Karl-Heinz Streibich, Chief Executive Officer
The Q3, 2007 result is the best third quarter result in the history of Software AG. This success is based on a highly profitable core business in data management, dynamic growth in integration software and an overall, efficient organization. Software AG’s profitable growth confirms that the acquisitions of the software companies SPL in Israel and webMethods in the U.S. were correct and the integration of the two companies is proceeding successfully in the third quarter. The financial markets have also lauded the transaction: In September 2007, Software AG received the award “Best Cross-Border Deal of 2007” for the webMethods acquisition in the U.S.
The integration of webMethods, which was acquired on May 25, 2007, is proceeding according to plan. Sales activities in the EMEA (Europe, Middle East, Africa) and APJ (Asia, Pacific, Japan) regions were merged in the third quarter. In addition, the Professional Services activities were combined in one unit and the integration of the R&D divisions was started. Further to the integration process, the organizational structure of Software AG was systematically aligned with the two business divisions Enterprise Transaction Systems (ETS) (data management) and webMethods (integration software).
Our new, customer-oriented organization gives us a strong market position and is the starting point for our success in 2008. The current consolidation trend in the software market shows how important a good market position is in such a dynamic industry. Our technology, our global customer base, financial strength and high efficiency will lead to further growth for Software AG, with the objective of becoming one of the three leading infrastructure software suppliers in the world.
In the third quarter, we restructured our company‘s organization, basing it on the two business divisions ETS and webMethods. This enabled the global concentration of forces on two business divisions initiated at the beginning of the year. The Company’s reporting was changed accordingly. A change in the composition of the Executive Board accompanied the reorganization. David Mitchell, CEO of webMethods, Inc. before the merger, was appointed to the Executive Board of Software AG in late July. Since then, his responsibilities include global sales for the webMethods division. Both business divisions are now represented by a member of the Executive Board responsible for sales and a member responsible for research and development.
What specific advantages can be expected from the adjustments? The new structure will primarily lead to an improved customer orientation. Sales are now organized as a continuous process chain within one business division, from the management level to the individual customer. The sales staff is made up of persons who are either data management experts or integration software experts. They are competent partners for our customers and receive optimum support from their respective business divisions.
The market confirms our strategy: In the third quarter, we recorded more than 250 new business transactions. Moreover, various market research firms, including AMR Research and Forrester Research, have given our products high marks. In September, we combined the former product group the “crossvision Suite” with the products from webMethods in the new product line “webMethods 7.1”. It combines first-rate products for SOA governance, business integration and business process management in an entirely modular product suite. We presented the new Version 7.1 at our customer conference “Integration World” in early November in Orlando, Florida, USA.
The first great joint sales success has already occurred in the third quarter just ended. By combining forces, Software AG obtained a large order in the financial services industry, which neither Software AG nor webMethods would have been able to obtain alone previously. This proves the acquisition’s potential for sales synergies.
As a result of the positive business development we continued to improve all significant key figures in the third quarter. This was also the first time that webMethods has been fully consolidated for the full period. Software AG increased its Group revenues to €157.8 million in Q3 2007 (Q3 2006: €113.8 million). An important factor in this result was the significant expansion of business in the webMethods division which contributed 44 percent to total revenues in the third quarter. Licensing revenues across both business divisions grew disproportionately in Q3 2007, reaching €57.4 million (Q3 2006: €37.0 million). EBIT for Q3 2007 rose to €32.4 million (Q3 2006: €25.6 million). With these key figures, we are fully on track for meeting our forecast for the entire year.
We reaffirm our forecast for 2007 with an increase in Group operating revenues (currency-adjusted) of 30 to 35 percent year-on-year, with licensing revenues climbing by 45 to 50 percent. According to our estimate, positive synergy effects will result in earnings per share of €3.10 to €3.25.
For 2008 as a whole, we anticipate continued robust growth in Group revenues, with operating revenues improving by 22-25 percent. According to our estimate, the EBIT margin will be around 23 percent, i.e. 1 percentage point above 2007 planning.
Software AG has again set high targets for itself and is building on the previous successes with customers and business partners.
Chief Executive Officer