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Pegasystems snags AOL but misses numbers

The software maker announces a customer service deal with America Online today but repors a wider-than-expected first-quarter loss.

Software maker Pegasystems announced a customer service deal with America Online today but reported a wider-than-expected first-quarter loss.

The Cambridge, Massachusetts-based company said AOL has agreed to use Pegasystems' customer contact center products to handle the automation of its billing inquiries, membership services and transactions, and other customer service-related calls.

The deal was announced simultaneously with Pegasystems' first-quarter earnings, both released after the stock market closed yesterday.

Pegasystems said in a statement that AOL will use its products and software to improve the quality and speed of service delivered to its 17 million members.

Under the deal, Pegasystems said AOL's membership division will use several customer automation products, including PegaWorks, to automate customer service requests, and PegaCall, to provide inbound computer-telephone integration. In addition, Pegasystems said AOL plans to implement PegaWeb, which would allow AOL subscribers access to a self-service membership system.

The AOL deal boosted Pegasystems' stock, which jumped 36.6 percent in late-afternoon trading even after the company posted the first-quarter results that missed analysts' expectations.

Pegasystems posted a first-quarter net loss of $8.2 million, or 29 cents a share, compared with a net loss of $400,000, or 1 cent a share, in its year-ago period. Analysts polled by First Call expected the company to report a loss of 13 cents.

Revenue for the quarter fell 2.5 percent to $13.9 million from $14.2 million in the comparable quarter a year earlier, the company said in a statement. License revenue also decreased from the year-ago period, down to $6 million compared with $8.2 million. Service revenue for the quarter increased 31.1 percent to $7.9 million vs. $6 million a year ago.

"We have made substantial progress on bringing stability to our company," Pegasystems chief executive Alan Trefler said in a statement. Trefler added that the company's cash holdings have increased to $26 million in the quarter and that it has recently made a number of direct sales and strategic alliances, including one with BroadVision to deliver e-commerce applications.