Letter from the CEO

As we approach the finish line of 2006, I look back at the great strides the business has accomplished. We have made excellent progress on the strategic business strategy goals we established at the beginning of 2006 and described in the first newsletter.

At ScienceLogic, we run our business by three simple rules:

• Commitment to continuous and rapid innovation
• Customer-centric product design philosophy
• High quality and value in every product and service we deliver

I am proud to report that ScienceLogic’s financial health is excellent! We are having another banner year of compounded growth, we have no debt and our business has remained profitable during each of the last 4 quarters. During 2006, we have doubled the size of our customer base and competed head-to-head with the largest marketplace competitors, winning time and time again.

These principles (and a lot of hard work) have enabled ScienceLogic to scale in just three years from startup to a profitable market challenger in a very mature and competitive industry. Against an industry backdrop marked by massive acquisitions by the Big 4 (IBM, BMC, CA and HP), ScienceLogic has achieved an average annual growth rate topping 200% and demonstrated strong and steady profitability while remaining true to our commitment to constant product innovation.

The best news is we're just getting started.

Our plan is not to stop there! ScienceLogic is going to drive forward with continued organic growth and investment in the full spectrum of IT Operations Management tools. The EM7 monitoring platform will expand in several key directions going forward to step into the next generation of IT business analytics. We have so many great ideas it is hard to select which ones should naturally come first, but you have lots of new enhancements to look forward to based upon the current development initiatives. One example: an agent-less Dynamic Database Performance trending tool that goes well beyond what you might have thought possible!

ScienceLogic is firing on all cylinders in 2006 and ready to charge forward in 2007.

I am really excited about the prospects for our business and the innovative solutions planned for 2007 and beyond. As ever, we are committed to our core values of nurturing long-term customer relationships, fostering our employees’ professional growth and building great products!

Dave