July 22 (Bloomberg) -- Software AG Chief Executive Officer Karl-Heinz Streibich said he plans to expand Germany’s second- largest software maker into Eastern Europe and Asia with the help of purchases as consolidation in the industry gains pace.
The Darmstadt, Germany-based company will resume takeovers once it has absorbed IDS Scheer AG, which Software AG agreed to buy for 477 million euros ($676.4 million) this month, Streibich said in an interview today. Future acquisitions may be similar in size to IDS Scheer or WebMethods Inc., for which Software AG paid $546 million in June 2007, Streibich said.
“Size plays an important role in the software business to reach profitability and visibility in the market,” he said. “Once we have paid back our loans for IDS Scheer in two to three years, we are free again for new loans and more acquisitions.”
Streibich has made at least nine acquisitions since taking over in October 2003, and IDS Scheer was the largest purchase in Software AG’s 40-year history. Software AG operates in more than 70 countries, and still lacks the size needed to compete with rivals in all but 15 of these markets, the CEO said.
“Consolidation always takes place, and it is important that smaller companies don’t remain small but grow,” Streibich said. Combining with IDS Scheer will lift Software AG’s annual sales to more than 1 billion euros, the CEO said.
Software AG today reported net income of 28.9 million euros for the second quarter. Sales rose 5 percent to 176.4 million euros. Streibich said Software AG will meet its revenue growth target of between 4 percent and 8 percent in 2009 and a margin on its earnings before interest and taxes of between 24.5 percent and 25.5 percent, excluding the integration of IDS.
Revenue growth in the second half will be similar to the preceding six months, when sales rose 4 percent to 341.7 million euros, Streibich predicted.
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