Dollar's Slide Sparks Software

The falling dollar will give most U.S.-based software companies a noticeable boost, with Lawson Software(LWSN Quote - Cramer on LWSN - Stock Picks) and Sybase(SY Quote - Cramer on SY - Stock Picks) reaping the largest benefits.

An analysis released Friday by Merrill Lynch's Kash Rangan found that the dollar's slide against the euro (off 5% since October) should add 4.6% to Lawson's license revenue and 2.5% to Sybase's over the next 12 months.

Other software companies in Rangan's coverage universe that stand to gain the most from currency fluctuations are JDA Software(JDAS Quote - Cramer on JDAS - Stock Picks) (a 2.2% boost), Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) (1.9%) and BEA Systems(BEAS Quote - Cramer on BEAS - Stock Picks)(1.6%).

Not surprisingly, Waldorf, Germany-based SAP(SAP Quote - Cramer on SAP - Stock Picks) will be hurt the most, losing 3.6% off its license revenue, according to Rangan. Merrill Lynch has an investment banking relationship with Sybase but not with the other companies mentioned in this story.

Unlike tourists, U.S. companies can win when the dollar declines since goods priced in euros are suddenly worth more in dollars. Of course, American companies with operations abroad pay salaries and other costs of doing business in euros and thus can take a hit to the bottom line.

Rangan's analysis mentions the percentage of a company's sales in Europe (as well as the Middle East and Africa) and the general cost of doing business in the euro zone, although he doesn't detail the effect on company earnings. One reason: Companies don't always disclose costs by geographic region.