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Software AGHeading for Growth

This presentation contains forward-looking statements based on beliefs of Software AG management. Such statements reflect current views of Software AG with respect to future events and results and are subject to risks and uncertainties. Actual results may vary materially from those projected here, due to factors including changes in general economic and business conditions, changesin currency exchange, the introduction of competing products, lack of market acceptance of new products, services or technologies and changes in business strategy. Software AG does not intend or assume any obligation to update these forward-looking statements.

June 01, 2006 – Credit Suisse European Technology Conference, Barcelona, Spain

Karl-Heinz Streibich, CEO

June 2006 / 2 Software AG

High performance Products and Services for Enterprise level IT infrastructureDatabase management systems (DBMS)Application Development ToolsTools for Legacy ModernizationEnterprise level Integration Solutions (BPM, SOA)

Revenue: 438 mn. € (2005; +6% yoy)EBIT Margin: 22% (2005; +160 bp yoy)

Employees: > 2,700 worldwide

Customers: > 3,000 worldwide across all industriesDistribution: > 70 countries (biggest revenue contribution from the US-market)Headquarter: Darmstadt, GermanyListing: Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW)

ADR Program (Sponsored Level 1; U.S. Security Code: 83403H 10 1 (Cusip))

MarketCap: ~ 1.1 bn. EUR (28 mn. shares, 70% Free Float)News: Launch of new product line „crossvision“ February 2006

Profile of Software AGThe No. 1 European IT System Software Provider


1969Company founded

1969

History of Software AG:37 Years Heritage of Technology Leadership

1971 FirstMainframeDatabasedeveloped byPeter Schnell

1971

1979FirstMainframe4GL

1979

1985First Platform IndependentLanguage

1985

1992First ServiceBroker forDistributedApplications

1992

1999IPO –Frankfurt Stock Exchange

IntroducedFirst XMLServer

1999 2000

2001FirstDatabase toutilize IBM’s 64- bit Virtual StorageArchitecture

“Global Market Leader for XML Servers” (IDC)

2001 2002

2003 SOAIntegration Packages:

Legacy Integrator

Service Integrator

Information Integrator

2003

2004Industry Integration Solutions:

2004

2005 Acquisition:

Strategic partnership with

BusinessProcess Manager

Application Composer

2005 …

2006Launch of

2006


Asset of Software AG:3,000 Customers Worldwide in All Industries

Media & Telecommunications

Retail & Manufacturing

Public Institutions

Travel & TransportFinance


Main Geographic Markets

Others32 %

USA/Canada26 %

Germany15 %

Spain18 %

Revenue by Main Markets

Growth Markets9 %

Total Revenue: € 438.0 million

Latin AmericaMexicoVenezuela

Chile and others

Eastern EuropeRussiaPoland

Turkey and others

Asia / Middle EastHong KongSouth East Asia

Israel and others

Growth Markets:


Project Services • Implementation of own products / system integration• Cost plus or fixed price projects• Own staff (1,100) + freelance

Licensing • Direct Sales Force (380 staff)• One-time payment for perpetual license • Additional payment for capacity upgrades and Add-on products • Price: Capacity/MIPS based (database)

User/Seats based (tools)

Maintenance• Annual contracts with automatic renewal and 3-5 year contracts• Operational support and functional upgrades of software

products• Price: around 15% of license list price

in % of total revenue 2005 (438 mn. euros)

30%

42%

28%

Business Model / Revenue Structure


Mature Market:Enterprise Transaction Systems (ETS)

Stable consolidated market• Growing with use of capacity• Legacy modernization

Competition • Limited competition • Loyal customers

Position of Software AG• Independent specialist for high

volume and high performance (mainframe) systems

Goal• Use leading position for revenue

growth with legacy modernization.Revenue Growth 2005: 5%

New Growth Market:Integration with Service-Oriented Architecture (SOA)

Dynamic and fragmented market• Growing with new offerings• New technology (BPM, SOA, XML)

Competition• Platform vendors (one size fits all)• Suite vendors (freedom of choice)• Component vendors (incomplete)

Position of Software AG• Independent suite vendor • Partner of platform vendors (e.g. SAP)

Goal • Reach leading position through fast

revenue growth with new productsRevenue Growth 2005: 16%

Strategy of Software AG:Focus on two Markets


Top Line Dynamics:Growth in Both Business Lines

Revenue by Business Line (€ millions)

crossvision(SOA integration)

+16%

91.578.9

+5%

Enterprise Transaction Systems (ETS)

325.2308.5+20-30%

+5-7%

2004 2005 2006e 2004 2005 2006e


(in mn. €)

* EBIT before income from investment** Net cash operating ./. CapEx

License Revenue EBIT* Free Cash Flow**

+9%

+14%

+42%+15%

+273%

+106%

2003 2004 2005 2003 2004 2005 2003 2004 20050

20

40

60

80

100

120

140

Financial Strength:Growth in Key Financials


Outlook 2006Growth in Revenue and Profit

Revenue

- License

- Maintenance

- Services

438.0

131.6

181.4

122.7

Operating EBIT Margin

2005

22.0%

Revenue BL ETSRevenue BL crossvision

325.291.5

FY 2006 Forecast*

+6%

+14%

Stable

+9%

Growth 2005*

+160 bp

+5%+16%

* At constant currency

Q1 2006a*

Growth: 10%

Growth: 18 to 20%

Stable

Growth: 12 to 15%

21 to 23%

Growth: 5 to 7%Growth: 20 to 30%

+10%

+19%

+ 4%

+ 9%

+10%

+15%

+100 bp


Growth Drivers

Enter markets with high growth potential:Latin America, Eastern Europe, Middle East and Asia (revenue growth 2005: 71%)

Portfolio Enhancements

Geographic Expansion

Increased sales force and service capacityIncreased sales and service efficiencyNew sales partners / system integrators

Organizational Readiness

A

B

C

Launch of Adabas 2006 and Natural 2006:Modernization and extension of mainframe systemsActive account management

New crossvision product suite:Integration with service oriented architecture


Sales Efficiency (increase sales per sales representative)

Professional Services Efficiency (increase service margin)

Average Deal Size (component sale vs. suite sale; follow-up projects vs. seeding projects)

Partner Sales Channel (System Integrators and Reselling Partners)

Drivers of Mid-term Profitability Improvements

2003: 63.9%2004: 66.6%2005: 67.2%

Gross profit margin:

Economies of Scale (G+A, R+D, Marketing)

Process Excellence Program (internal organization)

2004: 20.4%2005: 22.0%Mid-term: 25%

EBITA margin (op.):


The Next Step Towards Market Leadership: 10 % Growth

2003

2004

2005

Financial Turnaround

Back to Growth ETS & Integration Focus

6% Revenue Growth22% EBIT Margin

10% Revenue Growth

Our goal: Global market leadership in specific segments

2006

Achieved

Achieved

Achieved


1st Wave

Data Centers

Our Strategy: Service Oriented Architecture (SOA)

4th Wave

Internet

SOA is the 5th big paradigm change in the IT industry

SOA

5th Wave2nd Wave

PCs / Servers

3rd Wave

Business Applications

1970s 1980s 2000 - 20051990s 2006 - 2010


Launching crossvision – February 28, 2006

New brand for SOA suite, products andbusiness line New comprehensive offeringNew flexible suite pricing General availability end of May 2006

Software AG’s Offering for SOA


crossvision Suite: the New Comprehensive Offering

CentraSitemanage and govern the lifecycle of your enterprise wide service landscapeis the leading SOA registry/repository in the market

crossvision application composerrapidly compose new business applications out of existing systems is a leading edge approach to composite applications

Two new products, four upgrades:

CentraSite

crossvision application composer

crossvisionbusiness process manager

crossvisioninformation integrator

crossvisionservice orchestrator

crossvisionlegacy integrator

New:

Upgrades:


Tier 1> €1 bn. revenue

Tier 2< €1 bn.revenue

Tier 3< €10 mn.revenue

Current Position of Software AG: ETS and Integration / SOA Market


Market Size 2004:547.2 mn. USD

Market Share Software AG: 3%

Worldwide SOA-Driven Software Revenue by Software Category, 2004-2009 (CAGR 75%)


Growth of Business Line crossvision will accelerate in H2 2006Full availability of productsFully trained sales force Growing pipeline for crossvisionSuite sales will increase average deal size

Partner FocusSuccess with technology partners

- Fujitsu, IDS Scheer, i-Log- Eclipse community

Start CentraSite community / OEMBuild sales partner channel (dedicated team at Headquarter) with focus onsystem integrators and ISVs

Outlook 2006 (I)


Improved Market Awareness & ImageNew branding and imageNew positioning with industry analysts

Acquisition PolicySustain organic growthEPS accretive

Outlook 2006 (II)

Geographic ExpansionRamp up in Latin America continues (Potential for 20% of group revenue within 5 years)Progress in Eastern Europe and Middle EastEnter Japan / Change agreement with distributor for larger revenue generation


Please contact:Investor Relations

Uhlandstraße 12, 64297 Darmstadt, Germanyphone: +49 (0) 61 51 / 92- 1899

fax: +49 (0) 61 51 / 92- 1933e-mail: [email protected]

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