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Software AG CEO Discusses Q3 2010 Results – Earnings Call Transcript

Software AG CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript

Software AG (

STWRY.PK

)

Q3 2010 Earnings Conference Call

October 26, 2010 12:30 pm ET

Executives

Otmar Winzig - Senior Vice President, Investor Relations and Compliance.

ArndZinnhardt - Chief Financial Officer

Analysts

Rymel Menshal – Barclays Capital

Waller – Unicredit

Thomas Becker - Commerzbank

Adam Wood – Morgan Stanley

Thomas Franklin – Massachusetts

Gregory –Bryan’s army

Fred - Credit Swiss

TheStreet Recommends

Derrick Malcom – Societe Generale

Sebastian - Capital Invest

Julian - Merryl Lynch

Presentation

Operator

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Ladies and gentlemen, welcome to the Q3 2010 Results Conference Call of Software AG. At this time, I would like to turn the conference over to OtmarWinzig, senior VP, investor relations and compliance. Please go ahead Mr. Winzig.

OtmarWinzig

Good morning ladies and gentlemen, friends of our community. Before we start as always, please let me make some housekeeping remarks. As regards to the conference, whoever is in has learnt this procedure, we have sent the dialing number by mail and rest of the participants have received the numbers for the Q & A dialog, in addition the conference will be broadcast via web in a listen only mode and access to the web is via our investor relations website. The webcast will display all the power point presentations, the charts which are related to this call are the same charts that are in our website for download, and the full presentation was sent earlier this morning in PDF format to all the invited parties. The call in the webcast is recorded and is available for replay later today. The agenda of today’s call is the following. The CFO ArndZinnhardtwill provide details of the Q3 and the 9 months’ 2010 figures and the financial performance of Software AG and those who are familiar with our calls may recognize the change in procedure, from now on, the CEO will be backed for commenting on major events and half and full year results, for the next time on January 27

th

, 2011, we are working something major happens in between.

After the presentation of ArndZinnhardt, you may ask questions. Please use only the dialing phone number for posing questions, otherwise, we cannot hear you. For technical reasons, we cannot take questions via email in this room here.

With respect to the capital market regulations, I have to now make the following statement. This presentation contains forward looking statements based on beliefs of Software AG management. Such statements reflect current views of Software AG, with respect to future events and results and are subject to risks and uncertainties. Actual results may vary materially from those predicted here due to factors including change of internal, economic and business conditions, change in currency exchange, in deduction of competing products like of market acceptance of new products, services or technologies and changes in business strategy. Software AG does not intend or assure any obligation to update these forward looking statements.

Now having said this, let us start and I hand over to ArndZinnhardt, the CFO of Software AG.

ArndZinnhardt

Good morning, ladies and gentlemen. Before I start, I would like to make some introductory remarks concerning the Q3 2010 reporting.

We saw a recovery of our ETS business compared to the first two quarters of 2010. What metrics grows, strong over the last 6 – 9 months, and particularly strong in Q2, slowed down a little, when comparing that to the previous quarter. On the other side, our [indiscernible] performance was very [indiscernible] resulting in a double digit growth of our newly formed BPE, business process at excellence business line. In addition, our revenues from service in consulting activities came in quite strong.

You will see the current CEC impact was material in Q3 and

We saw a positive idea share acquisition synergy effect in Q3.

Having said that let me start with the currency impact on Q3, as well as for the first nine months. 43% of our total revenue was generated in the euro zone in the first 9 months. The remaining part of the business is generated in foreign currency. Besides, our strong US based business which contributes to 23% of our currency related revenues. Only the Brazilian Real has some larger impact on our business.

In Q3, license and maintenance revenue were equally affected. The currency effect for the first nine months 2010 is roughly 31 million. For the remaining quarter, we do not anticipate this development continuing in more quarters especially regarding the For Exchange effect in the US dollar.

What about regional performance? As in last quarter, the America’s showed strong momentum during Q3. Our major market, the US market kept on track and was very positive, in the quarter, as well as year to date. Even though there are various opinions that are causes due to macro-economic uncertainties, like higher employment, lower than expected economic rebound and more reluctant investment mood.

On the other side, India showed a mixed picture, whereas Dutch, Germany, Austria and Switzerland, the Nordic region as well as the Middle East, were strong. … and UK showed more challenging business environment. APJ was driven by a very dynamic performance in Australia, while Japan continued to be demanding. As you know, we have a diversified business model and our clients come from many industries. In comparison to last year, we sold a stable proportion of our business in the financial sector. On the other hand, even as governments implemented cost cutting programs, predominantly in Spain and the UK, the revenue shared in this area grew year on year. From our perspective, the quality of IT infrastructure is key to modern cost efficient processes also in the public sector.

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