Reading between the lines of SDL’s interim update, the cautious but confident vibe of the first six months of the year (see here) has been toned down. It looks like it has been a see-saw period for the information management provider.
For the three months to September 30, management says performance was in line with expectations at the group level but that suggests Western Europe was still lagging as it was at the half-year stage. Language services has seen growth but technology revenues “continue to be surpressed”. The good news that Alterian has integrated well into the business and is performing ahead of expectations on several measures including financial results, was countered by litigation arising from SDL’s acquisition of Trados - way back in 2005. A former Trados shareholder claims Trados directors failed in their fiduciary duty at the time. Although SDL says the case is without merit, it is anticipating a court hearing in 2013 and says the potential exposure is $1m to $3m.
Language services have traditionally been the driver for the business, regularly delivering organic growth and today’s statement indicates this is still the case. The technology side of the business, which includes content management and the Alterian marketing and analytics portfolio, is less consistent. Management is focused on pulling the technology business into shape, it just needs to take ensure it does not focus too heavily on this side, to the detriment of the language business.