In the language field, the popular media is covering two items: the incredible language needs of all of the U.S. endeavors overseas (Bosnia, North Korea, Afghanistan, Iraq, Qatar, Saudi Arabia, Yemen) and wherever Al Qeada is hiding, and the 10 new countries to be admitted into the EC. The language needs of any Middle East conflict are unimaginable. The U.S. Department of Defense is spending more on languages than Microsoft - US $350 million per annum plus. A lot of that is at the Defense Language Institute in Monterey, California. This is not being done without some difficulty. A friend of mine is learning Farsi for use in the military. This is somewhat difficult when you think you have learned a tough guy phrase that you can use in intimidating the enemy: Jigar-toe bikhoram, which literally means, "I will eat your liver." However, it is also a colloquial expression for a very romantic way of saying, "I love you."

And insofar as EC accession is concerned, the new countries (Slovenia, Estonia, Czech Republic, Hungary, Lithuanian, Latvia, Poland, Slovakia, Malta, and Cyprus) have tremendous languages needs. Just think, every one of these countries has to translate every page of EC documentation (85,000 pages in all) into their own language. Since it opened in 1997, the Latvian Translation and Terminology Center has translated 53,166 pages and they have to get the rest done by 11 P.M. April 30, 2004. After this date, the EC will have 10 more languages to translate and cross translate. The translation tools business will do particularly well, as all these countries are doing well. Slovenia's stock market return for the last 12 months has been 95.3%, compared to the absolute disaster in the US. The translation business in these countries will grow. The leading firm in Latvia, a country of 2.5 million people, reported translation sales of US $8 million in 2002. It is unlikely that Western firms will try to handle these languages and instead will hand them over to single language vendors in these countries who will prosper and in turn become attractive investment opportunities.

And in the mundane rest of the world, we can also expect more translation to be done. For example, the EC legislation requiring the translation of product labels and instructions in order to gain the use of the coveted CE marking has been in transition. However, in December 2003, all in vitro diagnostic tools will have to have the CE marking, which means more translation will be required in this area.

The Public Companies

Rory Cowan, the CEO of Lionbridge (LIOX) is pleased for he feels Wall Street is giving the bigger language firms their due. Cowan pays attention to financial ratios like EBITDA (earnings) to share price. He notes that Lionbridge and Bowne are enjoying better ratios, in the 10-12 times EBITDA range, than IT Services firms like Cap Gemini and in the same range as consulting firms like Gartner.

Lionbridge's stock is now around US $2.50 share. It expects 2002 sales to come in at the upper range of US $115-120 million and a stated EBITDA of US $5 to $7 million. For 2003, Lionbridge hopes to reach US $130 million in sales with an EBITDA in the US $12 million range. The financial message boards, which usually are vicious towards Lionbridge, now state, "I am very pleased albeit somewhat surprised to see LIOX doing as well as they seem to be doing now. Hope management allows clarity to become the norm quarter on quarter." Lionbridge's market capitalization stands at around US $72 million as we go to press.

The big news at Bowne Global Solutions is that it replaced its chief executive with Jim Fagan, a Bowne insider. He replaced Carl Gleaser who had overseen much of Bowne's acquisitions in the last three years. Although Bowne's (BNE) CEO, Robert Johnson, said Gleaser left to pursue "other ventures," a number of financial message boards gave another spin. To quote the message board: "Fagan was most likely chosen to run BGS as a stop gap measure—because the guy who used to run it blabbed all over Belgium that as soon as BGS hits US $225 million in sales, the unit would be put up for sale. In doing so, everyone in the industry knows what the trigger is, and so, they are all sitting and waiting it out for the asking price to drop." As for Fagan himself, another message noted: "Jim is an honorable man in an unhonorable business. He is a great manager who is open to new and fresh ideas..."

Bowne's stock is trading around US $10 a share, which is very good in this economic climate. The last three months ending September 30 2002 show that globalization sales were US $26 million (US $25.3 million for the same period in 2001) and EBITDA was US $3.8 million (compared to US $1.1 million in 2001). Bowne was selected as a preferred vendor for Microsoft and should benefit from that relationship when Microsoft begins launching new products.

(NOTE: Requests to Bowne Global Solutions for comment on these statements were not responded to by the time this article went to press.)

SDL International (SDL PLC LS: SDL) has seen its share price cut in half to 30 pence in the last 4 months; but this has been the trend with most major London indices. Market capitalization now stands at around £12 million.

Across the English Channel, Systran (SICOOVAM Nouveau Marché France FRF) trades at around €1.00 and currently has a market capitalization of €9.8 million. Revenues and financials for 2002 are due on February 3, 2003.

Venture Capital

No significant venture capital entered into the market in recent months and the venture capital globalization firms report no further capital infusions.

There has been little positive to report on what has been going on in a number of the firms that were started a couple of years ago. However, Martha Geller of Global Sight reports, "Global Sight had its best year ever, tripling new orders last year (from the prior year) and with not only healthy backlog but healthy pipeline..."

Privately Held Companies

There is a considerable amount of activity among a select group of privately held firms which have gotten to a certain size where they can begin establishing working relationships and alliances with a variety of hi-tech firms that would previously have ignored these relationships. The hottest sector for alliances? Content management.

What Will Happen in 2003?

• More consolidation. We are not done yet.
• More meaningful partnerships, particularly with non-language firms that are already doing business with the U.S. Federal government, as more language resources are needed.
• The 10-country expansion of the EC will trigger an increase in the amount of European language work. Hurry up and find (or buy) your Estonian vendors!
• The US security crisis and the EC expansion will both give the language business a "shot in the arm." That's American English for business will be better.
• China will continue to boom. Watch single-language Chinese language sources look to offer other languages and buy into U.S. and European firms.
• ROI is on its way out as a concern and buzz word among companies, and content management is in.
• The distinction between a tools provider and service provider will continue to blur in the customer's eye.
• Look for less emphasis on CRM software and more on how to establish human relationships with your customers.

Check back with me next January to see if these occur.