31% of total revenue, respectively. We cannot be certain that customers that have accounted for significant revenue in past periods, individually or in aggregate, will renew our services and continue to generate revenue in any future period. In addition, our customers that have monthly renewal arrangements may terminate their services at any time with little or no penalty. If we lose a major customer or a group of significant customers, our revenue could significantly decline.
We believe that the challenges for our business include 1) continuing to drive growth in our Internet and Mobile revenue, 2) continuing to control our expenses for the remainder of fiscal 2009, 3) improving profitability and 4) successfully navigating the global economic downturn. Critical Accounting Policies and Estimates Our condensed consolidated financial statements and accompanying notes included elsewhere in this quarterly report on Form 10-Q are prepared in accordance with accounting principles generally accepted in the United States. Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008 describes the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. These accounting principles require us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
• Revenue recognition

• Allowance for doubtful accounts and billing allowance

• Inventories and inventory valuation

• Allocation of purchase price for business combinations

• Goodwill, identifiable intangible assets and long-lived assets - Impairment assessments

• Stock-based compensation

• Income taxes, deferred income taxes and deferred income tax liabilities

Revenue Recognition
We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") 104, "Revenue Recognition" ("SAB 104"), Emerging Issues Task Force ("EITF") Issue 00-21 "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"), Statement of Position ("SOP") No. 97-2, "Software Revenue Recognition" ("SOP 97-2"), and the EITF Issue 03-5, "Applicability of AICPA Statement of Position 97-2 to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software" ("EITF 03-5"). We generally recognize revenue when all of the following criteria have been met:
• Persuasive evidence of an arrangement exists,

• Delivery of the product or service,

• Fee is fixed and determinable and

• Collection is deemed reasonably assured.

One of the critical judgments that we make is the assessment that "collectibility is probable." Our recognition of revenue is based on our assessment of the probability of collecting the related accounts receivable on a customer-by-customer basis. If we determine that collection is not reasonably assured, then revenue is deferred and recognized upon the receipt of cash from that arrangement.
Our revenue consists of subscription services revenue, ratable license revenue and professional services revenue.
Subscription Services Revenue: Subscription services revenue consists of fees from sales of subscriptions to our Perspective family of services and Global Roamer.

Subscription service revenue is recognized in accordance with SAB 104 and EITF 00-21.
We also enter into multiple element arrangements where sufficient objective evidence of fair value does not exist for the allocation of revenue. As a result, the elements within our subscription arrangements do not qualify for treatment as separate units of accounting. Accordingly, we account for fees received under subscription arrangements as a single unit of accounting and recognize the entire arrangement fee as revenue either ratably over the service period, generally over twelve months, or based upon actual monthly usage. For customers that are billed the entire amount of their subscription in advance, subscription services revenue is deferred upon invoicing and is recognized ratably over the service period, generally ranging from one to twelve months, commencing on the day service is first provided. For customers that are billed on a monthly basis, revenue is recognized monthly based upon actual service usage for the month. Regardless of when billing occurs, we recognize revenue as services are provided and defer any revenue that is unearned. WebEffective service is sold on a subscription basis or as part of a professional services engagement. We recognize revenue from the use of our WebEffective service that is sold on a subscription basis ratably over the subscription period, commencing on the day service is first provided, and such revenue is recorded as subscription services revenue. We recognize revenue from the use of our WebEffective service as part of a professional services engagement and revenue is recorded as professional services revenue. Ratable Licenses Revenue: Ratable licenses revenue consists of fees from the sale of mobile automated test equipment, maintenance, engineering and minor consulting services associated with Keynote SIGOS System Integrated Test Environment ("SITE") as a result of our acquisition of SIGOS Systemintegration GmbH ("Keynote SIGOS") in the third quarter of fiscal 2006. We frequently enter into multiple element arrangements with mobile customers for the sale of our automated test equipment, including both hardware and software licenses, consulting services to configure the hardware and software (implementation or integration services), post contract support (maintenance) services, training services and other minor consulting services. These multiple element arrangements are within the scope of SOP 97-2, and EITF 03-5. This determination is based on the hardware component of our multiple element arrangements being deemed to be a software related element. In addition, customers only purchase the software and hardware as a package, with payments due upon delivery of this hardware and software package.
None of the Keynote SIGOS implementation/integration services provided by us are considered to be essential to the functionality of the licensed products. This assessment is due to the implementation/integration services being performed during a relatively short period (generally within two to three months) compared to the length of the arrangement which typically ranges from twelve to thirty-six months. Additionally, the implementation/integration services are general in nature and we have a history of successfully gaining customer acceptance.
We cannot allocate the arrangement consideration to the multiple elements based on the vendor specific objective evidence ("VSOE") of fair value since sufficient evidence of VSOE does not exist for the undelivered elements of the arrangement, typically maintenance. Therefore, we recognize the entire arrangement fee into revenue ratably over the maintenance period, historically ranging from twelve to thirty-six months, once the implementation and integration services are completed, usually within two to three months following the delivery of the hardware and software. Where acceptance provisions exist in the arrangement, the ratable recognition of revenue begins when evidence of customer acceptance of the software and hardware has occurred as intended under the respective arrangement's contractual terms.
Professional Services Revenue: Professional services revenue consists of fees generated from our LoadPro, CEM and professional consulting services that are purchased as part of a professional service project. Revenue from these services is recognized as the services are performed, typically over a period of one to three months. For professional service projects that contain milestones, we recognize revenue once the services or milestones have been delivered, based on input measures. Payment occurs either up-front or over time.
We also enter into multiple element arrangements that generally consist of either: 1) the combination of subscription and professional services or 2) multiple professional services. For these arrangements, we recognize revenue in accordance with EITF 00-21. We allocate and defer revenue for the undelivered items based on objective evidence of fair value of the undelivered elements and recognize the difference between the total arrangement fee and the amount deferred for the undelivered items as revenue. When sufficient objective evidence of fair value does not exist for undelivered items when subscription and professional services are combined, the entire arrangement fee is recognized ratably over the applicable performance period.
Deferred Revenue: Deferred revenue is comprised of all unearned revenue that has been collected in advance, primarily unearned subscription services and ratable licenses revenue, and is recorded as deferred revenue on the balance sheet until the revenue is earned. Any unpaid deferred revenue reduces the balance of accounts receivable and is not reflected in deferred revenue. Short-term deferred revenue represents the unearned revenue that has been collected in advance that will be earned within twelve months of the balance sheet date. Correspondingly, long-term deferred revenue represents the unearned revenue that will be earned after twelve months of the balance sheet date and primarily relates to ratable licenses revenue.

We generally do not grant refunds. All discounts granted reduce revenue. Free trials are occasionally provided to prospective customers who would like to try certain of our Perspective and other subscription services before they commit to purchasing the services. The services provided during the trial period are typically stand-alone transactions and are not bundled with other services. Revenue is not recognized for these free trial periods.
The table below represents the balances of gross deferred revenue (short-term and long-term aggregated) as of March 31, 2009 and September 30, 2008. Unpaid deferred revenue that has an associated accounts receivable balance as of the balance sheet dates is added back to net deferred revenue, resulting in gross deferred revenue. The amount of unpaid deferred revenue may change at any point in time as it is based upon the timing of when invoices are collected and whether there is any unpaid deferred revenue associated with such accounts receivable.

                                                         Domestic          International          Total
Net deferred revenue                                    $    6,107        $        15,224        $ 21,331
Addback: unpaid deferred revenue                             3,210                  2,304           5,514

Gross deferred revenue at March 31, 2009                $    9,317        $        17,528        $ 26,845


Net deferred revenue                                    $    5,982        $        13,951        $ 19,933
Addback: unpaid deferred revenue                             2,425                  2,331           4,756

Gross deferred revenue at September 30, 2008            $    8,407        $        16,282        $ 24,689

Allowance for Doubtful Accounts and Billing Allowance Accounts receivable are recorded net of an allowance for doubtful accounts receivable and billing allowance and unpaid deferred revenue to the extent that there is any associated accounts receivable balance.
Our allowance for doubtful accounts is determined based on historical trends, experience and current market and industry conditions. We regularly review the adequacy of our accounts receivable allowance after considering the age of each invoice of the accounts receivable aging, each customer's expected ability to pay and our collection history with each customer. We review invoices greater than 60 days past due to determine whether an allowance is appropriate based on the receivable balance. In addition, we maintain a reserve for all other invoices, which is calculated by applying a percentage, based on historical collection trends, to the outstanding accounts receivable balance as well as specifically identified accounts that are deemed uncollectible.
Billing allowance represents the reserve for potential billing adjustments that are recorded as a reduction of revenue and represents a percentage of revenue based on historical trends and experience. The allowance for doubtful accounts and billing allowance represent management's best estimate, but changes in circumstances relating to accounts receivable and billing adjustments, including unforeseen declines in market conditions and collection rates and the number of billing adjustments, may result in additional allowances in the future or reductions in allowances due to future recoveries or trends. Inventories and Inventory Valuation
Inventories related to SIGOS SITE systems were approximately $1.1 million as of March 31, 2009, and relate to direct costs associated with finished goods hardware. Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market. Market is based on estimated replacement value. Determining market value of inventories involves numerous judgments, including average selling prices and sales volumes of future periods. We primarily utilize current selling prices for measuring any potential declines in market value below cost. Any adjustment for market value is charged to direct cost of ratable licenses at the point of market value decline.
We evaluate our ending inventories for excess quantities and obsolescence on a quarterly basis. This evaluation includes analysis of historical and forecasted sales of our product. Inventories on hand in excess of forecasted demand are provided for. In addition, we write off inventories that are considered obsolete. Obsolescence is determined from several factors, including competitiveness of product offerings, market conditions, and product life cycles.
Our inventories include mainly computer hardware and mobile hardware and accessories that may be subject to technological obsolescence. Our products are sold in a competitive industry. If actual product demand or selling prices are less favorable than we

estimate, we may be required to take inventory write-downs. For the three months ended March 31, 2009 and 2008, we did not experience any write-down of inventories.
Allocation of Purchase Price for Business Combinations We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed, as well as any in-process research and development ("IPR&D"), based on their estimated fair values. Our methodology for allocating the purchase price relating to acquisitions is usually determined based on management's assessment in conjunction with valuations performed by an independent third party. Such a valuation requires making significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer contracts, customer lists and acquired developed technologies, expected costs to develop IPR&D into commercially viable products and estimating cash flows from projects when completed and discount rates. Estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Other estimates such as accruals associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.
Goodwill, Identifiable Intangible Assets and Long-Lived Assets Goodwill is measured as the excess of the cost of acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. We evaluate our identifiable goodwill for impairment on an annual basis, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable for our single reporting unit. In addition we evaluate our intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
• significant changes in the manner of our use of the acquired assets or the strategy of our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

Management continually applies its judgment when performing these evaluations to determine the timing of the testing, the undiscounted net cash flows used to assess recoverability of the intangible assets and the fair value of the asset group.
We performed an annual goodwill and long lived assets impairment review during the fourth quarter in fiscal 2006, 2007, and 2008. We did not record an impairment charge based on our reviews. The goodwill recorded on the condensed consolidated balance sheet as of March 31, 2009 was approximately $62.1 million as compared to $64.4 million as of September 30, 2008.
Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. Given the continuing deterioration of economic conditions, we evaluated if there were any triggering events that would indicate an interim impairment analysis of our goodwill balances during the three months ended March 31, 2009 was necessary. There was a decline in the market capitalization of our company, as well as comparable companies, during the three months ended March 31, 2009. We concluded that there were no triggering events as of March 31, 2009 which would require a formal impairment analysis of the carrying value of goodwill. In making this determination, we considered the carrying value of our stockholders' equity as compared with our market capitalization and the implied control premium to reconcile these amounts. We also considered our historical and forecasted revenues and operating results. We believe that the recent decline in our market capitalization is not due to any fundamental change or adverse events in our company's operations. Accordingly, we have not recognized any impairment charge of goodwill in the accompanying condensed consolidated financial statements. We will continue to monitor our economic situation and the need to perform an impairment analysis in light of recent macro-economic indications in the equity markets as well as recent volatility and downward pressure on our market capitalization. To the extent we conclude that there are any indicators of impairment prior to the date of the next annual goodwill impairment test on September 30, 2009, we will perform an impairment analysis under SFAS No. 142, "Goodwill and Other Intangible Assets," and could record an impairment charge to write down goodwill to its fair value. Any such charge could be significant and accordingly, would have a material impact on our financial position and results of operations, but would not be expected to have a material adverse effect on our cash flows from operations.
If future events or circumstances indicate that an impairment assessment is required on intangible or long-lived assets and an asset group is determined to be impaired, our financial results could be materially and adversely impacted in future periods.

Stock-Based Compensation
We issue stock options to our employees and outside directors and provide our employees the right to purchase common stock under our employee stock purchase plan. Since October 1, 2005, we account for stock-based compensation in accordance with SFAS No. 123R. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the service (vesting) period. The value of an option is estimated using the Black-Scholes option valuation model which requires the input of highly subjective assumptions. A change in our assumptions could materially affect the fair value estimate, and thus, the total calculated costs associated with the grant of stock options or the issue of stock under the employee stock purchase plan. If actual forfeiture rates differ significantly from estimated forfeiture rates, stock-based compensation expense and our results of operations could be materially impacted. See Note 1 to the Notes to Condensed Consolidated Financial Statements for more detail.
Income Taxes, Deferred Income Tax Assets and Deferred Income Tax Liabilities We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax liabilities, including the impact, if any, of additional taxes resulting from tax examinations together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting . . .