1. Significant Events during the Reporting Period

During the first quarter of 2008, Software AG successfully continued the activities it had initiated in fiscal 2007. These activities are aimed at expanding the Company’s technology and market leadership as an independent provider of infrastructure software for business processes. The highlights of the first quarter included our strategically important market entry into Brazil, our successful participation in CeBIT with many new customer contacts and the expansion of our partnerships, as well as the ongoing integration of webMethods.

Brazilian market entry started on schedule

As planned, we began to service the Brazilian market directly at the beginning of the year. We won the legal disputes with our former distributor, and began operations with an initial team of employees. The more than 150 users of our software products in Brazil represent an enormous potential for new business. The overall potential is higher than we had originally assumed. We have therefore increased our projections of total 2008 revenue in Brazil, now in the range from US$25 million to US$30 million. By April we had signed our first contract for more than US$1 million.

A demonstration of our new technology leadership at CeBIT

Our participation in CeBIT, the world’s largest computer trade show, was an important exhibition highlight for Software AG in the first months of 2008. We were visited by more than 70 politicians from over 50 countries and received press coverage in more than 20 nations, which also made this event very interesting for us from an international perspective. We held intensive discussions with more than 450 existing and potential customers in Hanover and presented our technology to them. We were also able to announce the signing of important contracts with international companies.

Important contracts signed

We were able to sign significant orders with well-known customers in the first quarter of 2008. We also expanded our partnership with Satyam, one of the world’s leading IT consulting and service providers. Together we are introducing a new process framework for the insurance industry. We entered into an important agreement with GFT, with whom we will collaborate in developing the markets in Brazil and the USA.

Major new international customers such as Coca-Cola Enterprises, T-Mobile, and many others were added in Q1 2008. Coca-Cola Enterprises, for example, purchased licenses for BPMS and CentraSite. T-Mobile, a company of the Deutsche Telekom Group, selected Software AG as its strategic partner in the area of SOA and BPM. This contract is the largest BPM/SOA order that Software AG has yet received in Germany, and is also the second important order from the telecommunications sector this year.

Leading products receive new awards and evaluation

Our products have once again received evaluation and recognition from independent market research companies. For example, Software AG was positioned as a ‘Leader’ in The Forrester Wave™: SOA Service Life-Cycle Management, Q1 2008 by Forrester Research1). In addition, Gartner positioned Software AG in the Leader’s Quadrants for Business Process Management Suites2) and SOA Governance3)4) .In a market assess ment issued December 31, 2007, Current Analysis recognized Software AG as a market leader in application infrastructure. In a similar assessment issued December 14, 2007, the research firm also named Software AG a market leader in Service-Oriented Architecture.

Software AG was also recognized by SearchSOA.com with “2007 Products of the Year” awards within two categories. webMethods BPMS v.7.1. was named the “2007 Product of the Year” in the Service Design and Modeling category. The webMethods ESB v.7.1 was recognized in the Service Assembly and Integration category. Software AG was the only company to receive multiple awards in this year’s competition.

Integration of webMethods continues to proceed on schedule

The most important areas of Software AG and webMethods, Inc., such as administration, sales (excluding the USA), and Professional Services, were already consolidated by the end of 2007. In the first half of 2008 we will be concerned primarily with the complete integration of Research & Development as well as Sales for the USA. Here, as in all of the other areas, we are placing top priority on combining our strengths to the “Power of Two,” or in this case, the “Power of Software AG.” The Company now has more than eight integrated and specialized webMethods R&D locations in Darmstadt, Fairfax, Seattle, Denver, San José, Sofia, Chennai, and Bangalore. The consolidation of Sales in the USA is also proceeding according to plan. The combined product portfolio received an extraordinarily positive response at CeBIT. Here we introduced for the first time products such as the webMethods Application Modernization Suite, which significantly enhances the functionality and utility of mainframe applications.

1) The Forrester Wave™: SOA Service Life-Cycle Management, Q1 2008 (by Larry Fulton with Randy Heffner and David D’Silva (January 28, 2008))

2) Gartner, Inc., Magic Quadrant for Business Process Management Suites, 2007 by Janelle Hill, Michele Cantara, Eric Deitert and Marc Kerremans (December 14, 2007)

3) Magic Quadrant for Integrated SOA Governance Technology Sets, 2007 by L. Frank Kenney and Darryl C. Plummer (December 31, 2007)

4) The Magic Quadrant is copyrighted 2007 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner’s analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the “Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.