Software AG's Results for 1999 -- Best in Company's History; Technological Leadership in Electronic Business.

Business/Technology Editors

DARMSTADT, Germany--(BUSINESS WIRE)--Feb. 18, 2000

--Strong growth in revenues and profit in 1999

--Licensing revenues up 18 percent

--Profit before tax up 49 percent from previous year

--Net profit climbs to DM 75 million

--Five acquisitions completed

--Strategic focus on electronic business

--Direct sales in US started

--New distribution and technology partners

Software AG, Darmstadt, Germany, announced today that revenues for the fiscal year ending December 31, 1999 grew to 715.6 million DM, up 14 percent from the previous year. Profit before tax rose 49 percent to DM 129.7 million over the same period. &uot;1999 was an extremely successful year for Software AG -- concerning revenue and profit as well as the IPO and our strategic focus on electronic business solutions,&uot; stated Dr. Erwin Koenigs, Chairman and CEO of Europe's largest systems software provider.

Once again, all three business segments have contributed to the growth. License revenue showed the strongest growth with DM 222.4 million in revenue, up 18 percent. This was on the basis of the robust growth in revenue (+20 percent) of the classic product lines, Adabas (database system) and Natural (development tool). The EntireX middleware product again has generated above average growth rates of 49%.

Professional Services showed an increase in revenue of 15 percent to DM 250.5 million. The rapid expansion of this labor-intensive division was boosted by acquisitions of several service providers in Europe and the US. During the 1999 fiscal year a total of five companies were acquired, with close to 400 employees. Maintenance revenue achieved a growth rate of 12 percent, reaching DM 239.5 million.

Best Results in Company's History

Profit before tax in 1999 increased by 49 percent to DM 129.7 million - the best result in the company's history. Net profit grew by 44 percent to DM 75.0 million, the lower growth rate resulting from a higher tax rate payable as the tax loss carry forward available in 1998 was largely consumed. Earnings per share increased by 44 percent to DM 2.88. The earnings per share as calculated by the DVFA/SG formula totaled DM 2.62 (+44 %). In 1999 cash and equivalents increased DM 159.2 million, totaling DM 385.4 million. The equity ratio for the Group was 38 percent (29 % on December 31, 1998). At a press conference in Frankfurt, Koenigs stated: &uot;We have clearly exceeded our targets.&uot;

Total spending for research and development was approximately DM 102 million, i.e. 22 percent of product revenue (licensing and maintenance).

The number of Software AG's employees worldwide rose to 2,639 (+21%) as of December 31, 1999.

Fourth Quarter Revenue and Profit up from Previous Year

Fourth quarter revenue also grew by 15 percent to DM 211.4 million from the previous year. Profit before tax increased 49 percent to DM 43.5 million.

Software AG was left largely unaffected by the general slowdown in the IT sector during the second half of 1999. Due to the Y2K problem, the typically higher than average year- end growth rates were not expected for 1999, thus fourth quarter performance slightly exceeded expectations.

Expansion in All Regions

The positive financial performance of the 1999 fiscal year was bolstered by all regions, with exceptionally good results coming from the German and Spanish markets. The Asian-Pacific region was able to recover from its difficulties in prior years. Only the North American distributor, SAGA Systems Inc., Reston, Virginia, did not meet expectations. Software AG has since restructured its US distribution rights and is rapidly expanding its direct presence in the American market. Following the acquisition of SPL's Enterprise Support Division in the second half of 1999, the new US subsidiary, Software AG, Inc., was established in Walnut Creek, California, near Silicon Valley with further presence in six high tech regions across the US and a total of 300 employees. Software AG will take major efforts to ramp up direct sales and to sign up distribution partners.

Strategic Focus on Electronic Business

Software AG's strategic focus on electronic business took a major step forward with the introduction of the Tamino XML database in November 1999. Tamino features a completely innovative technology for electronic business that, for the first time ever, allows data to be processed directly in the new Internet format, XML. According to market analysts, this technology will radically speed up and change business processes over the internet. With its other new products, Bolero (development tool for Internet applications) and EntireX (middleware software for linking electronic business applications across the enterprise), Software AG now offers a complete suite of systems software for electronic business solutions.

New Distribution Partners Tap High-Volume Market Segments

During the current fiscal year, Software AG will release the open system architecture &uot;XENON&uot; (Xml ENabled Network). It will serve as a platform for partner companies that specialize in the development of XML-based electronic business solutions. The platform strategy is already showing first successes. Since the beginning of the year, five partnerships have been established with companies that are interested in offering to their customers solutions based on Software AG technology. For Software AG, this means access to new market segments in addition to its existing customer base. For example, one of its new partners, California-based SCO, has more than 15,000 distribution partners worldwide who, starting in fall 2000, will be offered SCO and Software AG products in a joint package. In order to fully exploit these market opportunities, Software AG is establishing new sales organizations in the US and Europe dedicated to partner business.

WAP and XML Attract New Customers

In cooperation with Nokia and Mannesmann, Software AG has developed solutions for the new WAP (Wireless Application Protocol) technology, a flavor of the XML standard. With these solutions a mobile phone can be used as a multimedia terminal to call up and access information from WAP service providers' databases. The first customer applications will be presented at CeBIT 2000 next week.

Financial service providers, the health care industry and public institutions are developing Internet applications based on the new XML technology. This innovative type of services offered by modern government agencies is known as &uot;e-Government&uot;. Soon, residents of Hamburg, Munich, and in the German state of Baden-Wurttemberg, will be able to communicate with their public authorities from their homes via the Internet. Software AG's XML systems, Tamino and Bolero, are the heart of these fully electronic processes.

Double-Digit Revenue and Profit Growth Rates in 2000

Dr. Koenigs, Chairman and CEO, comments on the company's outlook: &uot;In the first few weeks of the current fiscal year, Software AG has set the course for further growth. Penetrating new market segments together with new distribution and technology partners will give us additional momentum. We expect to see significant revenue growth from our electronic business product line, starting in the second half of 2000. For the full year 2000 we expect revenue growth to be at least on level with 1999. Furthermore we again expect above average profit increases.&uot;

Please visit us on the Internet: www.softwareag.com

Software AG, based in Darmstadt, Germany, with currently more than 2,600 employees and sales amounting to DM 626 million (euro 320 million) in 1998, is one of the largest system software companies worldwide. Software AG is the premier provider of database management technology. Both products and services, used in more than 90 countries, are focused on mission-critical electronic business applications spanning heterogeneous platforms, from mainframe, OpenVMS, AS/400, Unix and Windows NT to the Web. About one third of the company's revenue is achieved through professional services. Software AG has been listed on the Frankfurt Stock Exchange (Main Market) since April 1999 (Security identification number 724260 / SOWG.F).

Key Figures

in DM million, unless stated
                                    12-31-99    12-31-98       Change

Revenues                              715,6       626,4         +14%
of which: Licensing                   222,4       188,4         +18%
     Maintenance                      239,5       214,8         +12%
     Professional Services            250,5       217,0         +15%
     Other                              3,2         6,2

Earnings before interest and
taxes (EBIT)                          116,0        79,4         +46%
     as % of revenues                    16          13

Profit before tax                     129,7        87,3         +49%
     as % of revenues                    18          14

Net profit                             75,0        52,2         +44%
     as % of revenues                    10           8

Earnings per share (DM) (A)            2,88        2,00         +44%
EPS according to DVFA/SG               2,62        1,82         +44%

Total assets                          705,7       508,3         +39%
Cash and equivalents                  385,4       226,2         +70%
Shareholders' equity                  271,3       148,6         +83%
     as % of total assets                38          29

Employees at year end                  2639        2186         +21%

     (A) The share has been traded on the Frankfurt stock exchange
since April 26, 1999 (SIC: 724260)