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Analyst Meeting 3 rd Quarter 2003

Analyst Meeting 3 rd Quarter 2003. October 23, 2003. Financial Data 3 rd Quarter 2003 YTD September 2003 . Arnd Zinnhardt, CFO. Revenue. (in mio. euros). -13%. 99.5. 114.8. 354.6. 304.4. -14%. 1.1. 0.4. 1.9. 121.3. 0.4. -26%. 39.8. -30%. 27.9. 90.1. 81.5. 26.2. 68.7.

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Analyst Meeting 3 rd Quarter 2003

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  1. Analyst Meeting 3rd Quarter 2003 October 23, 2003

  2. Financial Data3rd Quarter 2003YTD September 2003 Arnd Zinnhardt, CFO

  3. Revenue (in mio. euros) -13% 99.5 114.8 354.6 304.4 -14% 1.1 0.4 1.9 121.3 0.4 -26% 39.8 -30% 27.9 90.1 81.5 26.2 68.7 -16% -13% 22.9 48.4 48.3 150.7 -5% ±0% 143.7 2003 2002 2003 2002 Q3 YTD Maintenance Licensing Project Services Other Analyst Meeting – October 23, 2003

  4. Revenue (net of currency effects) (in mio. euros) -8% -7% 114.8 [105.2] 354.6 [329.2] 1.1 2.0 0.4 Maintenance 0.4 121.3 -23% 39.8 Licensing 93.2 -28% 28.7 Project Services 81,5 -8% 75,3 24.3 26.2 -7% Other 51.8 158,7 48.4 150,7 +5% +7% 2003 2002 2003 2002 Q3 YTD Analyst Meeting – October 23, 2003

  5. RevenueSequential Growth Q2 / Q3 2003 -5% 104.7 99.5 Maintenance 1.1 0.4 Licensing 31.6 -12% 27.9 Project Services 24.0 -5% Other 22.9 48.3 +1% 48.0 Q3 2003 Q2 2003 Analyst Meeting – October 23, 2003

  6. Licensing Revenue by Product Group (in mio. euros) YTD 2003 YTD 2002 5% 7% 7% 8% 8% 11% 13% 15% 63% 63% Solutions Other Enterprise Transaction EntireX Tamino Analyst Meeting – October 23, 2003

  7. Revenue by Region (in mio. euros) Americas Southern / Western Europe Northern EuropeAsia-SA Central / Eastern Europe 41.0 34.9 27.6 25.7 17.1 17.3 29.3 21.8 0.2 4.7 6.7 0.3 4.3 0.0 0.0 12.5 0.1 8.8 0.1 13.9 0.8 17.3 0.0 0.0 6.8 15.1 2.5 1.9 21.6 5.0 6.2 4.4 5.2 21.5 3.2 3.4 9.4 10.4 9.2 10.5 7.1 7.1 2002 2003 2002 2003 2002 2003 2002 2003 Q 3 Q 3 Q 3 Q 3 Licensing Currency Effects Maintenance Project Services Other Analyst Meeting – October 23, 2003

  8. Revenue by Region (in mio. euros) Americas Southern / Western Europe Northern EuropeAsia-SA Central / Eastern Europe 126.6 103.2 88.0 83.9 54.7 50.7 85.9 67.8 0.6 20.1 22.7 0.9 12.7 0.1 0.1 34.3 0.8 25.6 0.1 55.3 35.7 4.0 0.0 48.9 24.0 0.3 8.9 69.0 5.3 18.3 17.0 17.1 12.7 64.0 13.4 11.5 28.8 31.8 28.0 31.0 21.1 20.8 2002 2003 2002 2003 2002 2003 2002 2003 YTD YTD YTD YTD Licensing Currency Effects Project Services Maintenance Other Analyst Meeting – October 23, 2003

  9. 2003 2003 2003 2002 2002 2002 Q3 Q3 Q3 Operating EBITA by Region (in mio. euros) Americas Southern / Western Europe Northern EuropeAsia-SA Central / Eastern Europe -21% -41% +39% -100% 1.2 11.7 0.2 9.3 5.0 4.2 3.2 3.6 1.9 0.0 2003 2002 Q3 Currency effects Analyst Meeting – October 23, 2003

  10. 2003 2003 2003 2002 2002 2002 YTD YTD YTD Operating EBITA by Region (in mio. euros) Americas Southern / Western Europe Northern EuropeAsia-SA Central / Eastern Europe -1% -17% +23% -72% 5.3 28.5 28.3 1.0 13.5 10.5 9.2 11.0 8.7 2.6 2003 2002 YTD Currency effects Analyst Meeting – October 23, 2003

  11. Research & Development Expensesby Product Group (in mio. euros) 49.5 43.9 Solutions 0% Tamino 5% 32% EntireX 24% EnterpriseTransaction 23% 19% 52% 45% 2003 2002 YTD Analyst Meeting – October 23, 2003

  12. Result (in mio. euros) Analyst Meeting – October 23, 2003

  13. Balance Sheet (in mio. euros) Analyst Meeting – October 23, 2003

  14. Cash flow (in mio. euros) Analyst Meeting – October 23, 2003

  15. Outlook for 2003 • Demand for IT is stabilizing gradually • Product revenues at same level as in 2002 (adjusted for differences in currency) • Maintenance business secures about 45% of revenues • Total revenues 2003: 410-415 mio. € • Operating results 10-15% higher than previous year’s 32 mio. € • Positive operating cash flow despite cash out for severance payments due to restructuring • Positive after-tax results Analyst Meeting – October 23, 2003

  16. Outlook for 2004 • More optimistic IT business climate • No further decline in revenues (adjusted for differences in currency) • Price pressure in project services will continue • Maintenance business will remain largest revenue segment • Reduced cost level after restructuring will improve earnings by at least 10 mio. € • Change to IFRS (IAS) may no longer require amortization of goodwill and will subsequently bolster income by 22 mio. € Analyst Meeting – October 23, 2003

  17. Strategy Karl-Heinz Streibich, CEO

  18. Focus of Future Strategy • Continue to increase financial strength • Help customers to protect their investment • Increase Software AG‘s market and customer orientation • Broaden the product portfolio • New technologies (e.g. XBRL) • Platform for Mobile Business • Platform for Content Management Analyst Meeting – October 23, 2003

  19. Platform for Mobile Business • Tamino Mobile Suite= Mobile Integration Platform (Available for partners also) • Application Frameworks = Components, to be customized for individual projects • Target market segments • Field Service Automation • Sales Force Automation • Management Information Systems • Initial results • 4 customer projects • 6 prototypes Analyst Meeting – October 23, 2003

  20. Platform for Content Management • Various areas of application • Web Content Management (e.g., portals) • Document Management (e.g., archiving) • Media Asset Management (e.g., video on demand) • Knowledge Management (e.g., self-learning systems) • Software AG has experience with projects in all areas of application • Consolidate solution expertise in the second half of 2003 • Tamino Content Suite= Solution platform for applications to process and exchange content Analyst Meeting – October 23, 2003

  21. Creating value added in a “content value chain” Content Value Chain Create Administrate Workflow Distribute Publish Exploit business and processes connect Content Content Management Document Management Portal Knowledge Management Value Added Source: Arthur D. Little Analyst Meeting – October 23, 2003

  22. XML creates added value 1) Based on average expenses, expense calculation in working months Source: Arthur D. Little Analyst Meeting – October 23, 2003

  23. Summary • Software AG has substantially increased income and margins in the first 9 months of 2003 • This positive development will accelerate in Q4 2003 and in particular in 2004 • Software AG has technology expertise in • the stable enterprise transaction market segment • the high-potential XML sector • In the mid-term, the enhanced product portfolio will lead to renewed growth Analyst Meeting – October 23, 2003

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