking to outsource their IT. And with Keane’s recent flurry of acquisitions, the consultancy firm would be well-positioned to mop up all the available work, he said. He also dismissed fears that Keane might suffer through a wave of corporate delays in development projects in favor of more pressing Year 2000 work. We’re the number one Year 2000 firm, he said, it presents a huge cross-selling opportunity. Since the beginning of 1991, we’ve already sold $455m worth of other services to our customers that initially came to us with Year 2000 problems. Keane shares closed at $32.75 on Friday, down $1.25 on the day.

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