Dear Ladies and Gentlemen,

2006 was another successful year for Software AG. The growth momentum experienced in recent years continued, and we surpassed all of our ambitious goals. Software AG achieved excellent levels in revenues and earnings in 2006. Total revenues rose by 10 percent to €483 million, and operating income (EBIT) performed even better with an increase of 15 percent. Our growth has therefore been accompanied by high profitability: The EBIT margin has reached its highest level ever at 23 percent.

We have our clear strategic orientation to thank for this extremely encouraging trend. Four factors contribute to our growth:

• We continually expand our product portfolio to increase our customer orientation and technological expertise.
• We supply the right products to rapidly expanding markets, enabling us to continue on a growth track through geographic expansion.
• We invest in global marketing and sales activities to increase our visibility in the market and strengthen our customer relationships.
• We reach additional customer groups and new markets by expanding our partner networks.

We see our achievements in 2006 as confirmation of our strategy as well as an incentive to continue the success story of Software AG.

 

Reacting speedily to market developments with an expanded product portfolio

Our new Crossvision line is an innovative product suite based on Service-Oriented Architecture (SOA). Crossvision has significantly expanded our product portfolio, and is setting new standards in the growing market for IT integration and networking. Service-Oriented Architecture creates powerful, flexible, and easily controllable IT structures. This enables our customers to optimize their business processes, efficiently integrate heterogenous IT systems, and react faster to changing business demands. This architecture meets users demands, making SOA a market of the future. International market analysts gave the Crossvision Suite a No. 1 rating in SOA product strategy and SOA portfolio.

We also expanded our product portfolio in Enterprise Transaction Systems (ETS) in 2006. Adabas 2006 and Natural 2006 underscore our leading position in the data management segment. The new product versions make it possible for our customers to manage large volumes of business-critical data and develop their own state-of-the-art, Service-Oriented Architectures. High global demand for increased data management capacities has led to a renaissance for mainframes, which benefited our business with our existing customer base in 2006. Our Legacy Modernization product area includes products from ETS and Crossvision. This is a stable and reliable bridge between our valuable existing legacy systems and the newest service-based platforms and technologies.

 

Geographic expansion and acquisition strategy

As part of our geographic expansion, we opened offices in Bahrain and Japan in 2006 as our focal points in the Middle East and Asia/Pacific regions. We will also start direct marketing in Brazil as of 2008.

In addition to organic growth, we are also looking to expand via acquisitions. Our intention is to strategically build up our product portfolio and increase our access to international markets.

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