RealTime IT News

eGain: A Win-Win

With a share price of $165 and a market capitalization of $4.7 billion, there are many nice options for Kana Communications (KANA) , which is a leader in online customer service.

Yesterday, the company agreed to use $271 million in stock to acquire Business Evolution and NetDialog. Both companies are privately held.

Such acquisitions allow KANA to offer more services to customers. For example, Business Evolution has sophisticated real-time chat and NetDialog has a product called Assist, which allows for online self-service (that is, not using actual customer reps for service).

Actually, online customer service is rapidly becoming a killer Net app. As the landscape becomes more and more competitive, Net companies need differentiators. Online customer service is one of the top.

So there should be much more to go for the spending spree. Simply put, there are many players in the online customer service space -- making the environment ripe for consolidation.

One company that should benefit from the action is eGain (EGAN) . At a $1.3 billion market capitalization, the company could make an attractive target for Kana. But even if this does not transpire, eGain's future looks particularly bright.

EGain is a leading provider of email management technology - known as eGain Mail. The company is showing strong sequential growth. The revenues in the last quarter were $1.39 million, compared to $619,000 in the prior quarter. In the latest quarter, the company added 45 new customers, which was up from 30 in the prior quarter. Of these new customers, about 50% used the eGain Hosted Network, in which eGain provides full-service for clients.

One important deal was with LookSmart (LOOK) , which is a top search directory. LookSmart now uses eGain Mail. As a result, the average response time to email has plunged from five days to less than a day. eGain Mail will also help LookSmart as it expands overseas.

LookSmart's eGain Mail is hosted on the eGain Hosted Network. The result has been reduced set-up costs, as well as better service. Thus, LookSmart can focus on its core business.

Actually, the hosting service is a big advantage for eGain. Currently, most online customer service companies rely on a software licensing model. While eGain does as well, its Hosted Network is done on a monthly subscription plan, thus creating a much more reliable annuity income stream.

So far, eGain has yet to experience the incredible rise of Kana. But as the company continues to grow strong, this should start to change fast.

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