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Software AG

Investor Presentation

July

2003

2

Investor Presentation

July 2003

Software AG Profile


Germany’s second largest software vendor


In the high
-
end, mission
-
critical IT business since 1969


Worldwide customer base of several thousand blue chip
companies and public sector organizations


Leader in XML system technology (DBMS and
integration)


System integrator for

own products and solutions


Listed at Frankfurt stock exchange (TecDAX)


Market Cap
325 mio.


/ Free Float: 68.4%


3

Investor Presentation

July 2003

Gl
obal Business

Four Business Regions
(share of revenue 2002):



Americas (35%)



Southern/


Western Europe


(26%)




Central/


Eastern Europe


(24%)



Asia/Northern


Europe (15%)

4

Investor Presentation

July 2003

Source of Revenue / Business Lines

Project Services

(Consulting and Implementation)



Licensing of Software Products


Maintenance (24x7 world wide)

Product Business

0
20
40
60
80
100
120
140
160
180

1999 2000 2001* 2002


2003

(in mio. euros)

* first consolidation of US acquisition

5

Investor Presentation

July 2003


1999 2000 2001* 2002

Results

(in mio. euros)

66

69

91

32

38

67

39

34

70

-
19

83

41

* first consolidation of US acquisition

62

62

110

54

Operating result

Net profit

Op. cash flow

Op. EBITA

-
40

-
20

0

20

40

60

80

100

120

Strategy

7

Investor Presentation

July 2003

Positioning of Software AG


Focus on product business


Licensing of software products


Excellent maintenance services


Global presence


Technology leader in XML


Expansion of the product portfolio to include
standardized solutions


System integrator for own products and solutions

8

Investor Presentation

July 2003






XML Server




-

native XML server

-

Storage, management, publishing and


exchange of XML documents

-

Extremely fast and reliable database

-

Available on all major platforms

-

For large and mission
-
critical applications

-

Integration server

-

Leveraging legacy systems for use in new


(e
-
)business solutions

-

Development platform

-

For large
-
scale (e
-
)business applications


Core Products

9

Investor Presentation

July 2003



Number 2 worldwide market share for mainframe DBMS


Customers are predominantly blue chip companies and
large public authorities


Adabas and Natural currently account for about ¾ of
product revenue


Adabas and Natural being continuously enhanced:


Support for new platforms and technologies (Linux, 64 bit, XML,

SQL) protects customers’ software investment


1/3 of R&D resources are allocated for Adabas and Natural

(20 mio. euros in 2002)

Adabas and Natural remain

the main sources of revenue

10

Investor Presentation

July 2003


Tamino XML Server sold more than 500 times


Great success with XML technology in projects


Daimler Chrysler


content management system (xDWS)


Local government in UK


e
-
government portal (IESD)


Vodafone


document management


North American Logistics (Van Lines)


Mobile field service application


California State Board of Equalization


e
-
filing



EntireX serves as (XML) integration server


Technologically and economically very attractive customer
solutions will be converted into standardized solutions


Strategy Realignment

11

Investor Presentation

July 2003

Tamino in Projects:

IESD, UK



Project size


Licenses 60 K



Implementation 30 K



Application Support 40 K





Integrated Electronic Service


Delivery (IESD) is a powerful


framework for building Public


Sector applications (Call Centres,


CRM, etc.)




Already repeated at


Aylesbury Vale District Council


Welland


Tewkesbury




Hinckley & Bosworth Borough Council

United Kingdom


12

Investor Presentation

July 2003

IESD Overview

SAG

Products

IESD

Components

Contact Centre

Internet

Portal

XML
Gateway

Vertical
Applications

Business

Applications

Call Centre

Content

Management

C.R.M

Management

Reporting

Workflow

Security &

Audit

13

Investor Presentation

July 2003



“Diogenes” / xDWS


Project size







Licenses:


285 K



PS:



1.3 mio.





Problem

Reduce the effort and expense to maintain and adapt automation and test
systems in the areas of development, production and service.



Solution


Seamless development of automotive electronic control units with function
prototyping, production code generation and hardware
-
in
-
the
-
loop test
based on common XML based DTD’s (xDWS / Tamino).



Benefits


Tight integration of all supply
-
chain
-
members. Cost
-
reduction. Better
Quality. FASTER development!

Tamino in Projects:

DaimlerChrysler

14

Investor Presentation

July 2003

Tamino in Projects:

Vodafone Spain



Project size : 2.2 mio.





Licenses: 1.4 mio.




PS: 740 K




Description:


Electronic Bills Presentation Solution Phase:
A system
that enables its clients and its internal users to see their
invoices and the billing information through Internet, using
XML technology (Tamino XML Server).


Archiving System Solution Phase:
Prepare a corporate
platform to archive different types of documents coming from
other applications (SAP, Lotus Notes, MS Exchange,…) using
Ixos products.



15

Investor Presentation

July 2003

North American Logistics (Van Lines)

nAL Mobile project


Project size: $710K (License $280K, PS $430K)



Description:

Mobile field service application integrated with SAG

and non
-
SAG backend systems


Repeatable, Yes


Partnering with Extended Systems, Inc. for mobile

solution called One Bridge


Our Extended System partner brought valuable expertise
in mobile and was key to securing this phase of nAL’s
business


Integrated the One Bridge Toolset with EntireX and
Tamino

Cellular






EntireX

ViaPhone


Tamino

Bill of Lading

Asset Mgmt


Warehouse Mgmt

Product Tracking

LEGACY SYSTEMS

16

Investor Presentation

July 2003

Software AG Portfolio

Evolving from Technology to Solutions

Products

Capabilities

Solutions


Tamino


Communicator


Mediator


Adabas/Natural


Partners


Content
Management


Digital Library


Mobile


Data Exchange


Web Enablement


Data Integration


Self
-
Service Portals


Content Suite


Mobile Suite


Partner Solutions


Regional Solutions


Individual Customer
Solutions

Committed to delivering value for our customers

17

Investor Presentation

July 2003

Current solution
-
business situation


Expansion of Portfolio with Solutions

Future solution

business

Business Lines

Develop a custom
application

Core products
(Tamino, EntireX,

Adabas/Natural)

Delivery to

customer

Project services/

system integration

Product business


(Licensing and
Maintenance)

Standardized

solution platform

Modify a solution
to meet customer
requirements


Core products
(Tamino, EntireX,

Adabas/Natural)


1
st

Quarter 2003

Financial Report

19

Investor Presentation

July 2003

Revenue Q1 2002/2003

30.6

40.0


-
24%


(
-
21%)

47.4

21.9

0.3

0.3

51.5

24.6

-
8%

(+3%)


-
11%

(
-
2%)


116.4

100.2

Q1 2002

Q1 2003

-
14%

(
-
6%)

(...) in constant currencies

(in mio. euros)

Other

Project Services

(Consulting and

Implementation)

Maintenance

(24x7 world wide)

Licensing of Software
Products

Product Business

20

Investor Presentation

July 2003

Licensing Revenue by Product Group

Q1 2002/2003


Q1 2002

Q1 2003

Solutions

Tamino

EntireX

Enterprise Transaction

Other

11%

4%

60%

15%

10%

56%

18%

8%


8%

24.6

21.9

10%

(in mio. euros)

21

Investor Presentation

July 2003

Revenue by Region Q1 2002/2003

33.1

39.5

Americas

Southern / Western
Europe

Northern Europe

Asia
-
SA

Central / Eastern
Europe

Actual

Q1 2002

Actual


Q1 2003

7.8

24.4

7.2

0.1

Project Services

Maintenance

Licensing

Other

4.1

21.3

7.4

0.3

Actual

Q1 2002

Actual


Q1 2003

Actual

Q1 2002

Actual


Q1 2003

Actual

Q1 2002

Actual


Q1 2003

28.0

29.3

16.9

17.5

23.0

30.4

18.6

6.8

3.8

0.1

16.8

6.7

4.5

3.5

9.7

4.3

1.8

9.4

5.6

0.1

10.4

10.6

9.3

0.1

8.3

10.2

4.4

0.1

0.0

0.0

(in mio. euros)

22

Investor Presentation

July 2003

Operating EBITA by Region

Q1 2002/2003

Q1 2002

Q1 2003

7.5

6.9

+9%

2.9

2.9

3.4

1.2

2.2

4.0

+0%

+82%

-
65%

Americas

Southern / Western
Europe

Northern Europe

Asia
-
SA

Central / Eastern
Europe

(in mio. euros)

23

Investor Presentation

July 2003

R&D by Product Group


Q1 2002

Q1 2003

30%

35%

25%

10%

36%

20%

16%


4%

18.0

15.2

24%


0%

Solutions

Tamino

EntireX

Enterprise Transaction

Other

(in mio. euros)

24

Investor Presentation

July 2003

Result Q1 2002/2003


2003

2002




Operating EBITDA

9.0

5.6

Depreciation


-
2.2


-
2.7

Operating EBITA

6.8

2.9

Goodwill
Amortization


-
5.5


-
5.5

Financial income

+1.0

+0.6

Operating result

2.3


-
2.0

Income from investments

0.0

+9.3

Restructuring expe
nses


-
23.8

-
11.3

Profit before tax


-
21.5


-
4.0

Taxes

+11.8

+1.6

Net income


-
9.7


-
2.4

Earnings per share (in euro)


-
0.36

-
0.09


(in mio. euros)

25

Investor Presentation

July 2003

Assets

March 31,
2003

Dec
.

31,

2002

Liabilities

March 31,

2003

De
c
.

31

2002


Fixed
Assets



215.
7


221
.
1


Shareholders

equity



216
.
9


214.
5

Inventories

5.
7

4.
6

Provis
i
o
ns

124.
9

108.
7

Trade receivables
and other assets

125.
2

132.
6

Liabilities
to Banks


0.
0

0.
0


Cash and cash
equivalents



80.
9



75.
4

Other liabilities

29.
9

35.
9


Prepaid expenses


40.
5


7.
1


Deferred income


96.
3


81.
7


Total


468.
0


440.
8


Total


468.
0


440.
8




Balance Sheet

(in mio. euros)

26

Investor Presentation

July 2003

Cash flow Q1 2002/2003


Q1

2003

Q1

2002

Net cash used in / provided by operating
activities


11.5

12.1

Net cash used in / provided by investing
activities



-
2.0

5.6

Net cash used in / provided by financing
activities



-
2.9


-
27.0

Change in cash funds from exchang
e rate
movements, changes in group structure for
cash funds



-
1.1

0.1

Net change in cash and cash equivalents



5.5


-
9.2

Cash and cash equivalents as of December 31


75.4


50.3


Cash and cash equivalents as of March 31


80.9


41.1


Ope
rating c
ash flow per share



0.42


0.44



(in mio. euros)

27

Investor Presentation

July 2003


Our medium
-
term goal is a Profit Margin of 15%

(operating result = PbT excluding one
-
time effects)


Savings potential of 55 to 60 million euros annually


Increase in profitability


Alignment of the organization in the regions


Focusing R&D on the future portfolio


Reduction of overhead


Headcount reduction ca. FTE 300


Approx. 1/3 of the savings will be reinvested in the
development of new solutions


Cost cuts in 2003 cover the restructuring expenses

Rightsizing of the Company

28

Investor Presentation

July 2003


Full year product revenue same level as 2002

(at constant currency)


Maintenance ensuring about 45% of total revenue


Project services continue to show weakness


Positive operating result (about the amount of 2002)


Positive operating cash flow


Positive net income


Outlook 2003

Sof
tware AG

Stock information

(as of June 30, 2003)

30

Investor Presentation

July 2003

Shareholder Structure

as of June 30, 2003 (Number of Shares: 27,3 mio.)

Software
-
AG
-

Foundation

31.6%

Private

Investors

11.5%

Institutional

Investors

56.9%

Germany

36.2%

UK

14.9%

Rest of
Europe

35.7%

USA

13.1%

Shareholder Structure

Free Float by Region


Market Cap: 325 mio. euros

Free Float: 68.4%

Major Funds:

Classic Fund Aktiengesellschaft, Liechtenstein

Capital Group Companies, Inc., USA

Fidelity International Ltd., USA

Rest of World: 0.1%

31

Investor Presentation

July 2003

24.03.03

Entry in TecDAX

Software AG

MDAX

Nemax/

TecDAX


Share Price Development

as of June 30, 2002


June 30, 2003

SAG share price:

30.06.02: 14.30


30.06.03: 11.90



SOW4.ET
6/30/2002
0
chart
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XETRA
Linienchart
30
06
2002
30
06
2003
1
keine
keine
1
-- keine --
TecDAX 30
MDax
2
1
Volumen rot/grün
-- keine --
1
keine
32

Investor Presentation

July 2003

Top Ten TecDAX


as of June 30, 2003


Stock Turnover

(in Euro)


Index Weight

(in %)

EPCOS AG


2,491,266,923

7.81

T
-
ONLINE INTERN.


2,200,613,731

10.93

QIAGEN


1,022,178,127


9.96

SINGULUS


951,385,894

7.92

MOBILCOM AG


690,050,909

2.00

AIXTRON AG


577,685,595

3.14

BB BIOTECH


3
70,149,580

9.69

UTD.INTERNET AG



239,853,722

5.15

Software AG


235,174,363

3.15

NORDEX

175,905,977


0.48



(in euros)

33

Investor Presentation

July 2003

Key Figures per Share

(in euros)


2002

2001

2000

1999






Earnings


1.23

1.44

2.55

1.47

Operating cash flow


1.49

3.05


-
0.71

2.70

Dividend

0.00

0.43

0.38

0.28






Price High


44.10

87.00

167.00

63.55

Price Low


8.41

35.90


57.00

22.50

Price / earnings ratio

at fiscal year
-
end

7

30

32

41