Following on from its prelims and profit warning earlier this month (see Software AG ends the year with a bad fall), Software AG has formally reported on its disappointing Q4 and full year 2011 (to December 31) but did not add much in the way of colour.
Full year revenue came in at 1.1bn Euros, 1% down on the previous year, with net income up 1% to 177m Euros. 7% growth in the Business Process Excellence (BPE) business line took revenue for this segment to 528m Euros. This positive result did not compensate for the 8% decline in Enterprise Transaction Systems (ETS) that took revenue down to 381m Euros, and the 5% decline in IDS Scheer Consulting revenues to 189m Euros. The result could have been worse though, given the awful Q4 period in which revenue fell 12% to 294m Euro and net income plummeted 20%.
As we noted in our coverage of the prelims, the ETS business line was one of the reasons for the poor overall performance, with Q4 being particularly bad because the expected budget flush on databases did not happen. But ETS had only been treading water during the previous nine months so there is a deeper issue around growth. The decline will continue through 2012: ETS revenue is expected to drop 7% - 12%. BPE is expected to grow 5% -15% in 2012 however, and is clearly the future of the business. But a fall in the US BPE business in Q4, that 40% license growth in Europe could not offset, is a worrying sign.
Despite the positive outlook for the BPE line, the declining ETS business is a drag on Software AG’s performance. We can’t help feeling the company could do more with it – the economic environment plays to aspects of the ETS portfolio such as application modernisation.