When Software AG floats on the Frankfurt and probably Nasdaq exchanges next year, investors will be able to choose which Software AG they like best: Software AG of Germany, a company specializing in internet- based business; or Software AG Systems Inc (SAGA), listed on the New York Stock Exchange, headquartered in Reston, Virginia, and specializing in middleware. But while the two companies have different owners, different strategies and different marketing slogans, they will sell an almost identical product range. SAGA was created when cash-strapped Software AG of Germany sold the majority of the US business to Thayer Capital for $150m in 1996. In return for 24% of net revenues, SAGA was given indefinite, exclusive rights to sell all Software AG products present and future in North America. An equivalent agreement gives Software AG the same rights over forthcoming SAGA products. Software AG still holds 9% of the company, and Software AG CEO, Dr Erwin K÷nigs remains on the board. Thayer quickly restructured SAGA, appointed Dan Gillis as CEO, and floated the company at $10 a share in May 1997. Since then, a strong financial performance, mainly in Year 2000-related services, has helped to boost the share price to nearly $30. In its latest quarter ended in April, SAGA reported revenue up 61% at $55.9m, and net profit up 293% at $5.4m. Although two-thirds of this comes from services, Gillis says products remain the long-term focus. SAGA will have a very different strategy to Software AG. Our interest is middleware. We are very excited about that market. It’s emerging very quickly, says Gillis. The base product for this focus will be Software AG’s EntireX, but SAGA will develop its own add-on products, and make acquisitions in the middleware area. The inter-dependence of both companies is so great that one question that will surely keep arising is the prospect of a merger. At present, both chief executives say it has never been discussed. But as they seek global branding, it may yet happen although it would be difficult to guess on whose terms.
