KANA Reduces Expenses and Provides Revenue Guidance; New Products Posi

    Business Editors/High-Tech Editors

    MENLO PARK, Calif.--(BUSINESS WIRE)--Feb. 28, 2005--KANA Software Inc. (NASDAQ: KANA), a leading provider of Service Resolution Management (SRM) solutions, today announced that the company expects to significantly reduce its quarterly cost of revenues as well as its Sales and Marketing (S&M), Research and Development (R&D), and General and Administrative (G&A) expenses to an approximate range of $12.5 million to $13 million by mid 2005. This will represent a reduction of approximately $3 million to $3.5 million per quarter from the 2004 average run rate.
    In December 2004, KANA successfully delivered two new Service Resolution Management solutions, KANA Resolution and KANA IQ ECS. KANA is now able to lower its R&D expense after the launch of these new products. KANA's R&D team will remain strong with a headcount of over 120 and a continued focus on delivering innovative SRM solutions. The cost reduction should have no effect on the current product delivery roadmap.
    "We continue to execute on our India and China outsourcing strategy by reducing some R&D headcount and by transferring other headcount to a technical support role," said Alan Hubbard, EVP of R&D for KANA. "This new phase will result in additional cost benefits while adding outsourced operations that expand our existing technical support for our global customer base."
    We currently expect our 2005 revenue to be in the range of $51 million to $55 million," said John Thompson, CFO of KANA. "Although we remain very cautious regarding 2005 revenue due to relatively long sales cycles that make revenue inherently harder to predict, we are encouraged by the feedback that we are receiving from our customers, integrator partners, and industry analysts about our new SRM solutions."
    The company has delayed the release of its Q4 2004 financial statements pending the outcome of an independent review of its travel and entertainment (T&E) internal controls and expenditures. As a result of the review which is substantially completed, KANA will enhance its internal control procedures. When completed, this review is not expected to result in any restatement to prior periods. KANA expects that within the next few weeks it will announce the date it anticipates reporting its Q4 financial results.

    About KANA

    KANA is the leading provider of Service Resolution Management (SRM) solutions that improve customer satisfaction, reduce service costs, and increase revenues. KANA's award-winning suite of customer service solutions for assisted, self, and proactive service enables companies to resolve customer requests quickly and accurately across multiple channels. Built on the industry's most advanced Web architecture, KANA's solutions are in use at more than half of the world's largest 100 companies. For more information visit www.kana.com.

    Cautionary Note Regarding Forward-looking Statements Under the Private Securities Litigation Reform Act of 1995:

    Information in this release regarding KANA's forecasts, projections, expectations, beliefs, and intentions are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to KANA as of the date of this release, which may likely change, and we assume no obligation to update any such forward-looking statement. These statements include statements about KANA's cost reduction measures and its expected reductions in operational expenses and amortization, KANA's expected revenues, and KANA's Resolution and IQ ECS products. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include, but are not limited to: competition in our marketplace, including introductions of new products or services, or reductions in prices, by competitors; risks associated with lack of market acceptance of KANA's products or services; inability to enhance and develop our products and services within budget and on schedule; inability to attract and retain qualified employees, to manage cash and expenditures or to expand sales; inability to manage our business in light of recent personnel reductions; KANA's history of losses; the effect of potential military action and terrorist activities; and slow economic conditions, particularly as they affect spending by our prospective customers on SRM and similar enterprise software products. These and other factors are risks associated with our business that may affect our operating results and are discussed in KANA's filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q.

    NOTE: KANA is a registered trademark of KANA Software, Inc. All other company and product names may be trademarks of their respective owners.

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CONTACT: KANA Software Jessica Hohn, 603-665-1306 jhohn@kana.com or Media: PAN Communications Elise Sherman, 978-474-1900 kana@pancomm.com or Investors: Market Street Partners Carolyn Bass, 415-445-3232 Carolyn@marketstreetpartners.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS BANKING TELECOMMUNICATIONS SOFTWARE SOURCE: KANA Software

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