Global economy keeps up dynamic growth
For 2005, the global economy is expected to grow by a good 4 percent. Compared to growth of 5 percent in 2004 the global economy will loose some of its momentum, but still experience above average growth. As before, positive incentives will be provided by the United States and the Asian threshold countries. The IMF is expecting 3.5 percent growth in the USA, and 7.5 percent in China. Due to falling export demand, the eurozone will lag behind the global economic trend, but still continue with a slight upswing. According to forecasts issued by the European Central Bank (ECB), economic growth of 1.9 percent is possible here.

In Germany, this will depend on whether the domestic demand is going to bolster the export-based bull market. The export impetus might slow down, due to the decreasing intensity of international growth. Against this background, the OECD predicts a 1.4 percent increase for the German economy.

Positive prognosis for the IT market
According to calculations by the market research institute Forrester Research, the global IT market will increase by 6 percent annually until 2008. IDC market researchers also forecast such growth for 2005. Above-average growth is expected for the regions of central and Eastern Europe, and the up-and-coming Asian states. According to a study by the market research institute Global Insight, the Eastern European market will expand by 11.9 percent annually, and the Chinese market by 9.3 percent until 2007

The USA continues to offer good prospects, and for Western Europe, IDC forecasts a slight increase. According to EITO's calculations, the Western European IT market will boom in 2005 by 4.2 percent. For Germany, EITO is predicting 4.1 percent growth. The federal association Bitkom expects a 5.5 percent increase for software and IT services. Therefore, the IT sector would develop better in 2005 than the overall economy.

Software in particular demand
Integration remains the key issue in the IT world. The progressive use of networking between companies and related business processes will drive the demand for software and IT services. The linkage of individual applications, together with efficient access to existing information, still tops the list of priorities. There is a growing demand for flexible software, tailored to reflect each customer's unique situations, which is capable of adapting to individual business and user requirements.

Profitable growth to be expected
For 2005, Software AG is aiming for sales growth of 4 to 6 percent. In the medium term, two-digit sales growth is possible. This is assuming that increasing revenues from XML integration solutions will add to the stable revenue i n the mainframe sector. Our focus still lies on profitable growth. We are planning for consistently high margins and, for 2005, expect an operating free cash flow of roughly 2 Euros per share.

The focus of the ETS business segment still lies on consolidating our broad customer base. At the same time, we intend to benefit from the opportunities offered by integrating and modernizing the lucrative Cobol market. In XML Business Integration, we see great potential for industry solutions. We will further develop our go-to-market model, primarily in the direction of business value selling, and addressing decision makers.

Focus on emerging markets
We expect additional incentives from direct entry into new sales territories, especially in the newly industrialized countries. In realizing geographic growth potential, we have adopted a dual approach: Presence through owned subsidiaries as well as partners. For this, we see potential in China, Eastern Europe, Russia, and most of all in South America.

Additional strength through partners
We will supplement our own growth through alliances and acquisitions. However, our goal is not primarily the purchase of additional revenue. We rather intend to generate technological components which will enhance and further develop our product portfolio. This implies that we will restrict ourselves to purchases of a reasonable size, which also helps to ensure seamless integration.