You usually can afford to go to conferences only if you have a job and your company is growing. Recently I began to go to meetings of the Northern Virginia Technology Council (NVTC), and it certainly seems that all the hi-tech firms in the DC area are doing fine and sending scores of people to a constant array of meetings and seminars (most of which begin at the ungodly hour of 7:30 AM). Trados and Globalization Partners are two localization firms that are very much involved in the international activities of the NVTC. Council members are adding employees and expanding international sales efforts. Welocalize is located in one of Washington DC's outer suburbs and reports its 2002 sales were up 62% and its earnings up 102%.

Of course Washington DC has government, and the government continues to grow as war expenses increase. Some of these expenses are being spent for translations and interpretation. The language difficulties faced by the Western Coalition partners in the Middle East have led to a greater awareness of the importance of languages. The U.S. military is dropping millions of leaflets in Egyptian Arabic over Iraq on just about every topic. Arab linguists have taken the military to task, however - Iraqi Arabic is highly colloquial.

Some companies have figured out that the only way to sell to the U.S. Government is to be listed on the GSA (the government procurement agency) schedule, as the government can't deal directly with companies. To my mind only one major firm has positioned itself to sell to the government, but others are now approaching a company that specializes in positioning companies to sell to the U.S. government. One language-learning firm used a facilitator to get a contract to supply the U.S. government with language learning tapes. This company has Logos of Modena as one of its marketing partners, and offers Logos' translations and localization services on its web site.

And while most of the world's economy is taking a go-slow approach to business expansion due to the war in Iraq, some of the people who advised the U.S. government on going to war are now maneuvering to take advantage of what happens after Iraq. In fact, you can hire one of the authors of Bush's Middle East policy, who will help you get a deal on Iraq's oil sales after the war! Washington insiders seem to thrive regardless of what happens elsewhere. But even this group will need language help.

Others don't want to pursue the U.S. government, even though private companies have really cut back on localization and language spending because of the uncertainties that the war has brought. The Middle East is not a good place for American companies to expand at present. Procter & Gamble, the U.S. consumer products concern, has seen its sales fall off because a group called the Egyptian Committee for Boycott claims that its detergent Ariel is named after Ariel Sharon, the Israeli leader, and that its atomic logo is a cleverly designed Star of David. Coca Cola's sales have dropped 10% from last year and McDonald's have fallen 50% in Saudi Arabia since last year.

2002 was not a disaster as far as mergers and acquisitions are concerned - overall it resembled 1996-97. One company that follows markets has predicted merger activity this year to be up 40% from last year, and said to look carefully at what happens in the latter part of this year. In our business there are already a couple of European firms on the prowl for U.S. acquisitions. The outsourcing fever that hit the market seems to have slowed down, and companies that have developed good in-house localization and translations capability have had to downsize, but have not disappeared altogether.

A look at most web sites reveals the days of bombarding the marketplace with press releases is dead; one major company's last release was October of 2002, and another listed its last white paper on May of 2001! Press releases and white papers were intended to get people interested in your IPO to raise major capital, but the only way to do that now is to make a sale. "We don't have time for PR," a representative of a localization firm funded by venture capital told me.

Public Companies

I have to be careful here since the management of one company I wrote about in my last article took issue with my saying that the firm wasn't doing well. Not so, said the management - but the management was subsequently fired.

I will say that the top public companies have never seen such a scramble to find sales people. Public relations expenditures may be down, but there is a flurry of effort to find good sales people. A friend of mine who hasn't been selling in this industry for seven years is getting calls. Few salespeople want stock options these days, but rather "a decent commission schedule," as Jeff Brink of PH Brink says.

SDL reports that its 2002 results were favorable. Turnover was up to £58 million from £33 million the year before. More importantly they made a profit of £3 million compared to a loss of £1.4 million. Their stock has been trading at around P 37.50.

The Bowne Global Solutions part of Bowne (BNE) has a totally new management team. In 2002 BGS sold $US 131 million of globalization services, and registered a loss of $US 12 million (EBTIDA-earnings before interest, taxes, and amortization). The year before this figure was a positive $US 2 million. Included here, of course, are the expenses of acquiring Berlitz GlobalNET, (about $US 15.7 million in the fourth quarter of 2002). For 2003 the company sees further costs of $US 10 to 15 million to integrate the companies. BGS will now represent about 10% of its parent's sales, and Bowne itself was not profitable in the last quarter.

Part of the Berlitz acquisition was a translation portal to handle translations via the Intranet. BGS has relaunched and renamed it Elcano. This is an interesting choice as in Spanish (according to Cassells' Spanish Dictionary) it means "frosty," "grey-haired," "old," and "ancient." Few companies have been able to make money offering this kind of service, but according to former Berlitz GlobalNET employees they did so, and this is an extension of that service.

Right after BGS in annual sales is Lionbridge Technologies (LIOX) which registered $US 118.3 million in sales (an increase of 17% over the previous year) and an operating profit of $US 451,000 compared to a loss of $US 20 million the year before! I would say that is a turnaround. They currently list a market capitalization of $US 63 million. Doesn't sound impressive? United Airlines market capitalization on March 31st was U.S. $55.6 million! All airline stocks have plummeted due to the economic downturn and the war. And the simple fact is people now travel by the Internet to do business as opposed to getting on the airplane. It still can't take vacation to the Caribbean via the Internet, but that is about all.

Lionbridge's stock is still in the doldrums at around $US 2.00 even though Barron's, the leading U.S. financial publication, gave it a mention in a column about a leading investor. The investor Paul Stuka stated he finds Lionbridge "real interesting." The chat boards take exception, but it's difficult to qualify exactly what these chatters are saying!

Systran also reported its 2002 revenue, which was € 8.4 million, but a loss of € 770,000, which is one million less than the previous year. Systran's stock continues to trade at around € 1.00 a share. Its capitalization is currently around € 10 million.

Venture Capital

0.

We could not find any activity outside of the U.S. government where any new capital was flowing into the language industry.

John Freivalds is Managing Director of JFA Inc., an international marketing communications firm based in Lexington, Virginia, outside of Washington DC. He can be reached at jfa@direcway.com