Annual Report 2007
Software AG Stock
1/4 forward
Blue chips lead the list of winners in 2007
A look at the international stock markets in 2007 reveals a divided situation: in the first half of the year the equity markets achieved new record levels. The most important drivers of this trend were dynamic global economic growth, high corporate profits, and an exceptionally active merger and acquisition environment. In the second half of the year the mortgage crisis in the USA and the growing confidence crisis in the financial sector dampened investors' appetite for risk.
Within Europe, the German stock market turned out to be the most resistant to the economic distortions associated with the U.S. mortgage crisis. The DAX benchmark index gained 22 percent in value since the beginning of 2007. Performance of secondary stocks and other European indexes varied. The MDAX posted an increase of 4.9 percent for the year. In 2006, this mid-cap index had achieved gains of 29 percent. The companies listed on the SDAX recorded an average decline of 6.8 percent in the course of the year. Conversely, the EuroStoxx50 picked up 6.9 percent in 2007.
The Dow Jones, which tracks 30 standard stocks, gained 6.0 percent -despite the fact that this index experienced its weakest fourth quarter in twenty years. The broader-based S&P 500 rose 4.2 percent. Both indexes had posted record highs in October.
Second-line technology stocks remained investor favorites in 2007. The technology-laden Nasdaq computer composite index rose 10.7 percent in 2007. The Nasdaq 100, which tracks the largest companies listed on the Nasdaq exchange, climbed by as much as 19.9 percent. The 30.2 percent increase of the TecDAX to 974 points surpassed the previous year's impressive 25.5 percent gain. As in prior years, the rally was primarily led by renewable energy stocks.
Wide price fluctuations for Software AG's share price
Software AG shares were not able to maintain pace with the performance of the TecDAX and Nasdaq 100 benchmark indices in 2007. The Xetra closing price on December 28, 2007 was €60.57. This means the stock gained 1.4 percent from the prior-year closing price of €59.74. Initially, strong financials and the acquisition of webMethods, Inc., as a confirmation of our growth trend, boosted the share price, particularly in the second quarter. On July 19, the share price reached its five-year high of €77.20. But as a consequence of the general weakness of the market it later declined significantly. Initially, competitors' profit warnings had an adverse effect on the share. The mortgage crisis in the USA and its repercussions on the financial sector led to fears that IT demand could plummet in the banking sector. Software AG generates roughly 15 percent of its revenues in this industry. Also, our strengthened, and highly competitive, position in the USA was considered as a critical issue in view of the persistent weakness of the dollar and mounting fears of recession. Dynamic growth companies with acquisition plans were increasingly discounted in the market.
