Germany’s Software AG sees 2nd quarter net profit rise by 7 percent

Software AG 2Q net profit up 7 percent

FRANKFURT — Germany’s Software AG said Wednesday that its second quarter net profit rose 7 percent on a strong improvement in revenue from licenses and maintenance.

The Darmstadt-based company reported a net profit of euro29 million ($41 million) in the April-June period, compared with euro27 million a year earlier.

Overall revenue improved 5 percent, climbing to euro176.4 million from euro168.8 million. High-margin product revenue — from licenses and maintenance — was up 9 percent, increasing to euro133.7 million from euro123.2 million.

Germany’s second-largest software company after SAP AG, Software AG makes software for banks, governments, health care and educational groups.

Chief financial officer Arnd Zinnhardt said the company’s next big step is integrating Saarbruecken-based IDS Scheer AG, whose acquisition in a euro477 million deal Software AG announced earlier this month.

While Software AG focuses on making software, Scheer is more focused on tailoring it to customers’ particular needs.

The two fit together well because they can “build a bridge between the processes and the software,” Zinnhardt said in a telephone interview.

Because of the integration, an updated 2009 outlook for the two companies will only be possible later in the year, he said.

However, Zinnhardt said he had not yet seen any marked upturn in Software AG’s or other companies’ business.

“Although some early indicators that tell us that we might have seen a downturn and now an upturn, we don’t see that in discussions with our customers,” he said. “Nobody really realizes an uptick. The coming six months will be very much like the first half of the year.”

After the IDS Scheer integration is complete, Software AG will probably be able to increase its revenue guidance, he said.

Zinnhardt reiterated that barring any major setbacks, the two companies’ consolidated revenue this year should be more than euro1 billion.

In 2008 Software AG saw revenues of euro720 million, while Scheer had revenues of euro420 million.

He added that Software AG did not expect any job cuts in sales and consulting, but that the two companies would achieve some savings by aligning some of the processes of their back offices, especially abroad. “We’re looking at synergies in detail and will be working on them in the coming weeks,” Zinnhardt said.

Software AG has U.S. offices in locations including Reston, Virginia; Alpharetta, Georgia; and Alviso, California, while Scheer has offices in Atlanta, Georgia; Berwyn, Pennsylvania; and Mountain View, California.

Shares of Software AG closed down 4.4 percent at euro49.10, while IDS Scheer shares were up less than 1 percent at euro14.99 in Frankfurt.

On the Net:

www.softwareag.com

www.ids-scheer.com