Annual Report 2007
Letter to shareholders
1/2 forward
Karl-Heinz Streibich
Chief Executive Officer
Dear Ladies and Gentlemen,
Fiscal year 2007 was a record year for Software AG. We once again grew dynamically and were highly profitable, recording the best results in our Company's nearly 40-year history for the second consecutive year. Group revenues rose by 29% to €621.3 million while the operating result (EBIT) improved by 23% to €136.8 million.
Software AG pursues and implements a clear strategy. This strategy has four growth drivers:
- Organic growth through innovation
- Geographic expansion
- Growth through acquisitions
- Addressing new customer groups through partnerships
We achieved organic growth in all areas - both in our ETS and webMethods business division and in the Professional Services business division. We were able to do so because of our strong customer orientation backed by innovative products that analysts rank as leaders in the global market.
We are also continuing to pursue growth through geographic expansion. The launch of direct distribution in Japan went especially well in 2007, with revenues more than tripling in this market. In addition, we made the preparations for a direct market entry in Brazil effective as of January 1, 2008. We anticipate that Brazil, the largest IT market in Latin America, will contribute 20 to 30 million U.S. dollars to revenue in 2008.
Acquisitions were the strongest growth drivers in the reporting year. The purchase of the U.S. software company webMethods, Inc., a leading provider specializing in the integration and optimization of business processes, was one of the largest acquisitions in the history of the European software industry. Effective as of April 1, 2007, we purchased an 80% holding in SPL, our distribution partner in Israel, and effectiveas of January 1, 2008, we bought the software division of the Israeli company Jacada. All of these acquisitions noticeably strengthened our core business. The webMethods product range ideally complements our portfolio. In addition, we gained about a thousand new customers. We reinforced our market position in the USA and secured important partners, particularly among system integrators for vertical industries. On the whole, the Software AG brand has been greatly augmented by the very strong brand name webMethods. The integration proceeded as planned and we achieved the targeted cost synergies. We expect to complete the integration in the first half of the year 2008.
We were able to launch our first shared product line in September 2007. Called webMethods 7.1, it incorporates our existing Crossvision product line in a fully modular product suite. It is a wholly integrated product including SOA governance and the next version will be available in the second quarter of 2008.
The benefits of the acquisition soon became apparent. With webMethods, we immediately became one of the world's largest independent providers in two growth markets: Service-Oriented Architecture (SOA) and Business Process Management (BPM). Top international market analysts ranked our innovative product portfolio as technologically leading. In addition, as of the third quarter we were able to win major client orders that we would not have been able to secure without the webMethods acquisition.
