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Ad-hoc Release in accordance with Section 15, WpHG (German Securities Act): Software AG to focus on two product lines

Darmstadt, 12/4/2003

At today’s meeting the Supervisory Board and Management Board of Software AG approved the strategic realignment. The key element is the focus on two product lines.

1. XML-based integration: Software AG will combine and enhance its products EntireX and Tamino, those that support the XML data format, to create a comprehensive integration platform. This will enable users to create cost-effective, seamless links between their legacy systems, attaining levels of efficiency and performance that would otherwise require the deployment of completely new systems. Software AG is the market leader for products based on XML technology. XML (eXtensible Markup Language) is a universal concept for the storage and transmission of data. Software AG Project Services will employ the new integration platform to develop customer-specific, easy-to-use efficient solutions. Systems integrators will also be able to use these state-of-the-art, highly productive tools to combat increasing cost pressures.

2. Enterprise transaction systems: Software AG will broaden its portfolio of mainframe software and look for new opportunities for existing products. By doing so, the company can build on its success and proven ability to increase enterprise productivity and efficiency in this technically demanding segment. With its Adabas (database) and Natural (development tools) product groups, Software AG has reached a key position at more than 3,500 large corporations and public sector organizations worldwide. Companies today wish to improve the productivity and efficiency of their existing systems thereby protecting their investments. The Enterprise Transaction Systems product line optimizes and modernizes legacy IT systems by using new tools to enhance performance, add new functionality such as intelligent backup, and deploy Web technologies. 

Focusing on two product lines will allow the company to consolidate its R&D (research and development) activities. Assuming stable business volumes, development costs for applications will fall. Tamino development spending will also decrease. XML Server Version 4 has already been released; as the product is now at a very advanced stage, future modifications, such as new functionality, will require significantly less R&D overhead. 

Focusing on two product lines will lead to a reduction of R&D costs worldwide. Software AG India will take over the technical support for Tamino and EntireX from Germany.

These steps will cut costs by 10 million euros in 2004, with approximately 20 million euros to be saved each year from 2005. Additional provisions totaling 13 to 17 million euros will be included in the 2003 accounts, formed to finance the restructuring.
Software AG full-year operating income for 2003 is expected to exceed 2002 levels (32 million euros) by between 10 and 15 percent. However, as a result of the one time restructuring charges, the company will post a negative figure for net income (after tax). 

Software AG is based in Darmstadt, Germany. Founded in 1969, Software AG continues to be Europe's largest and a leading global provider of system software and services enabling enterprise data integration and management. Software AG develops products and solutions that support the XML (Extensible Markup Language) standard. XML simplifies the exchange of documents and data as well as the integration of cutting-edge Web applications into traditional IT architectures. In 2002, the corporation achieved 475 million euros in total revenue. Software AG has offices in over 70 countries and currently employs a staff of more than 2,700. Software AG is listed on the Frankfurt Stock Exchange (TecDax, ISIN DE 0003304002 / SOW).

Software AG
Otmar Winzig
Senior Vice President
Investor Relations & Compliance
Uhlandstrasse 12
64297 Darmstadt
Tel: +49 (0) 6151-92-1669
Fax: +49 (0) 6151-92-34-1669